PKI creditors' meeting underway
Wednesday, July 30, 2008
by BETTER FARMING STAFF
Susan Taves, spokesperson for BDO Dunwoody Limited, the trustee for Pigeon King International Inc., says the inspectors will offer guidance on several questions to do with the company’s bankruptcy. Most of these involve deciding whether to obtain a court decision about the relationship between claims concerning contract arrangements with PKI’s owner, Arlan Galbraith, and the company. According to a BDO report released today, PKI may end up having obligations to these contract holders because “it appears that the sole proprietor activities were rolled into PKI.”
The Waterloo-based pigeon breeding business collapsed suddenly in June. Initial estimates put the amount owing creditors, including those who held breeding contracts with the company, at more than $20 million.
Speaking after the creditors’ meeting broke up - shortly before noon - Taves noted there are also questions surrounding banking activity in the company’s last two weeks of operation. She urges those who think they may have advanced money to the business shortly before its collapse in June to file a claim with the trustee if they haven’t already done so. She notes that creditors can still file paperwork. “Today’s meeting is not a cut-off point,” she says, noting BDO can file notice about a formal cut-off date under the Bankuptcy Insolvency Act but has not yet done so.
Between 200 and 225 people have filed claims to date.
Bob Bergman was one of those who filed a claim and attended the meeting. The Lucknow area resident says he has put down the 100 pair of pigeons that he acquired from PKI. Initial records show that he is owed more than $18,000.
Bergman, who also boards horses, says he has filled out a report with police but notes that so far, nothing has been proven to be illegal about the former pigeon breeding business’ operations. He notes that breeders are suffering and it’s unlikely they will get their money back. He says he’d like to know if there was some other way to claim the loss.
BDO’s preliminary report, posted this morning on the company’s website, shows that unsecured creditors of Pigeon King International have so far proven they’re owed more than $39 million. There are no secured creditors. If records of contracts from 450 breeders that negotiated their agreements with the company’s owner, Arlan Galbraith, before it incorporated in 2007, are rolled into the mix, the estimate of nearly $40 million released today could increase even further.
Creditors may have proven their claims but that doesn’t mean that they will ultimately be allowed, the report suggests: “The original purchase of birds does not appear to be a debt of PKI and may be disallowed,” it says. “Claims for the future purchase of birds by PKI appear to be contingent and may be disallowed.”
Taves affirmed after the meeting that no firm number owed had yet been set and pointed out that creditors’ claims must undergo more review.
There were plenty of empty seats at a creditor’s meeting being held this morning to discuss the financial details of the bankruptcy. The meeting was held at Bingeman’s Conference Centre in Kitchener. BDO has organized the meeting, which is mandatory under the Bankruptcy Act.
Shortly past 10 a.m., the about 60 creditors attended voted to exlude about 12 representatives from the media. The decision on whether to include the media in the proceedings had been the second item on the agenda. Taves says the decision was nearly unanimous.
Ted Wellhauser, a family lawyer and fancy bird enthusiast, was among those barred from attending the meeting. Wellhauser raises concerns that the meeting is being held behind closed doors, noting that although he has been told the Bankruptcy Act allows for this to happen, the significance of the situation should have been taken into account. This is the “biggest commercial story event in the region for quite some time,” he says, noting the public won’t think highly of the decision to hold it behind closed doors.
PKI’s owner Arlan Galbraith did attend the meeting, arriving and departing from a back door. Bergman says Galbraith spoke only once to help facilitate a response to one question.
Outside the building where the meeting took place was one lone demonstrator who was calling for changes in the Canadian legal system concerning business fraud.
To date, no Canadian authorities have found anything wrong with Galbraith’s venture. Nevertheless, before it declared bankruptcy in June, PKI’s business activities fell under the scrutiny of jurisdictions in the United States with one of these calling the venture a “‘Ponzi’ type of investment scheme” and another alleging false statements or omissions of fact had taken place.
The hallmark of a Ponzi is using money from new investors to pay off earlier investors, making the eventual collapse of the business inevitable. Since the term “Ponzi” was first coined (after Charles Ponzi, who convinced 10,550 investors in 1920s Boston to invest US$9.8 million in a scheme that played on the value of international postal reply coupons in different currencies), defenders of creditors’ interests have scratched their heads to find ways to recover the money. BF