PwC, the trustee overseeing disgraced mortgage broker Greg Martel’s bankruptcy, has gone to bat for investors with the Canada Revenue Agency to try to relieve some of the pressure investors have been feeling.
In an email to investors sent this week, PwC said it had heard back from the federal agency which has provided some guidance “for investors who wish to pause collection activities that may be currently underway.”
Several of Martel’s investors had complained they were facing tax bills and then collection proceedings initiated by the CRA.
A number of them shared with the Times Colonist that their T-5 forms, used to report interest and investment income from non-registered investments, stated they had income from investments made with Martel, even though Martel had stopped sending cheques.
Essentially, they were being taxed on investment money they don’t have and that has gone missing along with Martel.
The Canada Revenue Agency suggested investors have two options.
First off they can file an objection which will preserve their right to an impartial review by the CRA that will consider underlying facts and circumstances. When an objection is filed the CRA normally postpones collection action on the amount in dispute, though interest will still accrue on unpaid balances owed.
The other option is for an investor to request an adjustment to their tax return to change amounts entered on specific lines. Those requests do not result in the CRA postponing collection activity.
Many investors are hoping the funds-flow analysis the trustee is undertaking will show where all of the money Martel took from investors went.
The analysis is being done to determine if the bridge loans Martel claimed to have arranged ever existed and if there is money sitting in an account somewhere that could offset investors’ losses.
On the other hand, the analysis may prove that Martel was operating a Ponzi scheme — a fraud where existing investors are paid with money from new investors — which many investors believe will give the CRA official licence to re-evaluate the taxable income.
PwC has told investors and creditors, who claim Martel owes them in excess of $300 million, that it has made significant progress on the funds-flow analysis.
PwC wrote this week it expects that analysis will determine the cash invested by and cash distributed to each investor.
The analysis will track more than 50,000 transactions through 40-plus accounts at various financial institutions.
Those transactions represent more than $295 million in short‑term loan investments Martel had been offering through his company My Mortgage Auction.
To date the receiver has found no proof the loans ever existed.
PwC believes there are other investors who have not yet come forward and anticipates more than 1,300 investors could be tied up in the scheme, which it estimates involves nearly $300 million.
To date, the receiver has recovered only a small fraction of that.
Martel’s whereabouts are unknown. Warrants for Martel’s arrest have been issued in Canada and the U.S.
The B.C. Securities Commission is also investigating.
