By Kristian Rasmussen
A Calgary man who forged his way into a financial corner while trying to weather a storm of debt at the Spirits Reach development near Canal Flats has been sentenced to 24 months under house arrest.
John Groothius, 45, of Calgary, who appeared in Invermere Provincial Court on Monday, October 29th, also received an $18,000 restitution order after pleading guilty to one charge of fraud over $5,000. Two charges of uttering a forged document were stayed.
Described by his lawyer, Dave Cunningham, as being on top of the world, when he and two partners started Calgary-based Enviro Custom Homes a decade prior, Mr. Groothius now faces a heavy load of repayments after recently coming out of two years of bankruptcy.
Those in business relationships must know that there are serious consequences if they lie and issue false documents in business situations, said Stephen Cooke, Crown Counsel, who sought a sentence of 18 months to two years for a crime that carries a maximum sentence of ten years in prison.
Provincial Court judge William Sheard agreed, handing out two years and forbidding Mr. Groothius from leaving his Calgary home for reasons other than work and medical emergencies for the first 12 months of the sentence, except for shopping on Saturdays.
The problems for Mr. Groothius began when he and partners Craig Bischke and Robert Maertens-Poole entered into a business relationship with local developers Dave and Donna Rae of Columere Park Developments in August 2006.
The group negotiated a fixed-price contract to build 62 attached single family residences in four phases over two years at Spirits Reach, located seven miles south of Columere.
The contract between the two groups and their financing company, Sterling Bridge Mortgage Corporation, stated that money would be advanced to the project in phases, but only after independent proof of work was completed under the scrutiny of a third- party consultant from Cranbrook.
The fixed-price contract proved troublesome for the ECH Enviro Custom Homes a B.C. arm of the trios Alberta company established in August 2006 because the company was already on shaky financial ground due to numerous unpaid bills from residential customers in Alberta.
ECH Enviro Homes began its new contract with a request for an advance of $382,000 as a deposit for the first nine units of the project, despite the fact that no work had yet been done. After receiving the funds, the company owners immediately paid down debts of their Alberta company.
After the initial advance, Sterling Bridge refused to forward any extra funds to ECH Enviro Homes unless an independent consultant verified that the work pertaining to each phase was completed.
Mr. Groothius bypassed this security measure and continued to pay down his companys Alberta debt by forging invoices for extra materials on behalf of the sub-trades working on the project. Sterling Bridge issued the cash, while advising that any extra costs would in the end be deducted from the total payout for that phase of the project. Although the majority of the money fraudulently forwarded to Mr. Groothius was used to pay down company debts, he also used $50,000 to fund a family vacation and buy a recreational vehicle.
Trouble arose when it was discovered that most of the invoices forwarded to Sterling Bridge Mortgage Corporation by Mr. Groothius were false. Through an October 27th, 2007 phone call with one of the tradespeople working on the project, Mr. Rae learned many of the trades had yet to be paid even though Columere Park Developments were on track with payments according to what they had been invoiced by Enviro Custom Homes.
Mr. Rae discovered that Enviro Custom Homes also had debts tied to Spirits Reach and no ability to pay them. In addition, Columere Park Developments had not held back 10 per cent of funds required under the Builders Lien Act because Mr. Groothius had told them that his company needed all the available cash to complete the project. As a result, Spirits Reach was liable to lien claims by unpaid workers.
Columere Park Developments was forced to borrow $2.25 million from their finance company to pay off project debts incurred by Enviro Custom Homes. Mr. and Mrs. Rae had to borrow from friends and mortgage other properties to proceed with the development.
From August 16th, 2006 to June, 2007, $2.1 million was forwarded to Enviro Custom Homes by Columere Park Developments. All but $190,000 was ultimately recovered.
Despite being declared bankrupt from September 2010 to October 2012, Mr. Groothius still owes a share of the $2.86 million awarded to Columere Park Developments from a civil suit against Enviro Custom Homes in 2010.
In addition to his financial woes, Mr. Groothius wife of 19 years left him as a result of the stresses of the case. They have three children aged 8, 11 and 15.
I would like to truly apologize to Dave and Donna Rae, Mr. Groothius told the courtroom during his sentencing. I believe in Spirits Reach and I wish it worked out.