Extrusion major Royal Group Technologies Ltd. designated three of its officers as recipients of controversial share warrants in a transaction, a fraud-trial jury was told.
Former Royal Group Chairman and CEO Vic De Zen, former President Douglas Dunsmuir and former Chief Financial Officer Gary Brown were specified as warrant designees as part of a sales agreement between Royal Group and Premdor Inc.
Royal Group sold its Steelwood Doors Inc. unit to Premdor in 2000. Part of the deal included Premdor issuing 200,000 warrants, which the prosecution alleges were fraudulently cashed in by certain Royal Group executives.
Premdor's board of directors was aware the warrants were being issued to Royal or its designees. But the board placed no limits on who could receive the warrants, according to defense lawyer Mark Sandler, who was cross examining John Ambruz, Premdor vice president of strategic development.
“The board said nothing about that,” Sandler told the court June 7. “No one suggested that Royal executives wanted to hide the fact these warrants were going to individuals.”
Royal Group and Premdor planned to set up a joint venture in 2000 in which Royal would make composite doors that would be sold by Premdor, a major door manufacturer and supplier. The deal also included Royal Group's sale of Steelwood to Premdor. The sale went ahead in 2002 but the parties did not proceed with the joint venture.
Ultimately the Premdor warrants were provided to De Zen, Dunsmuir, former corporate finance Vice President Ron Goegan, former Vice President Luciano Galasso and former accounting director Gordon Brocklehurst, who were all charged with fraud over C$5,000 (US$4,750). The prosecution in the lengthy case alleges the insiders gained from selling the warrants without disclosing that part of the Steelwood deal to Royal Group's board or in the public company's communications. The warrants were sold for about C$2 million (US$1.9 million).
In a parallel case, De Zen, Dunsmuir, Goegan and Brown are charged with fraud related to a 1998 land-flip deal involving an area next to Royal Group's headquarters in Woodbridge, Ontario.
The trial is taking place in Oshawa. It will recess June 25 and resume in September. Lawyers estimate it could last into November or later.
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