The troubled history of Global Fruit

Sunday, October 5, 2014

Is it a pioneer of high-density apple production, or just a chimera?

by MARY BAXTER

When Marius and Irma Botden and their four children arrived in Canada in 2001 to establish an apple orchard, their prospects appeared anything but rosy. Acreage was plummeting, the industry's marketing board was in limbo and growers were facing increasing competition in the domestic marketplace from cheap imports.

In the Netherlands, the Botdens grew apple trees and advised others how to establish fruiting tree nursery stock. They wanted to move into the fruit-growing business, but Dutch land prices were too high. "We were travelling in Europe," Botden says, to check out other countries. "We checked the United States as well."

Then, one day in the late 1990s, Hans Soer knocked on their farm door. Soer, also Dutch, had moved to Canada in 1987. But he often returned to his homeland for his business, Tryland Financial Service, which promoted Canada as a destination to farmers in other countries and assisted them in making the leap.

Soer, stocky, quick-speaking with an affable demeanour, often puts the title "Ing." before his name. It's a European acronym meaning engineer, but which he describes as the equivalent of a B.Sc. He claims a long association with agriculture – growing up in the dairy industry in Holland, studying the business at a college there and working with farmers in the banking industry after graduation and, here in Ontario, undertaking ventures in hog, apple and dairy production.

The apple industry had snagged his interest because he sensed there was an opportunity that Ontario growers hadn't quite realized.

Over the past three decades, Ontario's population had been growing rapidly through immigration. Many of those arriving came from countries that appreciated apples, but wanted a pome far sweeter than Ontario's traditional fare of McIntoshes and Spartans.

Soer says the province's farmers had become disconnected from the market by continuing to grow the older varieties, were losing their market share to more cheaply priced imports as well as imports to meet the new demand, and were growing their crops in inefficient low-density orchards.

"In Holland, in the '60s and '70s, you would already plant 2,000 or 3,000 trees an acre. In Ontario, in 1985 it was still 500 to 600 trees – very low density," Soer says. Introducing European-style high-density production, therefore, could give an Ontario orchard a significant edge in the domestic market.

But Soer was not a professional apple tree grower. So when he learned the Botdens planned to emigrate, he realized he'd found a family that could help him turn his long-held vision into a reality.

Thirteen years later, Ontario's apple industry is on an upswing and Global Fruit, the business Soer and the Botdens launched, appears poised for sweet success. The apples grown – Gala, Honeycrisp, Ambrosia and Red Prince – are found at major grocery stores in Ontario and beyond. Their 700 acres of large-scale, high-intensity orchard production is spread across three locations mostly under two hours from the Toronto market, one of the best markets for apples in the world. Late last year, they acquired their own distribution facility in Thornbury, where they plan to establish Global Fruit as a brand that promotes a quality product and employs rigorous production and environmental conservation standards.

Twice Botden and the Thornbury operation have received regional Premier's agriculture innovation awards for innovative production. Michael Bloom, vice-president of the Conference Board of Canada, a non-profit think tank based in Ottawa, describes Soer, Global Fruit's CEO, as "one of the most innovative and successful producers and agricultural entrepreneurs in Canada," whose company's revenues "put him among the largest farmers in Canada."

Hidden hazards
Despite the accolades and apparent success, some people aren't so happy they have dealt with Global Fruit and Hans Soer. The nature of these concerns is a reminder of the hidden hazards farmers face when undertaking new ventures or choosing partners, or even getting into financial arrangements they don't fully understand.

Such complications were not at all what Toon Veldman, a broiler chicken farmer near Dutton in Elgin County, expected when he became involved with Global Fruit. Veldman first learned of the company and its CEO through his accountant in 2004 after announcing plans to move to Canada.  

Global Fruit offered shares at $55,000 per acre with the promise of a 15 to 30 per cent return on investment once the trees began producing. In 2004 on its website, the share was described as a "partnership" where those who participated purchased "one or more acres of orchard." The website further said, "this investment gives the partner ownership of the apple trees, partial ownership of the capital equipment required, a 14-year lease on the land, and depending on the number of acres purchased, the tax benefits of being a farmer." The arrangement would last for 14 years – the life of the trees. "The partner is now a producer of apples who outsources all cultivation, marketing and management activities to Global Fruit for the duration of the project," the website said.  

