The Ontario Securities Commission has issued a lengthy statement of charges against Hamilton condo developer Harry Stinson, Stinson, best known locally for his redevelopment of the historic Stinson School into lofts, is accused of trading in securities without a license, misleading investors, and breach of a number of other securities regulations.
The statement of allegations notes that Stinson raised $19 Million on a plan to restore the former Adams Mark Hotel as the Buffalo Grand. The plan would be to renovate the hotel and sell individual suites to investors who would share in the hotel’s profits. The statement says none of several companies operated by Stinson was registered under the Ontario Securities Act.
The statement alleges that Stinson and an employee who is also facing charges, marketed the project by “posting promotional content on social media, sending mass emails, hosting investment seminars, disseminating promotional flyers and brochures, meeting with potential investors, giving tours of the Hotel, publishing a promotional YouTube video about the Hotel, and posting promotional material on Stinson’s website.”
The promotional material used phrases such as “rapid fixed returns;” fixed double-digit returns, no surprises;” “earn 20+% (RRSP-and TFSA-eligible);” and “fixed return, (not a ‘projection’).” The OSC statement notes that “prospectus requirements ensure that investors receive full, true and plain disclosure of all material facts related to the securities being issued, helping them make informed investment decisions.”
The statement explained that requiring registration of companies issuing shares serves “as an important gatekeeping function by ensuring that only properly qualified and suitable persons engage in the business of trading securities with the public, and registrants…are subject to a robust regulatory regime and ongoing oversight.”
The statement says Stinson had promised investors that their money would be used to make extensive renovations on the 42-year-old Buffalo hotel property. Instead only a small amount of the money went into renovations—the rest was co-mingled with other Stinson bank accounts and “were used for other Stinson projects and transfers to other bank accounts and credit cards.” The statement goes on to say that Stinson ran into cash flow problems, which were not disclosed to investors, and was unable to meet his loan obligations. None of the allegations have been tested in court or in front of the OSC, which has slated a hearing on the matter in March.
As recently as last summer Stinson announced plans to build a 25-storey condo project next to the hotel and in the meantime would get the hotel back into operation as a hotel. Then over the Christmas week a $3 Million fire broke out in the hotel that was later declared arson. The fire came just days after Stinson had signed a deal for the hotel to become a Ramada Inn.
Stinson was sanctioned by the OSC in 2006 over a Toronto condo project where investors were invited to purchase units in a scheme that bore some similarity to the Buffalo plan. In 2007 Stinson filed for creditor protection as a result of an $11.8 million dispute with David Mirvish, who had invested in the property Stinson had developed at 1 King West in Toronto. In 2008, he floated a proposed 100-story development at the Royal Connaught Hotel but withdrew the project a few months later. In 2013, at an event marking the opening of the Stinson lofts, he announced a similar project on the site of the Gibson School, which has not materialized thus far.