From the STRU Thread:
Mike Strathdee
RECORD STAFF
Monday 29 March 1999
Former executives of Struthers Inc. admit that they broke Ontario securities laws when
they sold shares in a controversial swine-breeding company that is millions of dollars in
debt and has left hundreds of area investors with virtually worthless shares.
"There's clearly infractions," Jason Struthers, son of company founder Ron Struthers,
admitted in an interview with The Record.
Struthers Inc. is one of a handful of companies started by Ron Struthers to
commercialize swine breeding and embryo transplant technology. Building on his father
Stan's breeding business, Struthers had offices in Guelph until last fall, until he was
evicted for non-payment of rent.
Struthers Inc. is now largely based in South Carolina. Its Canadian presence consists of
space in a lawyer's office in Mississauga.
Jason Struthers, formerly the company's secretary/director of international business
development, and colleague Paul Allcock, who served as director of corporate affairs,
say they ran afoul of securities law after receiving bad advice.
Under provincial securities law, a company must clear a prospectus, a detailed offering
document, with regulators in order to sell shares to more than 50 shareholders. The
Record has obtained a shareholders list which indicates that shares in several Struthers
companies were sold or issued to more than 1,200 people, including 300 in Ontario and
close to 200 within the Waterloo Region-Wellington and Perth County area.
Investors paid tens and in some cases hundreds of thousands of dollars for Struthers
shares, which were sold at various times for $1, $3 and$4.50. Struthers Inc. stock
began trading on the U.S. over-the-counter bulletin board at $6.50 a share last June,
but quickly fell to only a few cents and never recovered. The shares last traded for 1.5
cents each, earlier this week.
At least two regulatory bodies -- the Ontario Securities Commission in this province,
and the Securities and Exchange Commission in the U.S. -- are investigating the
Struthers companies, The Record has learned.
The OSC has sent a five-page questionnaire to investors asking them about their
investment knowledge, how they became aware of the Struthers companies, what
information "were you provided with that induced you to make your investment," in
which Struthers business the investment was made, and who sold them the investment.
And the RCMP has interviewed a number of people in an effort to determine whether it
has grounds to launch a criminal investigation. "I've been co-operating with the RCMP
on this," a haggard-looking Ron Struthers told The Record.
Struthers says he has met with RCMP officers a handful of times since an initial,
four-hour interview two months ago. He wouldn't comment on what the RCMP or
securities regulators are looking into.
He did confirm when asked, however, that Revenue Canada has been looking at the
books of the Struthers companies for the past three months in connection with money
owed for employee payroll deductions.
"I don't have the books, I don't have access to the books, but I do know Revenue
Canada has been in and done the audits."
The OSC can ask a court to force a company to file financial statements and a
prospectus. The agency can also seek an order directing a person to repay any part of
the money paid by a security holder for securities.
Struthers raised at least $6.5 million US through the sale of shares over a period of
several years. Shareholders have never received financial statements for the company,
and only received share certificates early this year.
"You've got to understand something," Jason Struthers said when asked about why the
company didn't comply with regulatory requirements. "When Ron started this company,
he had zero knowledge of how a public company functions. We relied on counsel to do
this; now it turns out that the information which counsel gave us was dead wrong."
Allcock also pointed fingers elsewhere when asked about why proper procedures
weren't followed when shares were sold. "We were always advised that we didn't need
it (a prospectus)," he said. Our advice has been the pits. We could've gone to the
variety store and got better advice."
Jason and Ron Struthers were removed from the board and management of Struthers
Inc. in a December restructuring.
Allcock, who said he and Jason raised the first $500,000 for the company, claims to
have left the firm earlier in a dispute over the best way to raise money.
© Copyright Kitchener-Waterloo Record 1998
Copy of K-W Record article, March 29, 1999, business section, page C1.
Guelph contractor sues U of G
Unpaid renovations at SRI office prompt Van-Con's $130,000-plus claim
By Mike Strathdee
RECORD STAFF
A Guelph contractor is suing the University of Guelph to recover payment for
renovations he did at a university research park for swine breeding companies formerly
operated by area businessman Ron Struthers.
Van-Con General Contractors is seeking more than $130,000 plus costs for
renovations done to an office building at 150 Research Lane between October 1997
and January 1998.
The company, operated by Ike Van Soelen, received a judgment last July against
Struthers Research Inc. (SRI), one of several companies started by Ron Struthers, a
Cambridge businessman and former Pentecostal minister.
But after being told that SRI has no assets, Van Soelen decided to pursue a claim
against the university, which has since rented the research park space he renovated to a
Guelph marketing company.
Ironically, that firm has also received a court judgment against a Struthers company for
work it never received payment for.
The university, in its statement of defence, denies any liability or responsibility for work
done by Van-Con. In a cross-claim, however, it seeks to hold SRI and Struthers
International Research Corp., another associated firm, responsible for any amount it is
found to be liable to Van-Con.
It also seeks a judgment for $100,000 against Struthers "as damages for breach of
contract regarding the agreement to lease between the university and Struthers IRC."
