Royal Group Technologies Ltd. executives and the firm's auditors routinely and openly dealt with related-party transactions in the years leading up to two secretive, related-party deals.
“KPMG reviewed how it might deal with [disclosed transactions],” said Renzo Francescutti, auditor with accounting firm KPMG LLP of Toronto. He was referring to several companies owned by Royal Group insiders that were bought by Royal Group after it went public in 1994.
Royal Group was an amalgamation of dozens of companies when it went public, and later added more that were closely held by Royal Group officers.
Former Royal Chairman and CEO Vic De Zen and three other former executives are charged with fraud in a land flip in which they made a C$6.5 million (US$6.3 million) profit. De Zen and three former executives also were charged with fraud in the sale of a door company in which they netted a C$2 million (US$1.9 million) profit. In each case the executives allegedly did not alert Royal Group's board that they were related-party transactions.
Francescutti was testifying under questioning by Crown Prosecutor Damien Frost. In Francescutti's testimony, he confirmed numerous examples of Royal Group and KPMG treating related-party transactions openly. Francescutti was involved in auditing Royal Group's books from 1997-2000.
Charged with De Zen in the 1998 land-flip deal are former Royal Group President Douglas Dunsmuir, former Chief Financial Officer Gary Brown and former corporate finance Vice President Ron Goegan. Charged with De Zen in the 2002 door subsidiary deal are Dunsmuir, Goegan, former Vice President Luciano Galasso and former accounting director Gordon Brocklehurst.
De Zen was fired in 2004 and the company was sold to Georgia Gulf Corp. in 2006. The company, now called Royal Group Inc., was until recently the largest profile and pipe extruder in North America. It was the second-largest in 2008, with estimated sales of $915 million.
The trial, in Oshawa, is expected to last into summer and resume in January.
Copyright 2010 Crain Communications Inc. All Rights Reserved.
