Leisure Canada's Cuban Golf Project Not Yet On Par

BC GOLF NEWS first interviewed the former CEO of Leisure Canada Inc., Walter Berukoff, in 2003 and over the past seven years shared some of the company's promising news releases.

This past August Leisure Canada was the subject of a featured article in Golf Magazine which provided a glowing hope for the future of the company for both investors and visitors to Cuba looking to play some golf in this sunny paradise.

Now, however, we'd like to share Mr. Baines' views on this long awaited project. His column last week was entitled:

by David Baines,
Vancouver Sun
Published: Saturday, February 27, 2010

For more than a decade, Leisure Canada Inc. has described itself as the "leading developer of luxury resorts in Cuba."

The North Vancouver company boasts on its website it has "multiple properties currently under development including five-star hotels, over 4,200 hotel rooms, championship golf courses, and time-share condominiums."

Earlier this month, the TSX Venture Exchange named Leisure Canada as one of its "Top 50" companies.

"These outstanding companies are proven leaders in their respective sectors," the company quoted TSXV president John McCoach in a release.

It was a huge leap to describe Leisure Canada as a "proven leader." To date, the company has raised more than $46 million US in equity capital, but hasn't built a thing.

Leisure Canada was a travel services company trading on the old Canadian Dealing Network in 1997 when it acquired Wilton Properties Ltd., a private company controlled by longtime Vancouver promoter Walter Berukoff and several associates. Wilton had negotiated a joint venture with the Cuban government to develop three vacation resorts at a total estimated cost of $400 million US. The venture was based largely on the premise that the U.S. would lift its embargo on Americans travelling to Cuba and the tourist industry in Cuba would boom.

But Leisure Canada wasn't going to wait for that to happen: "Architectural and engineering work on the first two Cuban resorts is proceeding well and has moved into the final design development stage," the company said in an August 1997 release.

In November 1999, the company said construction would commence within a matter of weeks: "The first phase of construction is expected to begin by early January 2000."

In ensuing months and years, Berukoff announced partnerships with big-name groups such as Le Meridien Hotels and the Professional Golfers' Association of Great Britain and Ireland.

Several officers and directors appear to be experienced in hotel development and management, and there has also been celebrity board members: Ken Taylor, the former Canadian ambassador to Iran who helped six Americans escape from the country during the hostage crisis in 1979, has been a director since 2000.

All this may have helped sell shares, but it didn't build any hotels. There were so many delays that, in 2005, the company wrote off $6.73 million of pre-construction costs on two of its three projects due to the "uncertainty of the recoverability of these costs."

With the stock languishing, the company's future looked bleak. Then in early 2008, Berukoff announced a Dubai-based firm called Profile Investments had "irrevocably agreed" to invest $20 million, and had even made a $995,307 US non-refundable advance. But by the end of the year, this "irrevocable" $20-million investment was reduced to $2 million, of which half was to be satisfied by the "non-refundable advance." Berukoff blamed it on the financial meltdown.

By early 2009, it looked as if the company was on death row, then it had a reprieve: A syndicate of underwriters led by Dundee Securities and Paradigm Capital brokered the private sale of just over $18 million worth of stock. Berukoff reportedly bought $2 million worth. Dundee -- which was generously rewarded for its efforts -- recommended the stock as a buy, with a $2 target price, based primarily on the possibility that the U.S. will relax its Cuba embargo. This is a very ambitious target considering the stock closed Friday at 28 cents.

But even Berukoff admits he has left shareholders standing at the altar on many occasions: "Frankly, I don't think our company has been a great performer," he says, taking issue with the TSXV's Top 50 ranking.

There are also serious questions about Berukoff's share dealings. To acquire Wilton, Leisure Canada paid 13 million shares. According to filings, Berukoff received "approximately 9.58 million" of those 13 million shares. He claims the other shares went to his associates. However, in 2002, one of those associates, Jorge Nicanovich, alleged in a lawsuit filed in B.C. Supreme Court that Berukoff gave him only 300,000 of the 2.6 million shares he was entitled to. Nicanovich claimed damages of $13.22 million.

Berukoff describes the claim as "spurious at best." He says the case never went to court and "nobody paid anybody anything," but he conceded it was a mistake to deal with Nicanovich, who has been involved in many dubious offshore stock deals involving Vancouver juniors.

In 1998, after the merger was completed, Berukoff reported that, as of April 1998, he owned 9,461,728 shares. He holds most of his shares through his private company, International Capital Inc., which is domiciled in Anguilla, a well-known tax and secrecy haven. He claims he has not sold a single share since the Cuban venture became a publicly traded entity in 1997. By May 2002, however, the balance of his holdings had declined to 7,850,728 shares, a reduction of 1,611,000 shares.

By April 2003, Berukoff's holdings had increased to 13,014,248 shares. In August 2003, he reported that his Anguilla company had pledged 3,834,768 of those shares to secure a loan from an unidentified third party. That reduction was duly reported on insider trading reports. But the shares have never reappeared. What happened to them has never been disclosed.

As of April 2004, Berukoff's holdings stood at 9,179,480 shares (after taking into the account the shares he pledged). By May 2008, that total had dropped to 7,414,617, a further reduction of 1,764,863 shares. This reduction does not appear to be consistent with Berukoff's assertion that he has not sold any shares.

Berukoff told me he relies on his "professional advisers" to file his reports. He said he will review the matter and if there are any errors, he will "get to the bottom of it."

If he doesn't, I think the BCSC should.

David Baines has been uncovering white collar crime, stock fraud in particular, for the past 23 years. He has an MBA from the University of Western Ontario and has won four National Newspaper Awards, a National Magazine Award and five Jack Webster Awards. His column appears regularly on Wednesdays and Saturdays, and on other days as events occur.
dbaines@vancouversun.com