'He used my chartered accountant's designation to establish credibility'

Wednesday, November 13, 2013

by DAVE PINK

The chartered accountant who worked six months for Arlan Galbraith in 2007 says the episode is a blot on his resume.

“I am very embarrassed to have been involved in this operation,” Darryl Diefenbacher said in Kitchener Superior Court Wednesday, where Galbraith is on trial for defrauding the investors in his Pigeon King International business of millions of dollars. He’s also charged with four other counts under the Bankruptcy and Insolvency Act.

Yet, during cross examination by Galbraith, Diefenbacher was accused of wanting to steal control of the business. Galbraith, who has chosen not to hire a lawyer and is acting in his own defence, accused Diefenbacher of being nothing more than a disgruntled employee who was jealous of Galbraith’s success.

“Isn’t it true that you wish you were like me?” Galbraith asked.

“I highly doubt that, sir,” Diefenbacher responded.

Diefenbacher, who for years had run his own public accounting firm and later had a controlling interest in several car dealerships in Guelph, went to work for Pigeon King in January 2007 after he responded to a Workopolis posting for a chief financial officer. Galbraith hired Diefenbacher during their initial interview at the Pigeon King office in Waterloo.

At first, everything went well. Diefenbacher admits he was enthusiastic and went to work transforming the company from a proprietorship to a corporation and helped with the transfer of the company’s financial records from paper to computer. He worked in the same office with Galbraith, alongside his desk.

“I got caught up with the pigeon religion,” he said.

Then, after about four months, Diefenbacher told the court that things didn’t appear to be right. He couldn’t see any end market for the pigeons, and the company’s success appeared to depend entirely on the sale of breeding pigeons to more and more growers.

Meanwhile, despite his job description as chief financial officer, Diefenbacher said Galbraith continued to sign the cheques and would not surrender any of the company’s financial duties.

“It was clear to me that as chief financial officer my duties were not as they were supposed to be. I was never involved in any of the financial discussions that I thought a CFO should be,” Diefenbacher testified.

“I was there strictly so he could say he had a chartered accountant on staff,” he said. “He used my chartered accountant’s designation to establish credibility.”

The rift with Galbraith grew wider late in June, when a new employee was hired for the downstairs office. Diefenbacher said he asked one of the female employees to speak to the new hire about her “inappropriate” dress. She showed “excessive cleavage” and her “clothes were tarty,” Diefenbacher said.

Galbraith reacted a short time later, Diefenbacher told the court. “Arlan came to me and told me to keep my nose out of their business.”

Diefenbacher pointed out that in 2007 the public was not yet aware of the Bernie Madoff Ponzi scheme in the United States, and that not much had been written about Ponzi and pyramid schemes, yet Diefenbacher said he came to believe this was a “pyramid scheme.”

“I had come to learn his activity was criminal in nature,” Diefenbacher testified. He did not hold back, and shared his suspicions with other Pigeon King employees in the Waterloo office.

“I understand this is difficult for you,” Crown attorney Lynn Robinson said during her examination of Diefenbacher. “I can see it in your face now.”

Then, during a visit to sales agents in Illinois, Wisconsin, Iowa and Minnesota, Diefenbacher said he openly discussed his beliefs. “I told them this is a pyramid scheme, and when this thing goes down you’re going to have to live with these people.”

Not surprisingly, Diefenbacher said he was summoned to a meeting with Galbraith on July 17, 2007.

“I was ready and prepared. I knew this was going to be my last day.

“I said, ‘Arlan, I’ve only said the truth.’ I said, ‘Arlan this is a pyramid.”

And, “I said ‘this is nothing like the discussion you’re going to have with the FBI and the OPP.’”

Diefenbacher said he signed a non-disclosure agreement and walked out with a $16,000 severance payment along with the pay he was owed.

He said he was questioned by Waterloo Regional Police in 2008, after Pigeon King went bankrupt.  

“My duties to the public are greater than my duties to an employer,” Diefenbacher testified.

In questions to previous witnesses, Galbraith had asked if they were aware he was planning to build a processing plant for meat pigeons, or squabs, in northern Ontario, near Cochrane.

Diefenbacher testified that he was aware Galbraith had purchased land near Cochrane, but that he believed it was for a cottage. As for plans to build a processing plant, “there could never be a more ridiculous statement,” said Diefenbacher. The cost of transporting pigeons to northern Ontario would be prohibitive and would make no economic sense, he said.

Diefenbacher testified that Galbraith had never spoken of using the pigeons for meat until after Diefenbacher returned from a visit with a sales agent in Iowa late in the spring of 2007. That sales agent had given Diefenbacher a newspaper article on squabs, and Diefenbacher brought it back to Waterloo for Galbraith.

“Then I noticed a shift in his sales pitch,” said Diefenbacher. “He was going to raise birds for squabbling.

“There was no foundation for that.” BF