The company's website further claimed it had 2,200 acres available for orchard development in the Beaver Valley (in Grey County) as well as near Sweaburg (not far from Woodstock) and Watford (in Lambton County). During a trip to Canada in 2004, Veldman toured Global Fruit's Sweaburg farm with Soer. "It was just small trees," he recalls. "It was not in production yet."

With his accountant in the Netherlands listed as one of Global Fruit's advisory board members, Veldman felt his money couldn't be in safer hands. So, in 2005, a month before they moved to Canada, he and his wife, Nellie, invested nearly $500,000 in nine acres of Global Fruit orchards. Soer helped the couple establish an Ontario numbered company for the investment.

Veldman knew it would take three years for the trees to mature and payouts to begin. During that time, he received financial statements. Then, in 2008, the year Veldman expected to begin receiving a return, financial reporting ceased and no money appeared. There wasn't any money in 2009 either, or the year after that. Indeed, Veldman claims he has never received a penny of either the principal or the promised investment return.

He says efforts to reach Soer to discuss the situation have been unsuccessful. He's left messages on Soer's business line, his cell phone and has even tried to reach him through business associates like the Botdens and one of Soer's lawyers, Keith McLean in Exeter.

"They say, OK, we'll let him know and then he will get in contact with you. Well, he never does."

Jan Willemse, a broiler chicken farmer north of Strathroy, likewise says his many attempts to reach Soer about money he's owed have been fruitless.

Willemse first encountered Soer after immigrating to Canada in the late 1990s. He obtained Soer's name from friends "who I trusted real good." Soer's financial, business and immigration advice did not disappoint.

That's why in 2002, when Soer asked Willemse and his wife, Leonza, to loan fellow expatriates money to expand their dairy operation north of London (at an attractive interest rate of 10 per cent), Willemse had no qualms. He accepted land in the Netherlands as collateral and ordered his bank to send the money to McLean in trust. In return, he was issued a promissory note signed by both Gerrit and Lenie Peters that stated he would receive $268,000 by May 31, 2003.

By 2005, Willemse still hadn't received payment. He called Soer and asked for the money back.

"‘Oh, OK,'" Willemse remembers Soer saying. "And then a few weeks later, I saw the guy (Gerrit Peters) who borrowed it from me, and he says, ‘well, it's all paid back, two months ago.' Then I give Hans another phone call, I say, ‘where is the money?'

"‘Oh, yeah, yeah. I invested it in apples.'"

Willemse says he ordered Soer to remove the money from the apple venture. Instead, he claims Soer gave him $50,000 and calculated on two pages of graph paper how the return on investment in four acres of Global Fruit orchard at $62,500 per acre – the investment price Global Fruit was offering by 2005 – would supply the remainder over time. Willemse says it's the only record he has of where his money has gone. Like Veldman, he says he has not received any other payments since. Willemse wants all his money back and doesn't think he's going to get it unless he sues, he says. To date, neither has taken legal action because of the expense involved, but they say that could change if there are more disgruntled investors who might consider splitting court costs.

Declined to speak
Veldman and Willemse, who are friends, say their apple acreage is located on the Sweaburg property, owned by Michiel and Henny Slegh. Henny Slegh, contacted in June, declined to speak on record. Soer says the orchard, and another located near Watford in Lambton County, is managed by Cor Vissers, whom he identifies as another key member of the Global Fruit team.

Gerrit Peters says he did not know where Soer found the money for his loan. "I deal with Hans." He denies Willemse ever approached him about not receiving payment on a loan.

In June, Soer and Botden, looking much like the Felix Ungar and Oscar Madison of the apple industry – Botden, 53, as knotted and sinewed as the apple trees strung between posts along rows of wire on his farm like grapevines in a vineyard, and Soer, 58, dressed in rumpled casual business attire – sit at the board table of Global Fruit's humble office near Thornbury. Soer vehemently denies Veldman's and Willemse's allegations about not making himself available to investors or providing adequate financial reporting concerning the investments.

