Apr. 16, 2014 – Investors in the company Capital Alternatives signed paperwork without understanding its purpose and had difficulty retrieving their funds, according to testimony heard on Wed. April 9, 2014.

Stephen Kendall and Chris Houston, two founders of investment company Capital Alternatives, stand accused of fraud and conspiracy to commit fraud.

Crown witness Cynthia Schug said she was convinced by colleague Margaret Sincovich to invest with Capital Alternatives in 2000 with the promise of rolling funds into the overseas gold company, Syndicated Gold Depository S.A. (SGD).

Schug was assured that she would be paid 3% of her investment balance per month in interest, a sum which would allow her to retire early.

“Being single, I was thinking I could take care of my mom and dad and not worry about money,” Schug said.

“I took my pension that Nortel had paid us out, which was around $50,000 and put that in, and then $25,000 in Nortel shares that we got when we worked for the company.”

Having attended a meeting with Gary Sorenson, a representative of SGD, Schug was convinced to take out a line of credit of $80,000 against her house to invest more money with Capital Alternatives.

After paying her membership and legal fees to Capital Alternatives, the second amount actually invested came to just under $42,000.

Schug recognized her own handwriting on the original investment documents, but could not identify the writing on many subsequent contracts and documents that transferred her money to different accounts, reinvesting the funds into SGD and tracking her funds overseas.

According to Schug, she only attended a few public meetings, and dealt primarily with Sincovich, who handled a lot of her paperwork on behalf of Capital Alternatives.

Schug had never met Kendall or Houston, and admitted that their names were unfamiliar.

Statements received in the mail proved that Schug’s money was accruing interest and that her balance was increasing.

By February 2002, Schug had a balance of over $135,000 and wanted to withdraw a portion of her investment to pay off her debt from purchasing a new car.

“I was having trouble getting the money out, and Margaret was helping me, but we weren’t getting anywhere and we started getting nervous,” Schug said.

“[Margaret] said that we needed to get our money out of there.”

Schug sent four written requests to release her money from Capital Alternatives and SGD to the company accountants in the U.S. over the course of five months, without response.

“Margaret was setting [the money] up to be wired into Yugoslavia and then Montenegro, but the company was saying ‘if you take the money out of our company we can’t guarantee it,’” Schug said.

“Basically, if they lost my money they wouldn’t be responsible.”

Schug was guided by Sincovich to write a letter to one of the heads of Capital Alternatives, Steve, but was given no last name.

By September 2002, Schug had been told that her money was no longer with SGD, but there was no evidence of its arrival in the Montenegro account.

“It was lost,” Schug said.

“Now I owe the government money because of investing some of my RRSP that I thought I could pay back with my monthly payments from SGD, and I had to remortgage my house because of my stupidity of taking money against it.”

Defense counsel Valfour Der Q.C. questioned Schug’s decision to reinvest her money from SGD to Yugoslavia, rather than having the entire amount returned to her personally.

“I was in debt, and the idea was to continue on making money, so I wouldn’t lose anything and I could pay everything back,” Schug said.

According to crown prosecutor Tyler Lord, Schug is one of nearly fifty investors testifying against Kendall and Houston.

“We’ve probably heard from over 20 already, and we’ve got at least another two weeks’ worth of witnesses to call in this fraud trial,” Lord said.

Kendall and Houston have pled not guilty to their charges and await a decision by Chief of Justice McIntyre, which should be made early in May.