The Indigenous fuel supplier that launched a lawsuit against Gen7 Fuel — alleging the non-Indigenous owners of the brand of First Nation gas stations used millions of dollars in misappropriated funds to live a lavish lifestyle — has won a preliminary court victory regarding a key piece of evidence in the case: a luxury yacht worth $3.6 million.
The Ontario Superior Court of Justice granted a recent injunction that prevents the owners of the discount gas station chain from relocating or selling the Italian yacht — named “Cuz We Can” — that was allegedly purchased using funds pilfered from the plaintiff.
The plaintiffs claim the vessel was renamed, removed from Transport Canada's registration system and had its maritime tracking devices deactivated, all in an attempt to “frustrate” their efforts to account for the allegedly stolen money.
The court ruling is one of the latest developments in the high-profile legal saga of Original Traders Energy (OTE), a fuel supplier headquartered on the Six Nations of the Grand River Territory. Co-founded by brothers Scott and Miles Hill, the Indigenous fuel-blending company was granted protection under the Companies’ Creditor Arrangement Act (CCAA) from a lengthy list of creditors who are owed more than $250 million in all.
Court filings for both the lawsuit and the insolvency process claim the married couple who allegedly controls Gen7 Fuel, Glenn Page and Mandy Cox of Waterdown, Ont., conspired with others to build the chain of First Nation gas stations using misappropriated funds from OTE’s bank accounts while working with the Hill brothers to build the fuel supply company.
None of the allegations laid out in the Hill brothers’ statement of claim have been tested in court.
The lawsuit also claims that Page and Cox used misappropriated OTE funds to pay for the couple’s expensive trips and high-priced items; one of the big-ticket items was the 70-foot yacht from Italian shipbuilder Azimut Benetti — at a price tag of US$3.6 million, with an additional $600,000 in taxes — which Page and Cox allegedly paid to have delivered to Italy while vacationing there.
Court filings related to OTE’s insolvency show the yacht is currently owned by 2658658 Ontario Inc., a numbered company co-directed by Page and Cox.
A motion approved in court this past March prevents Page, Cox and those acting on their behalf or in conjunction with them from “directly or indirectly selling, transferring, encumbering or dealing” with the yacht, now known as “Home South,” after the vessel was listed for sale by several boat brokers in Florida.
“At the time of filing the notice of motion, OTE Group was unaware of the exact whereabouts of the yacht, although filed evidence confirming that it was listed for sale by various boat brokers in Hollywood, Fla., without the permission of the OTE Group which maintains the security interest registered over the yacht,” said an excerpt from the court motion.
At the time of the hearing, legal counsel for OTE informed the court it had been advised the yacht had recently left port in Florida and “was believed to be bound for the Bahamas.”
KMPG Inc., acting as the third-party monitor in the fuel supply company’s ongoing insolvency proceedings, expressed concerns to the court that the yacht could be potentially relocated or sold off given the evidence laid out by OTE ownership in court affidavits.
The independent monitor in the CCAA proceedings also noted that “significant OTE Group funds appear to have been misappropriated or paid by the OTE Group without proper authorization to purchase the Italian yacht.”
“The monitor shares the concerns of the OTE Group that the Italian yacht is a material asset and that the Italian yacht and any sale proceeds thereof must not be permitted to disappear, dissipate or be moved beyond the reach of the OTE Group and its creditors,” the court record said.
“This is of particular concern given the evidence set out in the fourth Hill affidavit that the yacht has regularly been moved between international jurisdictions, attempts have been made to hide or obscure its identity, including changing its name, removing it from Transport Canada's registration system and apparently deactivating or interfering with its maritime tracking devices such that the Italian yacht cannot be located using its GPS locator.”
Legal counsel for the respondents advised the court that a number of wire transfers of funds used to acquire the 70-foot yacht were not improper or fraudulent, since “they could be said to be distributions of profits to which the respondents were entitled.”
In his endorsement of the motion, Ontario Superior Court Justice Peter Osborne said that even if the respondents were entitled to distributions of OTE profit, that didn’t mean they were “somehow entitled to simply take funds and apply them for their own uses.”
“The books and records of the OTE Group are incomplete and lacking,” said Osborne. “There is no evidence before me of resolutions, meeting minutes, correspondence or any documents demonstrating or even suggesting that these transfers were in fact, or were even intended to be, distributions of profit or income.”
Osborne ordered the respondents to return the yacht to Florida as part of the court injunction.
Legal counsel for the respondents confirmed with the courts that the vessel had been returned to Florida about a week after the injunction was granted.
According to CCAA court filings, OTE owes its creditors more than $78 million, with roughly half of that debt owed to the government in provincial and federal gas tax remittance payments.
Assessments from the Canada Revenue Agency, meanwhile, show that OTE owes more than $174 million in federal fuel charge and excise tax payments.