The man who founded one of Canada’s most beloved brands of ethnic food says he lost his business to a fraud because he trusted his banker, the Royal Bank of Canada.
Peter Spyros Goudas, the entrepreneur from Greece who founded Goudas Food Products and Investments Ltd., in Toronto in 1969, says in court documents that his company, which sold food under the brand “Mr. Goudas,” went bankrupt in 2014 after the Royal Bank encouraged him to trust John Simmonds, and because the bank failed to do its due diligence before it loaned millions of dollars to Simmonds.
As the Financial Post reported, police have arrested Simmonds three times on fraud charges — twice last year and again on Feb. 3. Simmonds faces eight fraud charges related to a garbage truck manufacturer in the Muskoka region, and 15 charges in the Mr. Goudas and related cases. Police say the Goudas Food fraud involves dozens of victims who lost $30 million.
Peter Goudas says in an affidavit filed in the bankruptcy proceedings that he met Simmonds in 2014: “I was told he was a wealthy, sophisticated, successful businessman.
“He persuaded me that he would be able to grow Goudas Food Products into a billion dollar business,” Goudas says. The offer was conditional on approval from the Royal Bank. Simmonds said the bank told him he could trust Simmonds.
“My contact at RBC, Donna O’Reilly, advised me that RBC had investigated John Simmonds, that he was a highly regarded businessman, that the deal was a fair one, and that RBC would be prepared to consent to a change of control in favour of Simmonds’s company,” Goudas says in the affidavit.
“I now realize that Simmonds is a serial fraudster who is primarily in the business of pumping and dumping penny stock of companies he controls.”
The court last week released Simmonds on bail into the custody of one of his daughters. He is living under house arrest while awaiting trial. He told the Financial Post that he is innocent.
“I didn’t steal any money,” he said. “Never stolen a dime in my life from anyone.”
Mark Hamill, a spokesman for Royal Bank, said, “This is before the courts so I can’t comment.”
The Royal Bank in court documents says that it did not recommend that Goudas sell to Simmonds. The bank said Goudas met RBC representatives in March of 2014 “to inform RBC that he wished to sell his ownership interest in Goudas” to Simmonds.
That month, Simmonds bought Goudas Food for US$10 million in shares in Simmonds’s company, A.C. Simmonds and Sons Inc. But Peter Goudas says he never got paid.
Simmonds agreed to deposit US$2.5-million of the purchase price into Peter Goudas’s bank account within five days of the closing. When RBC recognized Simmonds and his designates as signing authorities for Goudas Food, “I assumed that the $2.5-million had been deposited on my behalf,” Goudas said in the affidavit. “In fact, the funds were never deposited.”
Police allege that Simmonds and eight co-conspirators cooked the books at Goudas Food to make it appear that customers owed the company a lot more money than was the case, “to secure additional money from lenders, creditors and investors.”
RBC, in the court documents, acknowledges that it increased its loan to Goudas Food from $10 million to $12 million in June, 2014, after Simmonds took control of the company. But the bank says that it was a victim.
“Goudas has knowingly made material and serious misrepresentations to RBC concerning the assets which comprise the borrowing base for the loan,” Robert Kizell, managing director in the asset backed lending division at RBC, says in an affidavit. “Such misrepresentations enticed RBC to allow Goudas to make draw downs under the loan.
“Any improper transfer of funds from Goudas to related parties (or elsewhere) was not apparent to RBC until the field examination” in July and August, 2014, Kizell said in the affidavit.
But Peter Goudas alleges that the bank let down its guard.
“It appears that Simmonds was able to borrow against artificial invoices made out to companies related to him or to non-existent companies,” Goudas adds. “I find this odd because because when I controlled Gouda Food Products, RBC always rigorously reviewed all my new customers and invoices to ensure that receivables due from such customers were eligible for inclusion in the borrowing base.”
Goudas Food went bankrupt in August, 2014. The court in Feb., 2015 approved the sale of Goudas Foods’s assets to Golden Food & Manufacture Ltd., a trio of investors, two of whom are longtime employees.
The Goudas Food court-appointed receivership, which names as defendants A.C. Simmonds and Sons Inc., John Simmonds’s company, and 19 of its affiliated companies, remains before the courts. The court dismissed an attempt by the defendants to have the case dismissed.