If you’re an investor that has money in the Dragon Fund, the fund originally started by Dave Jones of Wealthstreet, you’ll be interested in knowing that the trustees of the Dragon Fund (of which Dave Jones is no longer one) have called a meeting. I phoned Michael Arnold (one of the trustees) today to ask what the latest updates were on the land in Airdrie, and he said they had been contacting investors via email – and that the email they sent me bounced. The meeting is being held on June 16th, 7pm, at Southside Victory Church (6402 1A Street SW) in Calgary. I’ll be there and will report back what the trustees tell the investors.

If you’re in the Calgary area and have had any dealings with Wealthstreet or Dave Jones, the President and CEO of Wealthstreet, the above notice of bankruptcy of Wealthstreet Inc. tells you where the company is at now. I get a few emails a month asking me what’s happening with Wealthstreet, and now it’s official. I’m not an accountant, but according to page two of this document, there are $3.2 million in unsecured creditors, $942K in preferred creditors, for total liabilities of $4.2 million dollars. The asset side of the equation shows $40K in accounts receivable, $4.4K in cash, and $1K in furniture. Somehow this company that dealt with millions of dollars in investment money only has assets totaling $45K. Interesting how that worked out, isn’t it?

The sad part of this document is the list of unsecured creditors; there are 136 individuals and companies on that list – most of them individuals – who are owed large sums of money. $50,000…$100,000…one couple is owed $228,167! Entire life savings were wiped out, which I find disheartening. I feel very fortunate that we were able to escape losing virtually nothing directly with Wealthstreet, instead having the bulk of our money locked up in the battle with the now-defunct Concrete Equities – a battle that seems to be nearly won last I heard. I received a copy of this document because apparently we have an unsecured claim with Wealthstreet of $1…despite what the cover letter says about a minimum $25 claim. I certainly never filed any claim with Wealthstreet.

Worth noting is that the single largest unsecured creditor is by Rachel Poffenroth in the amount of $658,874. Why is that worth noting? She was the one-time President of Wealthstreet – she held the position when Ashley and I started dealing with Wealthstreet. Also noteworthy is that the second biggest creditor, this time a preferred creditor, is one Dave Jones, claiming $650,000. Given the corporate assets of $45K, I think they’re both out of luck. It’s a strange world we live in…

“Look at the thing of value as what’s underneath the money.  If you want to generate more income, then think of how you can generate more value, not more money.  Also recognize that both value and wealth come in more forms than just money.  You can be financially wealthy but be bankrupt in true friendships, peer respect or health.”

This is a great blog post about what money really is, and how money and value are not the same thing. Worth a quick read.

This is an incredibly well-written and well-researched article about Concrete Equities – I’m not sure how I missed it when it was published in September 2009 (maybe because I was in new dad mode), but it’s worth a read for anyone involved in this debacle. This paragraph is particularly apt:

“Recently returned CEO Dave Jones played the absent founder; current president Vincenzo De Palma, whom you might recognize from Concrete’s TV ads, drew from a background mostly spent selling lumber out of Prince George, B.C.; 20-something executive Vinnie Aurora’s qualifications included being the son of a colleague of Jones; and, along with experience as an investment industry veteran, office manager Dave Humeniuk bore the albatross of a lifetime ban from selling real estate in the province of Alberta. The result: a corporate environment poisoned by infighting and finger-pointing and which produced no significant financial reporting, a lapsed mortgage, allegations of impropriety and incompetence, no dividends since the start of this year despite purportedly cash-positive properties, and, because of it all, more than 2,000 investors raring for a fight.”

If ever there was a cautionary tale for investors, this is it!

A CBC news reporter, Dave Sims, contact me about a week ago for a story he was working on; he wanted permission to use photos of the Concrete Equities protests that happened in June of 2009. They weren’t my photos, so I couldn’t give permission, but thankfully Sims found someone who had some photos for his article, which you can check out here. I spoke to Dave on the phone about my opinions about exempt market funds, and it was summed up as follows:

“Jason Dunn, another Calgary investor who has lost at least $10,000 in the Concrete Equities collapse, doesn’t share that view. He wants investors to have as many choices as possible — even high-risk ones — but he does agree that investors should be protected against fraud.”

What I meant by that statement is that properly informed investors who are qualified to take the risks (accredited investors) involved in exempt markets should be allowed to do so. I believe that people should be able to do what they want with their money, even if it’s high risk.

