Former PKI salesman goes to bat for beaten investors

Photo: The entrance to Arlan Galbraith's property near Cochrane Ontario.

by BETTER FARMING STAFF
© Copyright AgMedia Inc

Former Pigeon King International salesman Bill Top, of Drayton, Ontario, says he doesn’t expect any pay for helping out “some small families [who] have lost their family farms, their livelihoods and family trust.” Top says “one person suffered a heart attack brought on by the stress of losing everything, two others are on suicide watch and yet another lost everything and has a disability. It’s clearly about justice.”

About 50 breeders are working together to recoup their losses after the June collapse of Pigeon King International (PKI), says organizer Joline Humbert. PKI sold pigeon breeding pairs for as much as $500 and bought back offspring for up to $50 each.

The group formed in July, just weeks after bankruptcy trustee BDO Dunwoody notified breeders of a creditors’ meeting to be held later that month. PKI’s owner, Arlan Galbraith, announced the company’s failure in an email on June 17 and then moved to his new luxury home in a remote area near Cochrane in northern Ontario.

“Everybody was lost; nobody knew where to go and we couldn’t get help,” says Humbert, who is based in Republic, Ohio. Humbert’s calls to PKI and to Moorefield Ontario salesman Keith Van Dyk went unreturned.

A desperate situation
Joline and her husband Aaron are desperate. Their 40-acre farm is collateral for a $400,000 loan. The money covered acquisition of 1,200 birds and an expensive barn. “We thought, ‘we are building this, we’re putting a lot of money into this, we are looking at a 10-year plan so we wanted the equipment to last,’” she says.

Breeding pairs arrived April 2 and the couple was preparing to ship their first 600 young birds when they learned of the collapse.

Dealing with birds
In the weeks that followed, the Humberts searched for a way to deal with the birds. A nearby processor briefly expressed interest in using them for squab production. “We were ecstatic,” Humbert says. But at seven ounces, the birds’ slaughter weight was far below the standard consumer expectations of between 16 and 18 ounces. The couple instead sold the birds to hunting clubs.

Because the situation involved two national jurisdictions, lawyers didn’t want to get involved. “By the third week in July, we were going nowhere,” she says.

Group forms
Then Humbert joined forces with another breeder, Darlene Thayer in Milan, Ohio. They  asked every U.S. breeder on the bankruptcy list for $100 to arrange for representation. Fifty responded and the group hired Toronto-based lawyer Maureen Ward to represent their interests with the trustee at the creditors meeting and investigate Galbraith’s private assets.

Lawyer departs
However, on Aug. 26, Ward, an attorney with Bennett Jones LLP, a Canadian firm specializing in fraud recovery, withdrew from the case and returned the group’s deposit of $2,000. “We believe that this private investigation is not necessary since the Trustee in Bankruptcy is thoroughly reviewing the accounts and personal assets of Arlan Galbraith and you will therefore be entitled to such information in that process,” Ward wrote in her letter of resignation.

Contacted Sept. 4, Ward says, “I could have taken on this as a full-time job as a charity, but I can’t.” Although she notes there are options for breeders to recover funds, “at this point we’re [the firm] not pursuing that.”

Top steps in
Having someone familiar with the Canadian legal system was key for the group, says Humbert, who doesn't know how laws work in Canada. That’s when they called Bill Top.

“His name just kept popping up,” Humbert recalls. Top worked for PKI as a salesman in 2005 but left February 2006, after becoming uneasy about company practices. Since his departure Top has registered his concerns with different Canadian authorities, including the Ontario Ministry of Agriculture, Food and Rural Affairs. Ministry officials claim no complaints about the business have been received and note OMAFRA is not authorized to investigate complaints about business practices.

That Canadian officials did not publicize they were alerted to possible problems with the business nearly two years before it declared bankruptcy infuriates Humbert. She and her husband researched not only the company (including contacting the Better Business Bureau in Ontario), but also the squab market in case they needed to find an alternative market for their birds. She says if a red flag had been raised, they would not have pursued the opportunity.

