Investors thought they were helping fund the ambitious expansion of a Saskatoon real estate company in the United States, but instead they were helping to keep a struggling company afloat.
That’s according to the findings of a court-ordered investigation that looked into the finances of the Epic Alliance group of companies.
Through its “no-hassle” landlord program, the company has promised to find tenants and manage hundreds of rental properties in Saskatoon and North Battleford for out-of-province investors.
However, based on the report by court-appointed investigator Ernst and Young, money from investors hoping to profit from the company’s growth was used to help pay absentee owners as the business floundered.
“EA Group has experienced frequent cash shortfalls on (hassle-free) properties,” the report said.
According to the report, the company was “suffering significant losses” as many homes were unoccupied or in need of repairs and maintenance.
Based on the report’s findings, the company also racked up losses in its other lines of business, such as its “fund-a-flip” program where investors were promised interest to help Epic Alliance buy houses to renovate and resell.
The “flipped” homes would generally be used as inventory for buyers under the homeowners program, according to court documents.
A house used as an example in the report was purchased for the house flipping program for $198,000. It was later re-priced at $260,000 before being sold to a hassle-free investor owner.
According to company records, $824 was spent on renovations. The amount spent on the work is unknown.
The report called the home’s life cycle within the company “typical” and noted that a single appraiser was used for all of the company’s properties.
Epic Alliance closed earlier this year following a temporary cease trade order issued in October by Saskatchewan’s Financial and Consumer Affairs Authority (FCAA) that halted the company’s cash flow. company, according to court documents
“We just couldn’t get back on the cease trade. The FCAA screwed us over, so that’s it,” Rochelle Laflamme said on a Zoom call with investors Jan. 19.
She co-founded Epic Alliance in 2013 with Alisa Thompson, who also participated in the call that informed investors of the company’s failure.
The pair touted a planned expansion south of the border to investors, registering 61 U.S. limited liability companies and pledging to become a billion-dollar company.
To fund Epic Alliance’s entry into the US market, $3.8 million was raised by selling shares in four numbered companies.
Instead, according to the Ernst and Young report, the money was used to cover operating losses incurred by the company in Canada.
“American expansion appears never to have materialized in any meaningful way,” the report said.
“The books and records of the company indicate that only two properties were bought and sold in the United States”
Through its various lines of business, Epic Alliance has raised a total of $211.9 from investors according to the Ernst and Young report. Most seem to have disappeared.
In February, a group of 121 investors successfully requested the court-ordered investigation.
The Saskatoon Police Department’s Economic Crimes Unit is investigating the company, based on a complaint from an Ontario-based investor.
CTV News was unable to reach Laflamme and Thompson for comment.