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With BlackBerry retrenching and retreating from Waterloo, Ont., Michael Wekerle saw an opportunity in 2014 to snap up a group of buildings that once housed the smartphone maker. His plan was to attract other tech firms to the city and boost economic development. He dubbed it the Waterloo Innovation Network.

But the venture is now mired in litigation, all but one of the eight buildings have been sold, and Mr. Wekerle is accusing the guy he put in charge of running it, Mark Arbour – once a close friend, confidant and even trustee of his estate – of orchestrating a $15-million fraud against him. The former Dragons’ Den star and Bay Street trader is also suing Mr. Arbour’s wife, adult son, a law firm, two commercial real estate agencies and sundry others for their involvement in the alleged scheme.

Businessman Michael Wekerle featured in a promo for the ninth season of Dragon’s Den.Handout

“Arbour increasingly abused Wekerle’s trust, took advantage of Wekerle’s personal difficulties, and ultimately defrauded the Wekerle Group of millions of dollars,” according to a lengthy statement of claim filed in November.

Jason Woycheshyn, a lawyer for Mr. Wekerle at Stewart McKelvey, said in an e-mail that had it not been for the alleged fraud, “it is likely that Mr. Wekerle would not have sold any of his buildings in Waterloo.”

Mr. Arbour has denied the claims in court and said the actions Mr. Wekerle characterizes as fraud were legitimate business transactions. Other court filings portray Mr. Wekerle as uninterested in the details of the venture and claim he rarely visited the properties as he struggled to repay debts at his other businesses – notably the famed El Mocambo club in Toronto.

Mr. Arbour said in an e-mail, through his lawyer, that the buildings were sold with Mr. Wekerle’s approval because office vacancies plummeted during the pandemic and because Mr. Wekerle had to service a large loan taken out to renovate the El Mocambo, not because of an alleged fraud. “The reason Michael Wekerle is in this poor financial situation is because of Michael Wekerle and his poor decisions,” Mr. Arbour said in the statement to The Globe and Mail.

None of the allegations have been tested in court.

The two men first met in 2014 through a mutual acquaintance and bonded over a shared history of personal tragedy, according to court documents. Mr. Wekerle was once a high-flying trader with GMP Capital Inc. and became legendary for his savant-like talents with the market. In 2010, his second wife died of a heart attack, sending him into a period of depression, and he parted ways with GMP the following year amid reports of erratic behaviour. Later, he started a merchant banking firm and joined Dragons’ Den for four seasons.

Mr. Arbour, meanwhile, is a former RCMP officer whose daughter died in 2014 at age 23. Mr. Wekerle, wanting to help him out, hired him as a personal assistant and before long put him in charge of managing the Waterloo real estate portfolio, which was held through a company called Wekerloo Developments.

At the heart of the litigation seems to be a subsidiary called Waterloo Innovation Network PM, or WIN PM, that served as the property manager of the buildings and received fees in return.

In 2014 Mr. Wekerle saw an opportunity to snap up a group of buildings in Waterloo, Ont. that once housed BlackBerry. He dubbed the propery the Waterloo Innovation Network (WIN).handout

In 2019, Mr. Wekerle transferred his shares in WIN PM to Mr. Arbour with the understanding that his stake would be returned whenever he wanted, according to court documents. The claim is somewhat vague about the reason for the transaction, stating only that Mr. Wekerle wanted to separate the property management arm from the rest of the operation in anticipation of bringing in new investors. Mr. Wekerle alleges his former partner then “fraudulently took steps” to ensure the shares were never returned and hid this fact.

Mr. Wekerle says the alleged fraud was uncovered last May during a phone call with Mr. Arbour. In response to routine business questions, he was “immediately and increasingly defensive,” stated that he “ran everything” and then hung up. Shortly afterward, he resigned as chief operating officer of Wekerloo.

According to court documents, he allegedly misappropriated more than $15-million from the group of companies through a variety of means, including unlawfully selling assets, draining bank accounts and using corporate funds to pay for renovations to his home and that of his son. The suit also alleges he paid his wife more than $1.2-million over four years, even though she had no role in any of the companies.