Van Soelen says the university is benefiting from work he did in the building. He has also
placed a lien against the property.
In its statement of claim, Van-Con alleges that a university official approved drawings
and specifications for work done at the building, but at one point, expressed concerns
about the financial viability of Struthers and instructed Van-Con to cease work.
The statement of claim goes on to allege that, subsequently, the official said the
university "no longer had any financial concerns about Struthers," and that Van-Con
could proceed with its renovations "since everything was now in order."
Van-Con also alleges that university officials "inspected the quality of work from time to
time during the course of its progress," and that Struthers was indebted to the university
"for the rent of facilities elsewhere, in the amount of $148,946.00."
A letter sent by a university lawyer to a former Van-Con lawyer indicates that Struthers'
tenancy in the research park "was terminated on March 4, 1998, as a result of arrears in
the payment of rent."
Earlier this month, a few days after the university filed its statement of defence in
connection with the Van-Con lawsuit, the office of research issued a brief press release
distancing itself from Struthers.
"In 1994, Struthers Research began investing in swine embryo research at the University
of Guelph," the announcement stated. "The University of Guelph no longer has a
research contract nor any research involvement with Struthers Research and parties
related in any way to Struthers Research. The University of Guelph does not have a
licensing agreement with Struthers Research or any other Struthers entity."
Larry Milligan, U of G's vice-president of research, said in an interview that the
university is "quite deliberately declaring that there is no linkage, that there is no licence
for the technology in place."
But more than a week after the announcement was made, a share-offering document
available by fax from the South Carolina office of Struthers Inc., the U.S. parent firm of
the companies named in the lawsuits, still indicated that the company "intends to take full
advantage of it's (sic) strong working relationship with the University of Guelph, a
world-renowned leading animal science institution."
Doug Beatty, vice-president of operations for Struthers Inc., brushed off the U of G
announcement. "They can say whatever they like," he said.
"There's things happening behind the scenes here. It's unfortunate. They pushed
Struthers out of Canada."
Company founder Ron Struthers broke his silence on the events Thursday, and
provided the Record with a copy of a 1994 contract between U of G and Struthers
Research.
Money owing to U of G is for subsequent, related work, and doesn't affect Struthers
Inc.'s ability to commercialize the embryo-transplant technology, he said in an interview.
"Basically, the technology is basically there for the use of this corporation (Struthers
Inc.)," he said.
U of G moved to dissociate itself from the Struthers companies following months of
talks because "we're not getting anywhere in clearing up the back debt" of more than
$200,000 owed to it by Struthers, Milligan said.
Milligan said he has received a legal opinion which suggests that the swine- embryo
transplant technology "is owned by the university."
U of G hopes to recoup its losses by commercializing that technology, possibly through
a licensing agreement with another firm.
Struthers Inc. has not publicly commented on its view of the millions of dollars in debts
run up by Ron Struthers and other firms which bear his name. The company said in
December that Ron Struthers no longer holds a management role with the firm.
A November share-offering document for Struthers Inc., which has shares quoted
through the U.S. over-the-counter bulletin board, claimed that the firm is "not presently
a party to any material litigation," and that its liabilities totalled $1,510.
The document doesn't refer to litigation or liabilities involving its subsidiaries. Struthers
officials have not responded to written questions submitted earlier this year to Richard
Lane, their New York-based lawyer.
Beatty said this week that "Struthers Inc. is a debt-free organization."
He wouldn't say whether Struthers Inc. has any responsibility for debts run up by its
subsidiaries or Ron Struthers. "You've sort of blindsided me. I don't know."
Ron Struthers says company officials verbally promised him, when he relinquished
control of the firm in the fall, that all of the millions of dollars in debts run up by Struthers
corporations and promissory notes to shareholders signed by him would be taken care
of. "I've been told that they (Struthers Inc. officials) have a block of shares set aside for
repayment of debts," he said.
But he can provide no proof that any such agreement exists, as he didn't get anything in
writing. "No. I didn't. Just trusted them.
© Copyright Kitchener-Waterloo Record 1998
Copy of K-W Record article, March 29, 1999, business section, page C2.
Newsletter to Struthers investors long on predictions, short on details
By Mike Strathdee
RECORD STAFF
Struthers Inc. has a bright new future ahead, the company's latest newsletter to investors
says.
The pork biotechnology company plans to train a team of surgeons in embryo-transplant
techniques at a major United States university and announce contracts with major swine
breeders, the newsletter states.
But the four-page document, which can also be seen on the Struthers Web site, is long
on predictions and short on specifics.
Titled "the Rooter's News," the newsletter refers to several upcoming developments
without providing any specific details.
"The commercialization of the embryo-transfer technology, through relationships already
formed with leaders in swine genetics in North America, will represent a positive cash
flow situation for the company and will allow for future growth and expansion," the
newsletter states.
Doug Beatty, vice-president of operations at Struthers' Charleston, S.C., office, said the
company won't be able to identify any of its partners nor the university where the
surgical training will take place, until after April 2.
