Investors who put thousands of dollars into businesses headed by Alena Pastuch told a Regina courtroom they were persuaded by promises of zero risk, guaranteed investments, company shares and the option to recoup the money with interest at any time.
But a decade after investing $100,000 and $200,000 respectively, two witnesses testified Tuesday they have yet to get back the bulk of their money.
“To my knowledge, the funds were used to complete the project and prepare it for sale,” Garnet Peterson told the court.
Asked by Crown prosecutor Dana Brule if Peterson had agreed Pastuch could use his invested money for her personal expenses — including gambling, clothing, health and beauty, spas, gym memberships or liquor, Peterson replied, “No.”
Brule later asked if Peterson agreed his funds would be used to buy memorabilia or put towards a band called Volcanoless in Canada. “No I wouldn’t think so,” said Peterson, adding he had never even heard of the band.
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Pastuch has pleaded not guilty to charges of theft, fraud and money laundering, stemming from the alleged misappropriation of millions of dollars in investments. Witnesses said they understood Pastuch’s technology companies were focused on creating cyber security and child protection software.
Corey Kardash first heard about Pastuch’s investment opportunity in the fall of 2007. “She made it sound like there wasn’t any risk,” he said. He made two $50,000 investments. He only ever received one $5,000 payment for his investment.
“She’d send emails out with updates,” Kardash said. They indicated the company had offices in Calgary and Los Angeles, and that Pastuch was on trips promoting the product. “The further it went along, the more skeptical I was.” Kardash said any communication from her stopped in 2010, a move she attributed to an investigation then underway by the securities commission.
In cross-examination by Pastuch, Kardash agreed he had received updates indicating the company had a $20-million valuation. “I don’t know who gave (it),” he said, adding he assumed the figure referred to the company’s assets.
Peterson testified to a written proposal he received in November 2007 from Pastuch, indicating her company had purchased technology for $1.3 million and needed money to perfect the product and bring it to market. Security for the investment included $1.8 million in “receivables” from the Saskatchewan government, according to the proposal.
Over time, Peterson and his company invested a total $200,000.
Shown a chain of emails between Pastuch and himself from late December 2008 to July 2009, Peterson said he was asking for half his investment back, as allowed by the terms of the agreement. “Her responses felt kind of threatening,” he told the court. For example, reading from Pastuch’s response, she stated, “this now puts us in a bit of a predicament … so I will be putting to the vote today to remove you altogether.” Peterson said it was the first time he understood he could be kicked out of the investment by a vote of “executives.”
In another email, Pastuch says she’s not going to allow any more guaranteed investors because of the “sheer frustration” in dealing with them.
Peterson eventually received $37,000, with a promise of future weekly instalments — but they never came. Asked what became of the rest of his money, Peterson replied, “I don’t know.”
An update sent to investors, including Peterson, in March 2010, as a securities investigation — separate from the criminal investigation — was underway said Pastuch and the company executives had decided to pay back in full all the guaranteed investors from the sale of the intellectual property. Another update four months later said efforts were underway to secure buyers, but blamed the commission’s actions for forcing it to change the name of the company and products, so potential buyers wouldn’t see the commission’s “deceptive stories.”
The letter also accused the commission of telling investors “complete lies.”
The trial before Justice Richard Elson is scheduled for three months.