However…when non-accredited investors who shouldn’t be investing in the first place get advice from their financial consultants to invest with a company that has financial links back to the financial consulting agency in question…when officers of the company in question engage in business practices that bankrupt the company…and when outright fraud is committed by officers of the company who take money for one investment and use it as a down-payment for another investment…something is obviously very wrong with the system. These people either believed they were too smart to get caught, or they weren’t afraid of the penalties.

I’m unsure of whether or not the current laws are strong enough to keep these types of people in check, or enough to protect investors until it’s too late – it certainly wasn’t enough to deter my financial consultant from signing paperwork saying we were except from the investor limitations because we were “friends or close business associates of the firm”. I’ve learned many hard and painful investing lessons over the past five years…the biggest of which is to never take any financial consultant at his word. Always investigate on your own; even a Google search on the names of the people involved will give you some measure of understanding about their track record in the industry. It amazes me – in a shameful way – that I spent hours researching which digital camera to spend $500 on, yet spent zero time researching the people wanting me to invest thousands of dollars with them. One of the many lessons I need to teach my son as he grows up…

Earlier this year, there were a couple of discussion threads started in the Canadian Business forums about Concrete Equities. The threads were full of useful information, and I posted in them several times. Curiously, right around the time that Vincenzo De Palma had his lawyers threaten to sue me for libel, the threads in the Canadian Business Forums were deleted. I don’t know why they were deleted – in fact a post I made there asking what happened was deleted – but it’s not hard to see the reasons why. Someone contacted me earlier this week about this topic; they’ve created a blog with all of the posts originally made to those Canadian Business Forum discussion threads about Concrete Equities. It makes for some interesting reading!

As I mentioned in this previous blog post, for one year I was a promissory note holder with Wealthstreet here in Calgary. We loaned Wealthstreet the money, and got it back with 10% interest on top, and that was the end of it. They asked us if we wanted to re-invest it, and we declined. Others chose to re-invest, or invested for the first time within the past year, and now with Wealthstreet shutting their doors the holders of those promissory notes are wondering what they can do to get their money back. The building that Wealthstreet formerly occupied was purchased by a numbered company owned by Dave Jones, meaning it’s an asset with real value. If you are a holder of a promissory note from Wealthstreet and would like to get organized to take action, please send an email to ***@***. This email address does not go to me – that email address forwards to someone who is a current promissory note holder who is interested in hearing from other promissory note holders who want to take collective action.

UPDATE: The above email address no longer works. The person to whom it went has informed me that she’s no longer seeking other promissory note holders; she’s got a group of them together and they’re taking collective action.

For those investors that haven’t yet been contacted, here’s the time and location of the next meeting for Concrete Equities investors:

Ernst & Young Town Hall Meeting
Nov. 10th, 2009, 7:00 PM
Telus Convention Centre
120-9th Ave. S.E. Calgary
Exhibition Hall D / E & Annex

I’ll be there, and am cautiously optimistic based on the tone of the email sent out by the steering committee.

Look what I found on the Alberta Securities Commission Web site:

“Calgary-based Teluric International Investments Ltd., the Teluric Diversified Fund, David Humeniuk and Elizabeth Humeniuk have provided an Undertaking to the Executive Director of the Alberta Securities Commission (ASC).  The Undertaking comes after ASC staff identified that the parties failed to disclose in a Teluric Diversified Fund offering memorandum information required by Alberta securities laws.  No sales occurred pursuant to the offering memorandum, nor are any sales contemplated in the future. The Undertaking states that Teluric International Investments, the Teluric Diversified Fund, David and Elizabeth Humeniuk agree they will cease all trading and refrain from any further trading of Teluric Diversified Fund securities until such time as the Executive Director releases them from this Undertaking.”

Who’s Dave Humeniuk you might be wondering? Why, he was a Director at Concrete Equities of course! Some truly interesting things have been said about the Santa Clara Mexico investment in court documents involving Dave Humeniuk and Vincenzo De Palma (sort of a “he said, he said” thing), and I’m planning on publishing those in the next week or two. Court documents aren’t libel because they fall under Absolute Privilege. Any lawyer reading this knows that. The document relating to the above ASC action can be found here – in short, it says that Dave Humeniuk needed to “Disclose any penalty or sanction (including the reason for it and whether it is currently in effect) that has been in effect during the last 10 years against (i) a director, executive officer or control person of the issuer, or (ii) an issuer of which a person referred to in (i) above was a director, executive officer or control person at the time.”

It seems he didn’t do that, and that’s against the rules.