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Gold/Mining/Energy : Samoth Capital SCF on TSE -- Ignore unavailable to you. Want to Upgrade?

To: Scott Mc who wrote (2)	8/14/1998 1:14:00 PM
From: dale w ruckle	Read Replies (2) \| Respond to of 8

IAN NOBLE inoble@biv.com BC and Alberta investors have won a battle in their bid to recover money lost in a San Diego condo deal made through real estate developer Kerry Dix. When Dix died of a drug overdose in October 1997, he left about 60 investors $3 million poorer. The money was earmarked for limited partnerships in a condo complex called Bay Villas. The money has vanished, but investors and a financing company, Pan West Financial Inc., still claim ownership interests in Bay Villas. To get their money back, they are suing Samoth USA, a subsidiary of Vancouver-based, Toronto Stock Exchange-listed Samoth Capital Corp., which provided bridge financing for Bay Villas. In the latest development, a U.S. District Court in June ordered Samoth to post a $5-million bond to protect in- vestors' interests if Samoth sells the development. Investors are looking for US$2.1 million, punitive damages and court costs from Samoth. If investors and Samoth cannot reach a deal to settle the lawsuit, the case will go to trial. In his ruling, U.S. District Court Justice William Enright said Pan West and the investors have demonstrated the probable validity of their property claims. Enright added that "substantial" questions remain regarding the nature and extent of Samoth's alleged participation in Dix's fraudulent scheme. "Samoth had much to gain if Dix failed to secure the necessary financing to exercise his repurchase option," he said. According to court documents, the deal began in 1996, when Dix negotiated an option to buy three properties, including the 116-unit Bay Villas, for $11.4 million. Because he could not raise the money, Dix struck a deal with Samoth. Samoth bought the property and made a deal with Dix that obligated Dix to repurchase the property from Samoth in the future. In addition to reimbursing Samoth's costs, Dix would pay Samoth an extra US$825,000 to US$1 million. Investors say Dix and Samoth decided to syndicate the deal for US$16 million, with Samoth getting US$1.4 million of the more than US$4-million profit, and a Dix company receiving the rest. Investors purchased limited partnership units from Dix for $18,000 or more and put the money into a trust operated by Dix's Vancouver-based Dix Group. But after Dix died in October 1997, the money was nowhere to be found. Investors want their money back. They say Samoth merely loaned the money to Dix and that, therefore, Samoth's only interest in the property is that of a secured lender who is holding the property in trust for the borrower, which is Dix and the entities he created. Alternatively, investors say Dix and Samoth must be considered joint-venture partners because Samoth participated in the offering memorandum that went to investors. If Dix and Samoth created a joint venture, Samoth could be liable for Dix's fraudulent activity. Samoth argues that Dix defaulted on the purchase agreement (investors dispute this claim). Samoth also states that Dix Group representatives said they had not received money from investors for the Bay Villas project by September 1997. If no money changed hands, Samoth says, then the investors cannot claim ownership. In September 1997, Samoth closed escrow and became owner of Bay Villas. Since then, Samoth has agreed to sell the apartments for US$18.2 million. B.C. Securities Commission deputy director of compliance Gerry Halischyk said the commission is winding down its investigation into the affair and that Dix apparently used the money collected for Bay Villas to pay for maintenance and renovations at other properties the developer was involved with. Halischyk added that it appears Dix was a one-man show. In 1970, Dix was convicted of possessing LSD, marijuana and hashish for the purpose of trafficking.*