Calgary men guilty in multimillion-dollar fraud case involving B.C. RV resort

Lake Koocanusa is seen, June 16, 2021, northeast of Libby, Mont. (Hunter D'Antuono/Flathead Beacon via AP, File)

Two men accused of defrauding millions out of people looking to buy vacation properties at Lake Koocanusa, B.C., have been found guilty by an Alberta judge.

On Sept. 20, Justice R.E. Nation of the Alberta Court of King's Bench found Craig McMorran guilty of fraud, money laundering and stealing a cottage from its rightful owners.

A second man charged in the case, Gus Kalabalikis, also known as Kosta, was found guilty of fraud.

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According to court documents, McMorran was working to develop a resort called Sweetwater Resort at Lake Koocanusa, located near Fernie, B.C. Kosta was his employee.

To this end, McMorran bought shares in a company called Marcer Ranching Ltd., which owned a 296-acre piece of property.

That land was subdivided into four development lots, which included "lower," "middle" and "upper terrace lands."

By 2012, RV owners paid Marcer to place their RVs at an existing campground and camp there.

Two years later, foreclosure proceedings began against Marcer against all the lands that were not already sold and subdivided, the majority of which were in the lakeside area.

After the foreclosure began, the court said McMorran began selling unsubdivided lots on a 50-year lease, with an option to buy the land once the subdivision was completed.

"Most of the 17 Crown witnesses who signed contracts with Marcer for either a cabin lot or an RV lot had a tour of the property with an individual called William Kiriakopoulos (Billy), and later completed the paperwork and signed contracts with Kosta, who was a salesman for Marcer in the sales office in Calgary. Kosta was in the office full time in Calgary and was paid as a contractor.

"The complainants who signed RV lot agreements were advised that subdivision and thus the transfer of title could not occur until the lots were serviced with water, power and sewage services. It was represented that servicing would occur soon, but the date kept on being delayed. In fact, the delay continued in some cases for years after the representation was made."

Once the foreclosure was complete, the new owner of the land denied access to anyone who had signed leases with McMorran and Kosta.

"The middle terrace lands were never subdivided out, and thus all moneys invested in these lands were lost. When title transferred to (the new owner), the only purchasers who could retain their interest in land were those who were already registered on subdivided lots, either along the lakeshore, or in the second row back. Everyone who purchased a middle terrace lot or an RV lease/lot received only the benefit of the use they made of it until the foreclosure was completed."

Seventeen complainants testified during the two-week trial, all of whom either signed a contract with McMorran to buy a lot in the middle terrace lands or to enter into a lease with an option to buy an RV lot.

One of those complainants was Michelle Brosseau of Calgary, who told CTV News in May that she was promised a piece of land for $8,500.

At the time, police said 85 people were defrauded more than $2 million after believing they were purchasing legitimate lot and dock spaces at the lake.

In his testimony, McMorran said the purchasers all knew the company was in foreclosure when they signed contracts and "it was foreclosure pricing being offered."

"He testified that he was trying to raise enough money to pay moneys to (the new owner) to stop the entry of the Order Absolute and save the project.

"McMorran’s evidence was that his lawyer told him he could just carry on selling as normal and the leases would survive the foreclosure, and that no one was in jeopardy."

In an analysis of the evidence, Nation said none of the complainants were aware of the illegality of a 50-year lease nor the existence of a foreclosure action.

"The Crown argued that both McMorran and Kosta were dishonest in their conduct, in a way that was not just negligent, but in a way that ordinary, reasonable people would find discreditable.

"(McMorran) was having members of the public contract with Marcer to obtain title from Marcer, when Marcer could not provide servicing to the RV lots, did not have a permit to have an RV lot and soon would not have title of the land to give. This non-disclosure and conduct constitutes 'other fraudulent means.'

"It is conduct that is clearly dishonest according to the standards of reasonable people."

Meanwhile, the court found that Kosta, who was merely doing what he was told by McMorran, only learned about the foreclosure proceedings in 2016 and then intentionally closed sales on April 18 of that year but did not share details about the project being in jeopardy.

"He knew the project was in jeopardy, not only because of the foreclosure action. Kosta was aware that Marcer was in financial trouble. It was late on his pay, and he had taken steps at times to divert money to be paid to Marcer to himself directly."

Nation also found McMorran guilty of stealing a cottage owned by Gwen and Wayne Yager, a pair of Marcer shareholders who had purchased a prefabricated home through Kosta's direction to be placed at Sweetwater Resort.

In September 2014, the couple visited the lot they had purchased to see the prefabricated home at the property, wrapped in plastic.

"The Yagers knew they needed a building permit to pour the concrete foundation for the home. They were dealing with Richard Halworth, who they understood was hired by Marcer to get permits to place the foundation for the home on their lot. There were delays in getting the permit."

After paying between $38,000 to $40,000 to have gravel delivered to the lot, they were told the permit was still delayed.

When they returned to the lot in 2016, the Yagers discovered their cottage was gone.

According to testimony, Kosta said McMorran came to him sometime in 2015 or 2016 to ask about four prefabricated homes that had been delivered to the land but did not have permits for foundations to be poured.

"Kosta said there were two clients who were looking to buy a home. (McMorran) said to sell those people the prefabricated home of the Yagers.

"Kosta said that the home was not 'ours' – it is the Yagers'. McMorran said he would take care of the Yagers. Kosta checked this twice, and then moved forward on the sale to the Skogs.

"He never followed up with McMorran to see if he spoke to the Yagers. He just assumed that McMorran would do so."

Nation said McMorran "meant to deprive the Yagers of the property or their interest in it."

"This is because the home was placed on a foundation on land belonging to someone else," Nation said.

The Yagers still have possession of the lot, which they retained after the foreclosure, but they have not been able to secure a permit to build a foundation.