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Tuesday, November 12, 2013

From Perp to Plaintiff: As the worm turns.

Every day is a remembrance day of sorts for former Winnipegger David Wolinsky.

Wolinsky remembers making the perp walk to an airplane at Vancouver International Airport four years ago, hands cuffed, legs shackled and escorted through the airport's public area by two City of Winnipeg policemen.

He remembers being charged with conspiracy to defraud the Astra Credit Union (before it was swallowed up by Assiniboine Credit Union).  He remembers seeing his name dragged through the mud. And he remembers what the judge said when he dropped all the charges in April.

It's those memories that fuel the lawsuit Wolinsky has launched against what appears to be everyone associated with Astra-cum-Assiniboine Credit Union short of the cleaning lady and the night security guard.

Joining Wolinsky in the suit are three co-plaintiffs--- a financial consultant to Wolinsky's holding company, the Protos Group; the chief financial officer of Maple Leaf Distillers, one of the companies controlled by Protos; and Astra's chief credit officer.
Together they want more than damages caused by the charges laid against them in 2009, they want punitive, aggravated and exemplary damages.

Former lawyer Wolinsky, the chairman of Protos Group, was once one of Winnipeg's most prominent movers and shakers. His company controlled Salisbury House restaurants, among other businesses, and among his investors was friend and Winnipeg Mayor Sam Katz, back when being the Mayor's friend was a good thing and not suspicious  or shameful.

The fortunes of Protos began to implode around 2004.
The company was Astra's largest commercial client and Protos owed Astra millions in loans.  Wolinsky saw an opportunity to sell off some of Protos' assets, primarily Maple Leaf Distillers, to raise much needed operating cash.

When a potential buyer came sniffing around, things looked good. But it was taking forever to close the deal. In the meantime, Wolinsky needed to put some lipstick on the porker which was bleeding money, and value. 

Astra management alleged he did that, with the collusion of one of its own managers, by transferring funds daily between the accounts of Protos companies to cover overdrafts in each account and to create the illusion of a healthy company.  The name for that in police circles is cheque kiting, and those allegations formed the basis of the charges against Wolinsky et al.
As it happened, the buyer backed out, Maple Leaf Distillers went belly up, as did Protos. And David Wolinsky found himself in a Winnipeg police interview room far from his home in White Rock, B.C.

Then, last April, vindication!

Provincial Court Judge Marvin Garfinkle tossed out all charges following a preliminary hearing, but not before some serious tut-tutting at the shenanigans pulled by Astra.

It turned out that Astra was more than willing to go along with the game of musical cheques as long as it was making money, and anticipating the sale of Maple Leaf Distillers which would recoup the almost $4 million loaned to the company.

The Wolinsky lawsuit describes it this way:

"Each time a Protos Group account went into overdraft, Astra charged that account an overdraft fee, consisting of a per overdraft cheque fee of $5.00. This fee was charged in addition to Astra's regular line of credit  interest rate as well as the excess overdraft interest rate charged by Astra on these accounts which ranged from 24-28 percent."

"The per cheque overdraft fee amounted to many thousands of dollars (at $5 per, how many cheques did they write?...ed) and the excess overdraft interest rate amounted to many hundreds of thousands of dollars."

Garfinkel found that Astra was just extending more credit to Protos through the cheque rotation and by that was knowingly taking on more risk.  He concluded:

"Astra was deprived, it lost a lot of money; but that loss occurred because of business decisions to keep Maple Leaf afloat so a potential sale could go through.  Astra, in my assessment of the facts and the documents, acted with full knowledge of the situation.  There was clear reporting of the status of the Protos companies.  The fact that those reports even went to Credit Union Central and red flags were raised, but no one shot it down.  The decision was made to keep Maple Leaf afloat.  It is easy to assess that decision with hindsight, but at the time the anticipation was that there was no problem to the sale going through.  Any falsehood that arose came about, if there was any falsehood, came about with full knowledge of the staff and executive and board of Astra.  When questions were asked, the answer was, no recourse was lost.  This was true.  There was never recourse.  It was all to the same financial institution.  The cheques were all from accounts held by Astra.  This was a form of a loan and a fee was assessed, and up until the end, it was paid.  There was no fraud."

Case dismissed.

But the public humiliation of being led through an airport in chains is long and lingering. Now it's David Wolinsky's turn at bat. And he's swinging for the fence.

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