Alleged details of a complicated business deal in 2008 that led to fraud charges against Colwood businessman Ralph Kelly were revealed in B.C. Supreme Court on Wednesday.
“I thought I understood what I was doing … but it was above my head,” Crown witness Frank Pecorelli testified on the opening day of the trial.
Kelly, who is representing himself in the proceedings, is facing six charges of fraud and six charges of theft from Pecorelli, his friend Garret Campbell, and several others.
Although Kelly refused to plead to the charges and refused to participate in the jury selection process on Monday, Justice Doug Halfyard advised the jury not to hold Kelly’s unusual behaviour against him.
“He has pleaded not guilty to all charges,” Halfyard said. “It was evident he was saying he was not guilty.”
In his opening remarks, prosecutor Ian Hay gave the jury an outline of the case. He emphasized that what he was saying was not evidence, but what he expects the five Crown witnesses will say.
The jury will hear that in December 2008, Kelly met with Pecorelli and Campbell on several occasions. He proposed that if they raised $250,000, he could obtain a $5-million loan by utilizing something called a bank guarantee, Hay said.
Pecorelli and Campbell are expected to testify that they didn’t really understand how the deal worked, but they believed in it, Hay said.
From the $5 million Kelly was going to get, he would provide a loan to Pecorelli and Campbell of $1.5 million and he would charge them the going business rate on the loan, Hay said.
If Pecorelli and Campbell put up the $250,000, once the $5-million loan was received, Kelly would pay them back the $250,000 and he would pay them a lump sum at a large interest rate of 65 per cent. That would allow them to pay off anybody who lent them money, Hay said.
The jury can expect to hear that Pecorelli and Campbell borrowed $150,000 from one woman and gave the money to Kelly. The jury will also hear that Pecorelli borrowed $25,000 from a friend, while Campbell borrowed $50,000 from another man. They contributed this money to the growing pot, Hay said.
Together, Pecorelli and Campbell raised $225,000. They were led to believe that was enough, Hay said.
“I expect you will hear, Mr. Kelly told them the money they raised was going to stay on deposit and in the event the $5-million loan wasn’t arranged, they’d get their money back,” Hay said.
After they gave $225,000 to Kelly and before the big money had arrived, Kelly met with Pecorelli alone and proposed that if he could come up with 30,000 euros — roughly $50,000 Canadian — in 48 hours, Kelly could boost the amount of his loan by $3 million.
Pecorelli is expected to testify that he approached another woman who lent him $25,000. He spent another $23,000 of his own money in order to come up with 30,000 euros.
“In the end, the money did not stay on deposit. No loan was obtained,” Hay said. “Mr. Kelly did not return anyone’s money. He did not provide the interest payment sum that was supposed to be given on top of the $225,000. He did not provide a $5-million loan. He did not do any of those things. So in the end, Mr. Campbell and Mr. Pecorelli were left owing substantial sums to all the people they borrowed money from. And the lenders lost the money.”
On the stand, Pecorelli testified that he had no training in stocks, bonds or finances when he first met Kelly in the fall of 2008. He told the jury that Kelly impressed him as a man who could be a mentor to him. He said Kelly was glorifying his past to build himself up as a businessman.
“I wanted to learn to be successful. I thought he knew what he was doing … ,” Pecorelli testified. “We were going to be able to pay everyone back as soon as he got the $5 million in his account.”
Pecorelli and Campbell wanted to use the loan to buy an established local business, he said. They put an ad on Used Victoria for young entrepreneurs who were looking for an opportunity, the jury heard.
