Judge assigns special investigator to look into real estate group's downfall
The implosion of a Saskatoon real estate company in January has cast a shadow of uncertainty over roughly 500 residential properties, and left scores of investors from across Canada asking what happened to their investment of more than $10 million in the business.
According to reporting by CBC News, the Epic Alliance group of firms ceased operations at the end of January. Rochelle Laflamme and Alisa Thompson, the company's founders, gave just over a week’s notice to investors and property partners through a 16-minute Zoom call.
“Everything is gone. Everything is bankrupt, guys. It's all gone,” Laflamme said in the January 19, 2022 video.
Epic Alliance, according to Laflamme and Thompson, had 504 properties in Saskatoon and North Battleford worth a total of $126 million before it fell apart.
They had established and ran three primary businesses.
One business was a loan program under which people gave anywhere from $50,000 to $500,000 to Epic in exchange for a one-page promissory note; the notes indicated interest rates varying from 15% to 20%. Through another business called "Fund-A-Flip,” buyers would buy homes through Epic, do improvements and upgrades, and sell for a profit.
Finally, its "Hassle Free Landlord Program" invited investors – mostly from outside the province – to buy homes acquired by Epic through the Fund-a-Flip program. With the promise of a 15% guaranteed rate of return, investors took out the mortgage on the home they bought, while Epic took responsibility for finding tenants, maintaining the property, and other aspects of management.
The promissory note program attracted the attention of the Financial Consumer Affairs Authority of Saskatchewan (FCAA). It noted that Epic Alliance and its owners were purveying advice and information on how to invest in securities, including real estate investments and promissory notes, without ever having registered as dealers or advisors.
The regulator issued a temporary cease trade order on the company’s operations on October 12, 2021. In November, the FCAA held a hearing to consider extending the temporary order. Declarations and support letters for Epic Alliance at the time “indicated that the temporary cease trade order was negatively impacting Epic Alliance's business,” it noted.
Though there was evidence of neglect and mismanagement of the properties, the company’s founders maintained it was the FCAA’s action that led to the company’s collapse. “We just couldn't come back from the cease trade order,” Laflamme said in the company’s Zoom call to investors.
When the news of Epic’s collapse broke, it sent shockwaves through real estate and business circles across Canada. Investors wanted to know where their money went; landlords suddenly left on their own worried who would handle their Saskatoon rental properties; and real estate professionals were concerned about what would happen to the hundreds of residences in the core neighborhood.
In a related development earlier this month, Justice Allisen Rothery of the Court of Queen's Bench tasked accounting firm Ernst and Young to investigate what happened to an estimated $10 million to $20 million that 120 investors put into Epic Alliance.
Saskatoon lawyer Mike Russell, who represented the 120 investors when they applied to have the special investigator appointed, expressed concern over how stakeholders came to learn what happened.
“The principals blamed the FCAA and essentially said, 'we're bankrupt.' And of course, people use bankrupt to mean we're insolvent, but they're not actually bankrupt like they've filed something,” he told CBC News.
“They did give back the keys to some of these properties … it's not like they disappeared. They stuck around, they handed out keys and so forth, which was a good thing to do,” he continued. “But typically you'd seek advice and you'd make statements as needed. There's a process.”