Separately, Mr. Wekerle filed a suit earlier this month against the buyers of one of the Waterloo buildings, alleging it was sold unlawfully for below fair market value.

Mr. Arbour provides an entirely different version of events in his statement of defence. In 2018, he was diagnosed with two forms of lymphoma – one Stage 4, the other incurable. To cover the costs of his treatment and get his financial affairs in order, he requested an advance on his potential future gains through his work at Wekerloo. Mr. Arbour says he and Mr. Wekerle agreed he was entitled to $6-million. (Mr. Wekerle characterizes the payment as a loan and says Mr. Arbour still owes him $3.9-million.) As part of the arrangement, WIN PM was also transferred to Mr. Arbour, and there was never an agreement to return the shares, he claims.

Moreover, everything he did was above board and benefited Wekerloo, he says. One of the buildings included a data centre, but Mr. Arbour was not able to drum up any business, in part because Waterloo was not a desirable location and the equipment was outdated. Instead, he sold the equipment and undertook a renovation to convert the space to offices. Mr. Wekerle claims his business partner stripped the assets and pocketed the proceeds – he also filed a police report about it, according to court documents – but Mr. Arbour says his boss agreed to the plan.

His wife, meanwhile, was employed as an interior designer and paid accordingly, according to Mr. Arbour. And he says he did not use company money to renovate personal property.

Before Mr. Wekerle accused him of fraud, Mr. Arbour had been trying to recover money from his former boss. In August, he filed a lawsuit seeking to recoup almost $900,000 that WIN PM had paid to Mr. Wekerle between 2019 and 2021, a period in which he allegedly performed no real work. Mr. Wekerle claims the lawsuit is an attempt to thwart his investigation into the alleged fraud.

Mr. Wekerle in front of the El Mocambo music venue, which he bought in 2014 with a $40-million loan at 12-per-cent interest.Handout

Over the past few years, Mr. Wekerle has been under financial strain, and Mr. Arbour claims he constantly requested money from WIN PM to help with his cash flow issues. “Wekerle would call Arbour on a monthly basis in a very depressed state because of his financial problems,” according to court documents.

In particular, he had borrowed $40-million at 12-per-cent interest from Waygar Capital, a lender in Toronto, to renovate the El Mocambo after buying it in 2014. It remained shuttered for years and only announced plans to reopen in April, 2020, but was forced to stay closed during the pandemic.

Mr. Arbour advanced more than $1.5-million from WIN PM to support the club, according to a separate lawsuit filed last August, but Mr. Wekerle has allegedly refused to pay it back and has since claimed there never was a loan agreement.

His lawyer, Mr. Woychesyhn, said in an e-mail that the initial loan from Waygar Capital was “for a substantially less amount” and that his client is looking to refinance the El Mocambo. (Waygar Capital declined to comment, citing client confidentiality.)

Mr. Wekerle also allegedly clashed with James Connacher, the former boss at Bay Street firm Gordon Capital, who held a 10-per-cent stake in Wekerloo. Mr. Wekerle allegedly withdrew large amounts of money from Wekerloo despite an agreement that he would not do so without approval, according to court documents. Mr. Connacher was preparing to sue, but they settled, and Mr. Wekerle agreed to repurchase the 10-per-cent stake, requiring him to borrow more money, according to Mr. Arbour’s statement of defence.

Mr. Woycheshyn disputes these claims and says Mr. Connacher’s primary concern was Mr. Arbour’s role in the operations. Ryan Connacher, who helps his grandfather manage his investments, told The Globe the 10-per-cent stake was sold because Mr. Arbour did not transfer the WIN PM shares Mr. Wekerle gave him back to Wekerloo. “We exited the investment amicably with Michael and ultimately chose to divest because of Mark Arbour’s actions,” he said in an e-mail.

Back in Waterloo, the one building Mr. Wekerle still owns is home to a research and development office for Ford Canada. The third floor, more than 42,500 square feet of office space, is currently vacant. According to his lawyer, Mr. Wekerle expects it to be fully leased in the coming months.

Former Dragons’ Den star Michael Wekerle in legal battle with partner over Waterloo property venture
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