No one has contacted him directly. "I have no idea" of the complaints, he says. It is up to Vissers, who is in charge of the Sweaburg and Watford orchards, to provide investors with the financial reporting. Vissers contacts them monthly, he claims. But if there is an investor who thinks Soer took money without permission, "then I want to see that client," he says.   

Moreover, Soer says investors – whom he claims number under 10 and whose money represents five per cent of Global Fruit's financing, with the remainder coming from the Botdens, himself and banks – all knew "it was going to be a long haul." They knew the scale of Global Fruit "is not the same (as what) you do in an afternoon."

Soer and Botden say Global Fruit has faced extraordinary hurdles over the past decade which have taxed its financial resources.  

Because they were among the first to introduce high-density production on such a large scale in Ontario, "there was no real example of how to do that," says Soer. The varieties they planned to grow, including Red Prince (a relative to Jonagold) under an exclusive Canadian licence from a nursery in the Netherlands, were all new to Ontario's climate. Little, if any, research existed on whether they could adapt.

Moreover, the specialized high-density orchard sprayers and picking platforms needed were not locally available. They had to import the equipment and customize it or build their own.

Establishing consistency in their product was crucial to their business vision; developing the method of management to achieve consistency "took way longer than we expected," Soer says.

They tried to teach other farmers the approaches they developed, but "they missed the vital points in apple crop production" and there were crop losses, Soer says.

Botden says a promise of government assistance that included help with obtaining funding never materialized.

Soer says he removed about 275 acres of his orchard in the late 2000s because of the lack of funding. It is for this reason as well that they quashed a plan outlined in company investment and promotional information of developing an education fund to finance post-secondary scholarships for needy youth in the Greater Toronto Area.

Both say government policy needs to be more supportive. Small companies "are starving for funding," Soer says. In 2012, when the orchard experienced crop failure, they could not insure the crop for more than one third of its value because it didn't have the production history needed to qualify for full coverage, says Botden.

Other lawsuits
If legal action is initiated against Soer, it won't be the first time. Since 2011, he has been named in two civil cases filed in the Ontario Superior Court of Justice; both he and Global Fruit are referenced in yet another:

In 2011, A.B.C. Farm Ltd., owned by Lambertus (Bert) and Mary Ann Caris of Strathroy, launched a civil case that named Soer along with Lambton County farmers Peter and Wilma Aarts claiming the three misrepresented the share ownership of a corporation connected to a 2,500-hog weanling operation in Birtle, Man. In an affidavit, Bert Caris claims A.B.C. had invested $500,000 to acquire a share in the venture, and the investment amount included shifting a $160,000 short-term loan the couple had made to Global Fruit to the new venture. The court action is ongoing and allegations have not been proven in court.

In 2012, A.B.C. Farm Ltd. filed another claim against Soer and the Aarts in connection with the same venture. Its application outlines the same claims as those in the 2011 action. In June 2012, in London, Judge A.J. Goodman ordered the Aarts and Soer to pay A.B.C. $575,000. Court documents show the amount is being garnisheed from the Aarts' and Soer's business earnings.

Court documents connected to a 2011 legal action filed by John and Catherine Van Kessel against Peter and Wilma Aarts also mention Soer and Global Fruit. The action concerns the same Manitoba hog barn and is ongoing; claims have not been proven in court. The couple claim they loaned $100,000 to the Aarts to acquire and operate the barn and the loan was never repaid. They want repayment of nearly $170,000. In a 2012 examination for discovery transcript, Peter Aarts, a former dairy farmer from the Netherlands, describes Soer as his "financial advisor" and claims Soer set up the loan arrangement with the Van Kessels. He claims Soer told him that he had taken care of repaying the loan, and alleges that when John Van Kessel confronted him in the spring of 2011, saying the loan hadn't been repaid, "It was quite a surprise and quite a shock." At first "I was thinking he needs the money back from the orchard. He invested money in the orchard, like through Hans (Soer)."

Franchise model
In early July, Global Fruit's website invited viewers to consider being "future partners" of the company who would be able to participate in a "franchise-like model." This would allow them to become apple producers, obtain the tax benefits of being a farmer and a 10 to 12 per cent annual return on investment for 14 years. A photograph of two hands gripped together with rows of apple trees in the background contributes a powerful symbol of partnership.

