CALGARY - A trial began Monday into an alleged multimillion-dollar Ponzi scheme that investigators say bilked thousands of investors around the world.
Gary Sorenson and Milowe Brost pleaded not guilty in a Calgary courtroom to two charges each of fraud and theft. Brost alone faces a fifth charge of money laundering, to which he also pleaded not guilty.
The two men were arrested in 2009 for what police have called "the largest Ponzi-type scheme" in Canadian history. Investigators have said investors around the world lost some $400 million.
The two defendants are being represented by different teams of lawyers.
Sorenson and Brost sat side by side with their arms crossed and eyes downcast while Justice Robert Hall instructed the 13-member jury and the Crown delivered its opening statement. They did not make eye contact with one another.
One set of alleged fraud and theft offences took place between 1999 and 2008 and involved companies named Syndicated Gold Depository SA, Base Metals Corporation LLC, Bahama Resource Alliance Ltd., and Merendon Mining Corporation Ltd.
"As a result of that activity, at least 2,000 investors lost tens of million of dollars," Crown lawyer Brian Holtby told the court.
"Some lost savings, some lost their RRSPs, some lost the equity in their homes. Some lost all of these things. The lives of many, many families were irreparably diminished."
Sorenson and Brost also each face a fraud and theft charge related to alleged wrongdoing between 2004 and 2005 related to a company called Strategic Metals Corp. Brost's money-laundering charge is connected to that.
Throughout the trial, which is expected to last six months, about 200 written, video and audio exhibits will be presented to the jury, and dozens of witnesses will be called.
Acknowledging their task will be daunting, Holtby told jurors the case is "simple" at its heart.
"The accused obtained tens of millions of dollars from ordinary people by lying to them directly and indirectly. When they obtained the money, they treated it as their own," Holtby said.
"They paid no regard to the promises they made to investors and lenders. Instead, they lived like royalty and every step of the way, they took steps designed to hide their wrongdoing."
Holtby said victims of the scheme were promised "astounding" returns with "little or no risk."
He said the case involves a mining fraud in addition to a Ponzi scheme, in which funds from new investors are used to pay old ones.
For instance, Holtby said purported Merendon prospects in Honduras, Venezuela, Ecuador and Yukon "produced gold only erratically and in very small amounts" and other holdings in Peru and British Columbia never reached the production stage.
"Merendon's holdings were simply props, cut-outs designed to induce potential investors to part with their money. Whether they generated any income or not was irrelevant," said Holtby.
Lawyers for the defendants are to deliver their opening statements on Tuesday.