Peguis faces massive loan repayment in shadow of Ontario investigation of lender Allegations surround deals brokered by embattled Winnipeg businessman McCoshen
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Hey there, time traveller!
This article was published 25/06/2021 (706 days ago), so information in it may no longer be current.
Allegations of financial irregularities and kickbacks are swirling around a local businessman — leading to a potential disaster for one Manitoba First Nation and a possible fundraising hole for the Assiniboine Park Conservancy.
An Ontario Securities Commission investigation has raised serious concerns about the business dealings of Sean McCoshen, 53, who in recent years has pocketed millions of dollars in fees by brokering massive loans for First Nations.
Through his Manitoba-based company Usand Group, McCoshen brokered at least $122 million in loans for Peguis First Nation from Bridging Finance Inc., a Toronto company recently placed into receivership over concerns of financial irregularities.
BFI has requested repayment from Peguis, in full, by June 30.
At two high-profile events in Winnipeg in 2018 and 2019, McCoshen pledged to donate a total of $3 million to the Assiniboine Park Conservancy to help fund the construction of “the Leaf” building at the new Diversity Gardens.
It remains unclear if McCoshen has followed through with the donations.
An attempt to reach McCoshen — who has not been seen in public since the allegations first came to light roughly two months ago — through one of his companies, the Alaska-Alberta Railway Development Corp., was not successful prior to deadline Friday.
The allegations against McCoshen were first reported by the Globe and Mail.
Born in Nova Scotia, McCoshen grew up in Winnipeg and began his business career in the city in the late-1990s. After graduating from the University of Western Ontario with a law degree, he was called to the Manitoba bar in 1996, but did not practice in the province.
His first business venture appears to have been in the fashion industry, with the Winnipeg-based clothing company Brawd Inc., founded in 1996. Years later, he headed up an entity called Trans Global International Commodities Solutions Inc., also headquartered in Winnipeg.
Both companies eventually went belly-up.
More recently, McCoshen founded AARDC, which is seeking to build a railroad from Fort McMurray, Alta., to Alaska. In recent years, much of his work focused on brokering loans for First Nations, including multiple communities in Manitoba.
On April 30, Bridging Finance Inc. — an entity entwined with many of McCoshen’s business ventures — was placed into receivership, following an investigation from the Ontario Securities Commission that reported evidence of financial irregularities and kickbacks.
In recent days, McCoshen’s railway company (also BFI’s largest borrower) has signalled it plans to file for creditor protection.
Peguis First Nation — according to various documents obtained by the Free Press — is currently heavily indebted due to the loans brokered by the Winnipeg businessman.
The relationship between Peguis and McCoshen dates to at least 2012. By the summer of 2017, Peguis (located some 190 kilometres north of Winnipeg) was facing a housing crisis and was seeking to develop employment opportunities for its members.
Peguis hired Usand Group to broker loans for it on a fee-based model. It connected the First Nation to BFI, which resulted in three financial arrangements worth more than $37 million.
In total, Usand Group was paid more than $7 million in fees.
However, according to an existing financial arrangement with the Bank of Montreal, Peguis was not allowed to take on additional debt at that time. As a result of the deal cut between Peguis and BFI, BMO requested repayment in full.
McCoshen then arranged for Peguis to borrow millions more from BFI — at a significantly elevated interest rate — so it could repay BMO. At minimum, the Manitoba community of roughly 10,000 has borrowed $122 million from BFI in recent years.
According to a March 2021 report from the Chief Peguis Investment Corp., the community is currently $135 million in debt.
Peguis Chief Glenn Hudson did not respond to multiple requests for comment by deadline Friday.
On May 17, Peguis chief and council issued a letter to band members updating them on the situation with BFI. Early this year, BFI had set June 30 as the deadline for repayment of the loans.
“Chief and council realized that BFI had no interest in the advancement of the community or the direct needs of our people,” states the letter obtained by the Free Press.
Band member and former Canadian senator Murray Sinclair has been tapped by the First Nation to lead a team that will investigate the financial relationship and to negotiate with BFI.
