Manitoba’s sixth-largest credit union has asked police to investigate the results of an internal audit that it says uncovered the movement of hundreds of millions of dollars in cheques among three related commercial accounts in 2005.
Winnipeg-based Astra Credit Union completed a special audit of the commercial accounts earlier this year. Astra has refused to release the findings of the audit, but sources have confirmed that at least $300 million in cheques were exchanged among the three accounts in 2005 alone, allowing the three companies allegedly involved to obtain millions of dollars of unauthorized credit.
Astra officials confirm the results of the audit were passed on to the Winnipeg Police Service for investigation. The police service refused to comment on its investigation.
“We’ve had no update from the police,” says Astra president Craig Lee. “They’re going through some interviews with Astra staff and others.”
Founded to serve members of the Canadian Armed Forces in Winnipeg, Astra currently operates six branches under an open bond. In its most recent financial statements, it reported total assets of $398 million.
The unauthorized loans first came to the attention of the Astra board in October 2005. At an emergency board meeting, it was discovered that three commercial accounts had been exchanging as much as $3 million in cheques on a daily basis, and were overdrawn well beyond authorized limits.
Astra then retained PricewaterhouseCoopers LLP to assist with an extended audit.
At its annual general meeting in April, Astra informed its more than 20,000 members that, after accounting for the “provision of doubtful loans” of $7.3 million extended in 2005, it was posting a net loss of $2.5 million.
In 2004, Astra recorded a $2.3 million net profit, allowing it to pay back $400,000 to its members in the form of loyalty bonuses. The 2005 loss turned what should have been a $4-million net profit into the $2.5-million loss, and eliminated plans to pay members another loyalty bonus.
Astra officials confirmed at the time that a senior employee in charge of overseeing the accounts had provided “incorrect” verbal and written reports to the credit union’s board. The employee in question was terminated.
The three accounts alleged to be involved in the audit belong to three related companies: Maple Leaf Distillers Inc., Protos International Inc. and Salisbury House of Canada Ltd. The three companies were related primarily through the involvement of Winnipeg businessmen David Wolinsky and Costas Ataliotis.
In addition to being officers and shareholders in Maple Leaf Distillers through Protos International (their holding company), Wolinsky and Ataliotis were officers of and had interests in Salisbury House.
Ataliotis and Wolinsky have repeatedly declined to comment on the Astra audit.
Both Maple Leaf Distillers, a blender and bottler of spirits and liqueurs that was once considered one of Manitoba’s fastest-growing companies, and Protos International were placed in receivership in January under the weight of $22 million in claims from creditors.
Salisbury House, a chain of 20 family diners, is considered to be a Winnipeg icon. Its minority shareholders once included notables such as Guess Who lead singer Burton Cummings and current Winnipeg Mayor Sam Katz.
Now under the control of a new ownership group, Salisbury House has asked the superintendent of bankruptcies to stay all legal proceedings to give it time to reach a deal with creditors, who are owed almost $7 million.
There may be more than one police investigation looking into the affairs of the three companies. BDO Dunwoody LLP, currently acting as the trustee in bankruptcy for Maple Leaf Distillers, has confirmed in a letter to creditors in late June that it had asked the superintendent of bankruptcies to refer “accounting irregularities” to the RCMP for further investigation.
Astra’s name, meanwhile, could disappear from the Winnipeg business landscape as early as January.
In late May, in the biggest merger in the province’s credit union history, Astra unveiled plans to team with the Assiniboine and Vantis credit unions to form the second-biggest co-operative financial institution in the province. With $1.7 billion in assets, the merged entity would trail only Steinbach Credit Union‘s $1.85 billion, assuming the deal is approved by members of the three credit unions.
Susan Deane, chairwoman of Assiniboine’s board, says the troika will retain Assiniboine’s name and brand and adds that she’s unconcerned with the recent history Astra brings to the deal. In fact, she says, Astra has recovered quickly from the challenge.
@page_break@Ian Dark, the 62-year-old chief executive of Astra, will not be joining the new entity.
He’ll oversee Astra’s integration process and then retire in January. “If I was 50 years old, I wouldn’t be retiring,” he says. IE