Investors thought they were helping to fund a Saskatoon real-estate firm’s ambitious expansion into the US — but instead, they were helping to keep a failing company afloat.
That’s according to the findings of a court-ordered investigation which delved into the finances of the Epic Alliance group of companies.
Through its “hassle-free” landlord program, the company promised to find tenants and manage hundreds of rental properties in Saskatoon and North Battleford for out-of-province investors.
However, based on the report from court-appointed investigator Ernst and Young, money from investors hoping to profit from the company’s growth was used to help pay the absentee landlords as the business floundered.
“The EA Group frequently experienced cash shortfalls on (hassle-free) properties,” the report said.
According to the report, the company was “incurring significant losses” as many of the homes sat unoccupied or required repairs and maintenance.
Based on the report’s findings, the company also racked up losses from its other lines of business — such as its “fund-a-flip” program where investors were promised interest for helping Epic Alliance buy homes to renovate and resell.
The “flipped” homes would typically be used as inventory for the buyers in the landlord program, according to court documents.
One home used as an example in the report was purchased for the home flipping program for $198,000. It was later reappraised at $260,000 before being sold to a hassle-free landlord investor.
According to the company’s records, $824 was spent on renovations. The amount spent on labor is unknown.
The report called the home’s life cycle within the company “typical” and noted that a single appraiser was used for all of the firm’s properties.
Epic Alliance shut down earlier this year in the wake of a temporary cease-trade order issued in October by Saskatchewan’s Financial and Consumer Affairs Authority (FCAA) which interrupted the firm’s cash flow, according to court documents
“We just couldn’t come back from the cease-trade order. The FCAA f***ed us, so that’s it,” Rochelle Laflamme said in a Jan. 19 Zoom call with investors.
She co-founded Epic Alliance in 2013 with Alisa Thompson, who also participated in the call which informed investors of the company’s failure.
The pair touted a planned expansion south of the border to investors, registering 61 limited liability companies in the US and pledging to become a billion-dollar company.
To fund Epic Alliance’s move into the US market, $3.8 million was raised by selling shares in four numbered corporations.
Instead, according to the Ernst and Young report, the money was used to cover operating losses incurred by the company in Canada.
“The US expansion appears to have never materialized in a significant way,” the report said.
“The books and records of the Company indicate that only two properties were purchased and sold in the US”
Through its various lines of business, Epic Alliance raised a total of $211.9 from investors according to the Ernst and Young report. Most of it appears to be gone.
In February, a group of 121 investors successfully applied for the court-ordered investigation.
Saskatoon Police Service’s economic crimes unit is investigating the company, based on a complaint from an investor based in Ontario.
CTV News has been unable to reach Laflamme and Thompson for comment.