But Soer says the company is not seeking new investors right now. Once he realized the challenges, he did a step back. "I did not want to have no more money with me, to have responsibility for that before I have solved my issues," he says. The acquisition of the packing house helps to solve these, because it is a key element to advance and maintain the Global Fruit brand.

As the company moves ahead and the challenges are sorted out, they will be able to offer current investors a 12 per cent return, he says. Nor will investors lose money because of his decision to pull acres. "I will reorganize that and I will pay (them) back; that's the whole thing."

Soer adds that Global Fruit's production model, based on the market and on price, "is still there." The company is "on the winning edge."

A tour of the Botdens' Thornbury operation reinforces the company's promise. There are stops along the way to admire Botden's many innovations – picking platforms, the initial version of which he had to ship from Italy and customize; an eco-sprayer similarly customized.  

Yet all of those well-maintained orchards thick with a potential of a bumper apple crop only bring into relief the troubling lack of detail about Global Fruit's operations. That's because mostly everything on view during the tour is held in the Botdens' name – the land, the equipment, the orchards, the Red Prince licensing agreement. No investor acres are located here.

At Sweaburg, where Veldman's and Willemse's money was invested, the orchard occupies land described in one South-West Oxford Council report as leased and operated not by Global Fruit or even by Soer, but by Vissers. No physical section of the orchard corresponds to the two men's investment. Their earnings are to be calculated as a representative proportion of the orchard's overall yield, less the cost of management and marketing.

Global Fruit itself seems a chimera. The distribution centre, touted as an integral component for fostering the company's future growth, is in the Botdens' name. The company's name and logo is not trademarked or incorporated, says Soer. However, the name "is registered" in Ontario, he claims. Searches of provincial and federal databases fail to confirm any registration.

Exeter lawyer Keith McLean says he's not sure if the name has been registered. "It would have been registered with consumer and commercial affairs – registered as a proprietorship," he says. "It's a numbered company that owns it but it carries on business under the firm name and style of Global Fruit. And I'm sure it (the numbered company) is registered."

McLean, who has represented Soer and describes himself as one of Soer's lawyers, was listed in early promotional materials as a member of the company's advisory board. "That's not right," he says. "If I was listed in it, I wasn't aware of it. And especially not dealing with finances."

Then there's the "franchise-like" opportunity that remains published on Global Fruit's website two weeks after Soer announced its suspension. Toronto lawyer Allan Dick, who specializes in franchise law, reviewed a 2004 Global Fruit information document about the opportunity. He says it doesn't meet the terms of a Franchise Disclosure Document under Ontario's franchise legislation. Dick says the information is "an investment proposal put together for potential investors in the project."

As the tour wraps up, Botden begins talking about the hoops he's had to jump through to obtain municipal permission to renovate a bunkhouse. He launches into an account of leaving the airport when he first arrived here for good. It's an analogy to illustrate Canadian attitude towards legislation.

He remembers noticing the signs for speed limits – one for 50, another later on for 80. No one paid attention. They drove at least 20 kilometres an hour over, no matter the limit. No one seemed to care. Not the police, not other drivers.

It took some time to get used to all the rules and their grey areas in Canada, Botden remarks. "When you know them, great. But when you don't know them . . ." He laughs slightly. It sounds like a sigh of exasperation. Soer, in the backseat, is silent.

Botden flicks his indicator switch and cautiously edges the pickup onto a side road. There are a few more turns and curves ahead before we arrive back where we began, at the tiny building buried in rows upon rows of apple trees with the Global Fruit sign out front. BF

With files from Jim Algie.

When immigration consulting was like ‘the wild west'
Back in the late 1990s and early 2000s, when Marius and Irma Botden decided to move to Canada to farm, it was like the "wild, wild west," in terms of predatory scammers who posed as immigration consultants, says Edward Corrigan, a lawyer in London who specializes in immigration.

"Some of the consultants were great – probably some of them were better than lawyers," he says. "But there were a lot of consultants that were simply people who thought they could make money fast, didn't know anything and were taking advantage of people." Fees might have been small, but some banks were paying commissions of $20,000 to $30,000 to line up new customers, he notes.