Top came on board in August, the same month that Humbert and Thayer gathered statements from other group members to file with the Waterloo Regional Police Service. The Waterloo fraud squad is conducting a preliminary investigation into PKI.

Comparing the information in the statements is revealing, Humbert says. A salesman warned one farmer that the hog business was going to go under because the market was so bad. The Humberts have contract hogs. The salesman, Van Dyk, “never mentioned that [warning] to us because he knew that we would know that was a lie,” she says. The group also learned there were at least two different bank destinations in Waterloo for breeder payments: a Scotiabank and a TD Canada Trust.

Tough to generate interest
Humbert and Thayer tried to raise interest locally. On Oct. 15 they met with a Seneca County, Ohio prosecutor. They also spoke to the FBI but were told the bureau would not act on anything less than a $1 million loss in one jurisdiction within a county, which the group hasn’t yet been able to prove.

Steve Moline, Iowa’s assistant attorney general, says he monitors developments. Last December, the state formally investigated the company’s operations and negotiated a deal barring PKI and Galbraith from establishing new contracts with state residents. Moline believes the company honoured the arrangement, declining comment about one resident’s claim to have negotiated a contract after the moratorium was introduced. If it exists, the allegation would be a part of the state’s investigative file, which is not a part of public record, Moline explains.

He says chances are slim of recouping any money from the defunct company and the state is unlikely to pursue PKI. “We are constrained by the elements of financial reality,” and adds prospects of recovering money are slim: “It appears that Mr. Galbraith was completely bust.”

Moline wasn’t surprised that company records show about $600,000 was spent on improvements to a property Galbraith personally owns and more than $2 million was transferred to a company bearing the same name as the property – Sacred Dove Ranch. PKI’s bankruptcy trustee found no clear connection between this corporation, whose sole shareholder is Galbraith, and the property. By July 2, the trustee seized the $20,000 that remained in the Sacred Dove Ranch Inc. bank account. Just how the other money was spent BDO spokesperson Susan Taves can’t say. “We aren’t really right now in a [legal] position to investigate that bank account.”

Moline observes that “what happens a lot of times [as a scheme begins to fail] is that toward the end it finally dawns on the guy that it’s not going to work so he’s not going to end up with nothing.”

“That’s when the goofy stuff starts.”

Iowa won’t attempt to claw back money from other investors, as has been the practice in some states facing similar circumstances. Moline wonders if there is statutory authority to do that.

Efforts in Canada falter
According to Humbert, the American group’s efforts so far in Canada have fallen on deaf ears. She has contacted with little success several different business groups and authorities, such as the Canadian Federation of Independent Business and the federal Competition Bureau. By Oct. 16, there had been no response to correspondence mailed to PKI’s trustee on Sept. 14.

Humbert says the group has no interest in joining a squab production venture being explored by 80 former PKI breeders in Ontario. “The birds are junk,” she repeats.

She and her husband feel they are in limbo. They don’t know how they will pay back $50,000 due in February. “We haven’t gotten any positive feedback on anything.”

Staff Sgt. Wally Hogg says the Waterloo Regional Police Service fraud squad is still doing its preliminary review of the case and expects to consult the Crown attorney in the next couple of weeks.

By late September police had interviewed six employees and fielded 130 complaints from breeders. Hogg affirms there has been no contact with breeders in the United States but says the squad contacted one state government.

RCMP on the job
An investigator with the RCMP is working with the squad on the preliminary investigation. Hogg notes that if police commence a formal investigation, RCMP involvement would be helpful “in the event we have to go Stateside.”

Taves says the bankruptcy review and investigation is finished “and we’ve relayed a bunch of information to the [Waterloo] police.” She says they provided the information because police already had a file opened “before we got involved.” She points out the police “are handling the complaints and determining if there has been a crime.”

“This file certainly has got some question marks around it, there’s no doubt about it,” Taves says. “There’s a lot of cash that moved.”

Taves says about $135,000 remains after liquefying assets. The money remains in a trust account “until we get any further comment from any other investigation that’s going on.”

Any other next steps are on hold too, pending the outcome of the police’s preliminary investigation. Taves could not confirm if one of those next steps might be to petition Galbraith into personal bankruptcy. BF

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