Developer glittered, but was not gold

Myles-Legér fallout hits employees, creditors, public

Ashley Fitzpatrick
Published on June 19, 2014

Last in a five-part series

When Myles-Legér was dec-lared bankrupt, a little more than five years after its incorporation, it cited $14.6 million in liabilities, and no cash. Any championing of the developer’s work, or of the Clarke brothers as star businessmen, came to a grinding halt.

The change in attitude towards both the company and its leaders came with the bankruptcy, but also with the end of the company’s community involvement.

The tap was turned off for sports teams and events. There were no more “Flatrock Myles-Legér Flyers” in the Avalon East senior hockey league, “Northeast Myles-Legér Eagles” in the junior league or “Myles-Legér Tournament of Heart” annual high school tournament. There was no more “Team Myles-Legér” with a stake at the Royal St. John’s Regatta.

Charitable donations also ended. There was no more co-sponsoring the Shinerama fundraiser, helping nursing students raise money to fight cystic fibrosis.

There were no more donations for new walking trails in the city of St. John’s. (In 1999 the company offered $80,000 to the Airport Heights Residents Committee to be put towards a trail in the area to tie into the Grand Concourse Authority’s trail network).

Political donations dried up, too. As a corporation, Myles-Legér had provided $23,450 towards political campaigns in the province — $1,000 at the municipal level for runs by Gerry Colbert and Kevin Breen, plus $14,400 to the provincial Progressive Conservatives and $7,850 for the Liberals.

Goodwill aside, the community was also left with the effects of job losses — direct and indirect — as a result of the company’s apparently dramatic turn of fortunes.

A month after the start of the bankruptcy process, The Telegram reported that Myles-Legér co-founders Randy and Bill Clarke were claiming more than 100 employees had lost their jobs as a result of a creditors’ vote against a proposal to keep the company in business.

The fate of well-known and highly visible properties within the City of St. John’s was thrown into question. And it was unclear when new ownership might be settled.

Businesses in the community were affected, as creditors lined up against Myles-Legér. As reported, the bankruptcy process is ongoing, 10 years later.

“We are still in the process of trying to sell the remaining assets. They’re relatively low-value,” said Greg Gosse, who has been handling the case for the trustee, PricewaterhouseCoopers.

“There is a purchase and sale agreement in place we’re hoping will conclude any time soon,” he said.

“Then we would have an obligation to go back to the inspectors and say here’s the final accounting. Here’s the way the funds are planned to be distributed. And the inspectors have to agree or disagree with that plan. At the end of the day, there should be an agreed plan from the inspectors and the trustee that goes out to the creditors and then there’s a court hearing and the court determines whether or not they accept the distribution.”

He expects the process will take at least six more months.

It is not the only thing keeping the Myles-Legér name alive. The company was already insolvent when a spot audit of the William J. Parsons law firm in Mount Pearl began on May 17, 2004. It revealed up to $4 million in unpaid mortgages dating back two years.

The law firm handled transactions for Myles-Legér properties and, according to an agreed statements of facts in subsequent disciplinary hearings, lawyers paid mortgage money back to the development company, as opposed to the banks.

The Law Society of Newfoundland and Labrador took over the firm, as the audit found that money placed from trust accounts for the discharge of mortgages was being re-purposed.

The Clarke brothers, along with company comptroller, Terrence Reardon, and one of the defunct company’s former lawyers, Parsons, now face criminal charges in relation to financing of the company’s activities.

Each man is dealing with 38 charges of fraud over $1,000 and a single charge of conspiracy to commit an indictable offence, as laid in 2012 following an RCMP investigation.

The Telegram requested an interview with a representative for the RCMP’s commercial crime section about the case, but was told no interview could be granted or comments made, given the case is before the courts.

Parsons’ case is scheduled to be called again June 24, while the other three cases are set to press at least into the fall.

Both lawyers involved — Parsons and Glenn Bursey — pleaded guilty in the disciplinary hearings that followed the spot audit at their firm. They were both disbarred on Nov. 16, 2005.  

“(Bursey) knew that he was breaching trust conditions, and that other solicitors were relying on his compliance with those conditions. He was well aware of the impending harm that inevitably occurred. And yet, despite having that knowledge, (he) did not act as he should have to stop the scheme,” reads the written decision from his disciplinary panel review.

Bursey died in 2007.

According to the written decision for Parsons, he was the leader in the financial scheme.

During his disciplinary hearing, Parsons’ attorney said the entire scheme began when Bill Clarke went to Parsons in 2000, requesting the entire proceeds from “eight or nine” property sales, launching a process where Parsons would advance funds and receive enough in the way of repayments to keep the money flowing to Clarke and Myles-Legér.

The Clarkes were not involved in the disciplinary hearings.

“At the time of (the Myles-Legér) receivership, 31 mortgages were outstanding that should have been paid from sales proceeds,” states the disciplinary panel’s decision in Parsons’ case.

“During the 2000-2004 period, Parsons provided Myles-Legér with millions of dollars, and approximately $2.3 millions in encumbrances remain undischarged.”

It meant there were outstanding mortgages, contrary to the owners’ belief, on properties throughout the city.

Brenda Grimes, executive director of the Law Society of Newfoundland and Labrador, told The Telegram measures have since come into place that would help prevent a similar case arising in future.

Mortgage funds are now typically sent directly to the banks, she said, as opposed to being held and placed in trust by lawyers. And random spot audits of law firms — started in 2004 and able to hit upon troubles at the law firm of William Parsons — are continuing.

Before then, scrutiny of the actions of lawyers in Newfoundland and Labrador in relation to their dealings with client finances was for the most part left to accountants, who acted as third-party overseers of a law firm’s books. That’s not unlike most private businesses.

The Institute of Chartered Accountants of Newfoundland and Labrador investigated the actions of two accountants — David Randell and Harry B. Kung — in relation to their review of Myles-Legér accounts. The investigation, required to maintain the reputation of the self-policing profession, cost the organizational body more than $80,000.

As with the lawyers, the complaints first went to a committee determining if they had merit and were worth convening a disciplinary panel. Both cases were moved forward.

Wilson Hoffe was a member of the panel reviewing Randell’s actions. Speaking with The Telegram recently, he said being brought before a disciplinary committee can, by virtue of human nature, naturally expose an accountant to rumours and innuendos, even before the accusations are heard.

“In Mr. Randell’s case, he had resigned as the accountant because he didn’t agree with some of things that were going on or appeared to be going on,” he said.

He encourages all accountants to err on the side of caution in their work, and for the public to not be quick to judge on accusations.

The written decision from the panel, issued in August 2009, states Randell became aware of and did not report “an apparent breach of the rules of professional conduct by a member, Harry B. Kung,” between March 2003 and May 2004. It does not specify what he discovered.

Randell did not contact the next accountant taking on the company’s accounts to tell them. He also did not notify the institute when he found out someone else had taken on the work without first speaking with him.

The errors could be attributed to oversight, rather than any malicious intent.

“Basically, I think for the most part he acted in a professional manner,” Hoffe said.

At the end of a five-year process, Randell was fined $500. He has since been able to return to practise in Mount Pearl.

Kung faced more serious allegations. He had signed off on the books at the William Parsons law firm for the year ended Dec. 31, 2002. Yet, when the law firm fell under investigation and Kung was being investigated for misconduct, he could not provide documentation relating to his work on the file, saying it existed but could not be located.

He admitted to practising as a public accountant without professional liability insurance.

In 2007, following the institute’s review, he was given a written reprimand, fined $3,000 and suspended from practice in the province for three years.

He was, at last report, living in Alberta.