Emanuel Arruda doesn’t expect everyone to believe him, but the co-founder of the League group of companies says he has maintained his integrity and is suffering as much as the investors who put their money and faith in the company and now face massive financial losses.
In an email exchange, Arruda, who founded League with Adam Gant in 2005, told the Times Colonist the damning report from the monitor overseeing League’s restructuring efforts paints a picture of “a company I’ve never seen.”
The report from PricewaterhouseCoopers showed League to be poorly run, with inexperienced people at the helm, and put much of the blame for its demise on the shoulders of its two founders.
Written by monitor Mike Vermette of PricewaterhouseCoopers, the report noted a key component to League’s fundraising efforts was to create an image of success with high-end offices, a coat of arms and regular cash distributions to investors — all things League could not afford to do.
The report noted that League, which at one point had 135 employees and $418 million in assets, will cease to exist by the first quarter of next year as the company has amassed $233 million in liabilities and owes $369 million to investors.
Arruda maintains he is in the same boat as investors — the monitor has said investors have lost $331 million, or 90 per cent, of the $369 million they originally invested.
“As the monitor’s report shows, through my actions (how I’ve invested my energy and my money) I’ve maintained integrity. … I believed in our investments just as much as [our investors] did,” he wrote. “Considering I invested and reinvested almost everything I saved into the [real estate investment trust] like so many others, I have no words that can adequately express how shocked and saddened I am.”
League’s 4,280 investors, who put $369 million into various investment schemes, are expected to recoup no more than $14 million as League winds down operations.
Arruda counts himself among their number.
And the monitor’s report does point out Arruda held investments in League totalling $290,000.
“I expect some will disbelieve my words, but my actions speak volumes,” Arruda wrote. “In building this business to fulfil my vision of helping families create wealth by giving them access to investments previously available only to institutions, I sacrificed my marriage, health, investments, income and now my good name.”
However, the monitor’s report also notes Arruda was well compensated and took in nearly $2.4 million between 2005 and the fall of 2013.
According to the monitor’s report, Gant did not make any direct investment into League, though his relatives invested more than $450,000. Of that they are expected to recoup less than $24,000.
Gant, whose compensation between 2005 and 2013 was $3.2 million, did not return calls for comment.
But having some skin in the game has not meant Arruda and Gant are getting a break from some of the 4,280 investors.
“I feel like a complete idiot,” said one investor who has lost more than $210,000 and asked to remain anonymous. “There’s nothing left. Adam Gant and Emanuel Arruda stole my retirement.”
Many investors said they were still digesting the monitor’s 120-page report that paints a very dim picture for the recovery of much money and the future of the company.
While secured lenders, who are owed $199 million, will get virtually all of their money back — there will be $193 million available after asset sales — other creditors and investors will get pennies on the dollar.
Some creditors with security will get $1.8 million of the $7.5 million owed to them; the general creditors, which include employees and trade creditors who are owed $23 million, stand to split $2.1 million.
The restructuring process under the auspices of the Companies Creditor’s Arrangement Act was intended to leave a company that could continue as a going concern and at some point offer some hope and value for investors.
But Vermette said it had been determined the best course of action is an orderly liquidation of assets to provide some return and then wind down the company.