Corrigan says the federal government introduced legislation a few years ago requiring immigration consultants to register with the Immigration Consultants of Canada Regulatory Council and obtain accreditation as a Regulated Canadian Immigration Consultant. Consultants must comply no matter if they are in Canada or elsewhere in the world, and certification includes passing an exam.

According to a Global Fruit promotional document, Soer's company, Tryland Financial Service, advised "self-employed immigrants" from the Netherlands and other northern and eastern European countries. "Since 1992, over 500 farmers are brought to Canada and U.S.A. with a total investment of $3.2 billion," the material states. Advice, the document says, has included helping newcomers buy real estate and set up farm businesses as well as providing advice on "tax, legal, financial, economic, innovation, visa, real estate and environmental issues."

Soer says that although he took kickbacks from accountants for providing the assistance, he only charged one farmer directly. He says he connected immigrants with a consultant and a bank. Today, he says he continues the service, "partly," but adds coming to Canada "is not an option anymore. Canada has lost its appeal to the world because it got expensive."

Soer is not listed as an immigration consultant in the federal database. BF

Ontario's apple industry: higher-density planting ‘is where it's at'
In the early 2000s, the Ontario apple industry's capacity to compete was not good, recalls Charles Stevens, chair of the Ontario Apple Growers and an apple grower in eastern Ontario. "A lot of apple growers didn't want to change."

Numbers dwindled as growers retired or opted out of the business and then, about three years ago, plunged dramatically in terms of numbers of acres and apples. "It was nothing to do with the crop," Stevens says of the final bottoming out. A government program that provided growers with financial assistance to take out apple trees ended, he explains.

But today, the industry's outlook has changed significantly, which he credits to several factors. First is closer co-operation along the production chain, which has meant growers are more responsive to what retailers want to see on their shelves and shift to new varieties in demand, such as Honeycrisp, Gala and Ambrosia apples.

New defect-sorting technology being used by the packing industry has helped increase apple quality and has made it possible to improve grading for chain stores.

There are growers who are "doing OK" growing at lower densities, but higher-density plantings "is really where it's all at," says Stevens.

He estimates it costs about $15,000 per acre to introduce high-density plantings. The trees developed for high-density production enable the grower to get into production much faster and generate greater production as well as more consistent quality.

Higher-density plantings have also changed how the trees are managed. Stevens uses the example of using platforms rather than ladders to pick which saves on labour costs. The use of GPS (global positioning system) in orchards enables precise planting and makes for narrower rows that are easier to maintain.

This year, Stevens planted 20 acres in high-density apples and says his is the first farm in eastern Ontario to use GPS in its planting. "I think it's a growth industry, but it's a complicated industry and it's a high-risk industry," he says.

On the one hand, more resources are needed to grow a good apple today than ever before.

But, on the other, there is a strong demand for Ontario-grown apples. With the advances of high-density production and the industry's proximity to the Toronto market, one of the largest apple markets in the world, local farmers are in a good position to compete with imports and still recoup a profit.

"Some of the packers themselves are growing a lot of their own apples because there's not enough growers to grow them for them," he says.

In fact, the number of commercial growers over 10 acres has shrunk dramatically from the roughly 1,000 that were around when he first started in the business 37 years ago. Today, there are about 200, he estimates. "That number will continue to shrink, but not as much as it has in the past." BF

Looking for a financial planner
When looking for someone to provide financial advice, Michael Bondy, a partner with the London Ontario office of chartered accountant firm Collins Barrow, advises to pay close attention to the person's accreditation and professional designations. These mean they are overlooked by a professional body.

You want to ensure the professional is able to do the kind of work you need, he says. "If you go to a life insurance agent for an estate plan, you pretty much know that answer to the estate plan is going to be ‘buy life insurance.'"

He advises looking for advisors who offer a fee for service rather than a fee for a product.

And, most importantly, financial advisors are just that – advisors. Normally they don't operate your business for you and don't operate businesses they ask you to invest in. If you are being offered a return on investment of 15 per cent every year, "there's something wrong." BF