Royal Group Tech. founder charged with fraud

TORONTO - A decade after the alleged wrongdoing, RCMP have laid fraud charges against Royal Group Technologies Ltd. founder Vic De Zen and other former executives of the plastic building products manufacturer.

Police said Thursday that De Zen and three other former executives defrauded the company of $27.4 million in a deal involving property north of Toronto.

De Zen and four other men, including two named in the other charges, are also alleged to have defrauded Royal Group of $2 million in the sale of a subsidiary.

De Zen declared himself "completely stunned'' by the charges.

"For five years my name has been dragged through the mud with unfounded, sensational allegations levelled against me,'' he said in a written statement.

The alleged offences occurred during 1997 and 1998, and the charges come almost five years after De Zen stepped aside as chief executive officer.

Royal Group, based in Woodbridge, north of Toronto, was acquired in late 2006 for C$1.7 billion by Georgia Gulf Corp. of Atlanta.

The long-running police investigation triggered the resignation of Greg Sorbara as Ontario finance minister in October 2005 after he was linked to the probe. He returned as finance minister in May 2006 after a judge found no reason for his name to have been included on a search warrant. Sorbara left cabinet last October but remains an MPP.

"The charges laid today illustrate the scope and complexity of the work being done by IMET teams across the country every day,'' stated Chief Superintendent Stephen White, head of the RCMP's Integrated Market Enforcement Teams.

"It is our hope that these types of results will act as a strong deterrent by demonstrating that Canada's financial markets are being policed.''

The alleged $27.4-million fraud arises from a deal in which land in Vaughan is said to have been purchased by individuals closely associated with Royal Group and then sold to the company at an inflated price.

In addition to De Zen, those charged include Douglas Dunsmuir, who was Royal Group's general counsel and succeeded De Zen as president, along with two former chief financial officers, Gary Brown and Ron Goegan.

The alleged $2-million fraud relates to the sale of Royal Group subsidiary Steelwood Doors to Premdor Inc., which included a warrant to buy 200,000 Premdor shares. RCMP charge that the warrant was not entered into Royal Group's books and instead was exercised by senior executives for their own benefit.

Charged in that case are De Zen, Dunsmuir and Goegan, along with Luciano Galasso, a former vice-president of Royal Group, and Gordon Brocklehurst, former director of accounting.

De Zen, who has insisted on his innocence throughout, said Thursday that the allegations are "without merit, and I intend to fight them vigorously in court.''

He added that the transactions at issue are civil in nature, not criminal matters, and were settled with Royal Group in 2005 when he repaid $9.8 million to the company.

Royal Group, making plastic pipe, window frames, outdoor furniture and other products, was founded by De Zen in 1970 as Royal Plastics Group.

The company developed a construction technique in which plastic forms are filled with concrete, and it grew rapidly, going public in 1994.

Its stock price rose steeply -- while De Zen retained voting control and received hefty bonuses -- and sales grew to $2 billion annually by 1997, when the corporation was renamed Royal Group Technologies.

De Zen, a tool and die maker by trade who was born near Venice in 1941 and immigrated to Canada in 1962, was named a member of the Order of Canada in 2002.

Investor unease set in during 2003 as earnings sagged and the stock price tumbled from over $30 to under $7, though it revived in following months as De Zen resigned as CEO while remaining chairman.

The shares fell again when RCMP and the OSC announced in early 2004 that they were investigating land deals in the Caribbean, and again later that year when the purchase of the 75-hectare plot north of Toronto came under scrutiny, prompting the departure of De Zen, Dunsmuir and Goegan.

RCMP said the IMET investigation was conducted in conjunction with the Ontario Securities Commission, the Canada Revenue Agency and federal prosecutors.

An RCMP spokesman said a court appearance in the case was set for Aug. 11.

In addition to Sorbara, who for a time in private life was a Royal Group director, the Bank of Nova Scotia had its name dragged into the probe when RCMP set up a mobile command post outside its head office at King and Bay streets while seizing documents in February 2005.