Former Royal Group Technologies Ltd. director Gregory Sorbara testified that he did not know a group of Royal Group insiders bought and then sold to Royal Group a 185-acre parcel of land adjacent to Royal's headquarters in Woodbridge, Ontario.
As a member of Royal Group's audit committee, Sorbara would have expected such a deal to come under scrutiny.
It would be a material contract, Sorbara said in response to questions posed by Crown Prosecutor Damien Frost in the trial on April 27.
The 1998 deal, Royal Group's largest real estate purchase up to that time, should have been disclosed to the board, according to Sorbara, even though Royal Group's constitution stipulated the board must be alerted if a contract meets a C$60 million (US$60 million) threshold. The constitution also requires officers of the company to disclose material contracts that could mean a conflict of interest.
Sorbara was a member of Royal's board from 1994-2003. He also was a member of the Province of Ontario Legislature.
Royal needed the 185-acre parcel to expand its manufacturing and distribution space, according to minutes from a board meeting. It planned to add 2 million square feet of space, partly to accommodate its growing Royal Building System product line of extruded building panels.
Former Royal Group Chairman Vic De Zen, former President Doug Dunsmuir, former Chief Financial Officer Gary Brown and former Vice President of corporate finance Ron Goegan are charged with fraud for buying the land through a closely held company and then flipping it to Royal for a C$6.5 million (US$6.5 million) profit.
The trial started in Justice Richard Blouin's court in Oshawa on April 20, and is continuing.
Sorbara testified that the audit committee was not told the price of the land bought by Royal, who it was purchased from, whether the accused had any role in it or whether De Zen or Goegan were approached to buy the land.
I don't recall anything about the property acquisition, Sorbara said under questioning.
Discussion centered around the building of the [expansion] campus.
Sorbara said other material contracts came to board attention, including the purchase of 60 percent of housewares producer Gracious Living. The land deal was not revealed to Royal's own real estate division. Royal Group's auditors, KPMG LLP, also seemed unaware of it and it was not reflected in Royal Group's annual report consolidated statements.
In a parallel fraud case, Royal Canadian Mounted Police charged De Zen, Dunsmuir, Goegan, former Vice President Luciano Galasso and accounting director Gordon Brocklehurst in relation to Royal Group's sale of a steel door subisidiary to Premdor Inc. in 2002. In that case, the accused allegedly executed warrants that were part of the sale price and pocketed the proceeds. The warrants and their sale also were not disclosed to the board, Sorbara recalled.
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