Struthers has had to sign non-disclosure agreements with the universities involved, as
"they don't want a slew of people calling," he said in a telephone interview.
"Unfortunately, we couldn't (identify partners) in that newsletter,'' he said.
''We wanted to, but we couldn't."
Contracts will be solidified and signed when company officials visit Iowa, Missouri and
Illinois in coming days, he predicted.
Company president Don Bowden, a veterinarian from Iowa, is handling the negotiations,
the newsletter stated.
The company also plans to purchase a mobile operating theatre, a surgical trailer, from
Alpha Omega, an Indiana company which builds mobile CT and MRI scanners, Beatty
said.
Struthers plans to have a six-metre (20-foot) surgical trailer based in Canada as
embryo-transplant work progresses, he said.
Company founder Ron Struthers, who has not had a management role with the
company since a restructuring last fall, told the Record last week that he is "pretty happy
with the guys in the States" and the way efforts to commercialize embryo-transplant
technology are proceeding.
He remains interested in working with the company which bears his name.
"My offer to the company is that anything I can do to take the company forward, any
knowledge I have, I will give it to them.
"I'd like to help grow the company if it's possible, if there's a place for me to be there."
Struthers said that when he handed over control of the firm late last year, he planned to
go to South Carolina and work out of the Struthers office there with current
management.
But poor health, including several operations related to kidney problems, have kept
Struthers in Cambridge. "At this point, it's not certain whether they want me there (U.S),
" he added.
© Copyright Kitchener-Waterloo Record 1998
HEADLINE Company ex-president has 'no idea' where close to $4 million has gone
BYLINE Mike Strathdee
SOURCE RECORD STAFF
DNOTE Ran with related story "Shareholders left to wonder where money went:
Former executives of Struthers Inc. admit they broke securities law" Page A1 "Guelph
contractor sues U of G: Unpaid renovations at SRI office prompt Van-Con's
$130,000-plus claim" Page C1 and "Newsletter to Struthers investors long on
predictions, short on details" Page C2
There are a number of mysteries surrounding events involving Struthers Inc. over the last
year.
Shareholders who have contacted the Record wonder how shares in Struthers Inc.,
which began trading at $6.50 each last June on the U.S. over-the-counter bulletin
board, quickly fell off to only a few cents in value, and never recovered. The shares last
traded at 1.5 cents on Friday.
They also wonder why, if the company's new management wanted to assure investors
that Ron and Jason Struthers no longer held any management positions in the company
as of early December, the share certificates which were issued to shareholders Dec. 29
were signed by Jason Struthers, secretary, and Ron Struthers, president.
The certificates were printed before the management restructuring occurred, Ron
Struthers told the Record this week. "Maybe it's even prudent," he said. "Why waste
another $15,000 to $20,000 (to print new shares)? Use up the (old certificate) stock."
It is unclear why Ron Struthers agreed to relinquish control of the company without
having a detailed, written agreement as to the royalty stream he is to receive for his past
work. Ron Struthers says he trusted his longtime advisers to take care of his interests.
Struthers Inc. documents suggest Ron Struthers will receive royalties, but don't specify
the amount. "It's never been flushed out," Ron Struthers asked when questioned on the
subject.
"I'm not (financially) in a point where I could go to a lawyer, or even hire one."
Another unanswered question is the issue of what happened to the millions of dollars
raised by the company, given that scores of creditors, large and small, weren't paid for
services rendered.
A Struthers Inc. offering document available to prospective investors through a
fax-on-demand service states that the company had total assets of $2,824 as of Nov.
15.
Ron Struthers insists that all of the money raised from investors -- at least $6.5 million
US, by some accounts more -- was used to pay expenses related to research and
market development efforts.
But The Record has obtained a copy of a draft, unaudited consolidated balance sheet
that states it was prepared for the management of Struthers Inc., dated July 31, 1998,
months before Ron Struthers stepped aside from the management of the company.
That document, which investors have never seen, stated that the company had cash of
$3,933,191 at the July 31, 1998, end of year.
"I have no idea," Ron Struthers said Thursday when shown the statement and asked
about the discrepancy. "I've never seen these documents (before)."
If the company had that much money last summer, "we would not have been in
problems," he insisted.
Companies which have stock quoted through the over-the-counter bulletin board in the
U.S. are not required to make the detailed filings of their financial statements with
regulators which other publicly traded firms must do.
Struthers Inc. is in the process of having its financial statements examined by auditors,
company spokesman Doug Beatty said. "When they're ready, we'll post them'' on the
company's web site, he said.
One of the reasons that the financial statements are being changed is because the
company's asset base is changing, he said. "There was a lot of stuff that went missing."
Beatty did not elaborate.
Ron Struthers denied that any assets of real value remain unaccounted for when the
company was evicted from a leased research farm south of Guelph in October.
"Nothing's gone missing that would influence those books by more than $5,000 or
$10,000," he said.
"There was no assets you could pick up and walk away with." |