“Chief and council realized that BFI had no interest in the advancement of the community or the direct needs of our people.” – Letter to Peguis band members
“The team… is creating a plan to ensure the community no longer is working with a lender that refuses to allow the advancement of the community and ensure that the First Nation only has lending relationships that are not overbearing and excessive in fees,” the letter states.
Alan Park, chief executive officer of Chief Peguis Investment Corp., which manages investments on behalf of the community, told the Free Press that BFI threw Peguis a lifeline in 2017, when it provided quick funding after the First Nation breached the terms of its loan with BMO.
Park said the vast majority of First Nations borrowers are reliable clients, who meet the terms of their financial agreements. In the rare cases they don’t, he said, it’s often because they’ve been fed bad advice from outsiders who don’t have the community’s best interests at heart.
“These First Nations groups and people are honourable. They pay their bills. They pay their loans. You always have your bad apples — but that happens in lending,” Park said.
“Where they often get into trouble is when they get advice from exterior consultants and advisers… If it doesn’t work, why do you keep repeating it? It gets you in trouble every single time. That’s why Peguis is where it is today — there’s no question about that in my mind.”
“These First Nations groups and people are honourable. They pay their bills. They pay their loans. You always have your bad apples– but that happens in lending.” – Alan Park, chief executive officer of Chief Peguis Investment Corp.
Peguis is not the only First Nations community in Manitoba to have past dealings with McCoshen.
In 2016, McCoshen brokered a loan for Misipawistik Cree Nation. After the deal went awry, the community filed a lawsuit against him. It was dropped just months later.
In November 2014, McCoshen brokered a loan for Brokenhead First Nation. Chief Deborah Smith said she does not know the exact details of the agreement, since it predates her time in office.
“There was an agreement with Usand that was entered into… I think it was to secure loans with the Bank of Montreal, and it does appear that Brokenhead did pay approximately $684,000 in fees to Usand that year,” Smith told the Free Press.
In 2016, the Aboriginal Peoples Television Network reported claims from two First Nations chiefs — one in Saskatchewan and one in Manitoba — who alleged McCoshen’s firm offered them kickbacks.
McCoshen sued the broadcaster and the two chiefs, claiming defamation. The case remains before the courts.
“It is the commission policy that all complaints and investigations are kept confidential, as such we cannot comment one way or another.” – Manitoba Securities Commision
On Friday, the Manitoba Securities Commission’s legal department issued a statement in response to inquiries from the Free Press about McCoshen and possible investigations into his business dealings in the province.
“It is the commission policy that all complaints and investigations are kept confidential, as such we cannot comment one way or another,” the MSC statement reads. “I would also note that we routinely provide assistance to other regulators on their investigations, but again cannot comment on any specific matter.”
At the same time, it remains unclear if McCoshen has followed through with a significant donation he pledged in Winnipeg.
In 2018, McCoshen announced he was donating $2 million to the Assiniboine Park Conservancy to support its Diversity Gardens projects. The following year, he pledged another $1 million.
When reached for comment this week, the conservancy would not confirm whether the pledges had been fulfilled.
“We do not disclose information regarding financial transactions related to private donations,” Laura Cabak, public relations communications manager, said in a written statement.
Unrelated to McCoshen’s pledged donations, the opening of the new, highly anticipated botanical conservatory has been significantly delayed, leading to two lawsuits.
The conservancy is suing the Leaf’s architects and an engineering firm, alleging design defects have delayed opening and sent costs skyrocketing. The lawsuit — alongside a related statement of claim against APC’s insurers — was filed last week. No statements of defence have been filed.
The outdoor portion of the facility is slated to open July 9. The opening of the indoor facility has been delayed until late 2022.
— with files from Dean Pritchard
Ryan Thorpe likes the pace of daily news, the feeling of a broadsheet in his hands and the stress of never-ending deadlines hanging over his head.
Updated on Friday, June 25, 2021 8:04 PM CDT: Corrects spelling from Bawd to Brawd.
Updated on Sunday, June 27, 2021 11:52 AM CDT: Changes time of loan agreement with Brokenhead First Nation from November 2016 to November 2014.