Former Royal Group Technologies Ltd. executives were acting within acceptable business practices when they were accused of fraud, their lawyer said April 21.
The bottom line is, no fraud was committed by anyone, said Mark Sandler, lawyer for former Royal Group Chairman, CEO and President Vic De Zen. Sandler gave the defense's opening remarks April 21, the second day of the trial being held in Oshawa.
Two allegedly fraudulent transactions fell below the C$60 million (US$60 million) threshold at which transactions needed to be approved by the Royal Group board, Sandler told the court.
One transaction was a 1998 land flip of 185 acres by which De Zen and three other executives shared in a C$6.5 million gain from a land sale to Royal Group for C$27.4 million.
The other transaction was the sale of a steel door company by Royal Group to Premdor Inc. The deal included warrants converted to shares in 2002, with Royal Group executives pocketing the proceeds of C$2 million from the shares sale rather than Royal Group.
Sandler said the transactions occurred during a time when corporate governance was less rigorous than it is now. De Zen's style was to reward executives for their work, and the payments were in keeping with that strategy. Royal Group is based in Woodbridge, Ontario.
The six pleaded not guilty to Justice Richard Blouin on the first day of the trial. Charged with fraud of over C$5,000 in the land-flip deal are Vic De Zen, former Royal Group President Douglas Dunsmuir, former Chief Financial Officer Gary Brown and former Vice President of corporate finance Ron Goegan.
Accused of fraud of over C$5,000 in the share warrant deal are De Zen, Dunsmuir and Goegan, former Vice President Luciano Galasso and former accounting director Gordon Brocklehurst.
De Zen founded Royal Group in 1970; by 1990, the firm had become the largest profile extruder in North America. De Zen regularly provided incentives to his managers to reward good work. At the time the firm went public, it had more than 60 managers and 49 joint ventures and subsidiaries, Sandler said.
De Zen was fired in 2004 and then lost control of Royal Group, which was bought by Atlanta-based Georgia Gulf Corp. in 2006.
Crown attorney Damien Frost said in his opening remarks that De Zen and other accused officials took elaborate steps to hide their actions from other Royal employees, securities officials and the investing public.
It is alleged that Mr. De Zen and other directors and officers of Royal Group defrauded their own company of millions of dollars, Frost said.
Thousands of relevant documents were collected by the Royal Canadian Mounted Police in their investigations of the alleged frauds. Any of the documents could be called up in court by the Crown prosecutors, Frost said. The Crown expects to call 24 witnesses at the trial, including former independent directors.
While Royal was a public company, the public markets provided it with hundreds of millions of dollars of financing as thousands of individuals invested in it, Frost stressed.
Galasso, Royal Group's vice president and director of taxation, left Royal in 2004 to work with De Zen's private company, Zzen Group of Woodbridge, Ontario, according to court records. Internet data indicate Zzen's main business is real estate development. De Zen also is rumored to be involved in another extrusion business, called Vision Extrusions Ltd. of Woodbridge.
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