Thursday, November 28, 2013

Pigeon King trial in final stage

The trial of Arlan Galbraith on fraud charges related to is Pigeon King International business is drawing to a swift close after several surprises in Kitchener court Thursday.

Crown attorney Lynne Robinson withdrew two of the four charges she laid under the Bankruptcy Act. 

Both withdrawn charges related to Galbraith’s use of personal credit cards to withdraw money after he put the business into bankruptcy in July, 2008.

The second surprise was that Galbraith has chosen to not testify in his own defence. He is, however, acting as his own lawyer.

The third surprise is that both Galbraith and Robinson finished presenting their evidence Thursday.

That leaves Monday afternoon for them to present their final submissions to the jury, which has been reduced from 14 to 12 people, many of them younger than 35.

The judge said he plans to present his charge to the jury on Tuesday.

The jury will be deciding whether Galbraith is guilty of fraud for persuading hundreds of people to buy breeding pairs of pigeons from his company on the contract promise that he would buy back offspring at profitable prices.

Robinson argues that the business could not succeed because Pigeon King would run out of new investors providing enough money to honour the contracts to existing investors.

A forensic auditor testified Wednesday that the business would have needed $167million from new investors to survive until 2011 when Galbraith said he hoped to open a meat-processing plant near Cochrane in Northern Ontario.

To raise $167 million from investors, he would have had to sign 10-year contracts to buy back $1.5 billion worth of breeding pairs from those investors.

Robinson is also continuing to pursue two charges under the Bankruptcy Act, one a slam-dunk charge for failure to show up for a meeting of creditors, the other that the business was wrongfully thrown into bankruptcy, given its financial situation before and after Galbraith pulled the plug.

That charge is similar to the fraud charge.

The last evidence Robinson introduced was three sets of documents from Iowa, Washington and Maryland state officials outlining their concerns about Pigeon King marketing to investors there.

Iowa banned Pigeon King because it deemed it a Ponzi scheme. The others put Galbraith on notice that they were pursuing concerns about the nature of the business.

That evidence was gathered by RCMP constable Carol South who testified about working with the Waterloo Region Police Services on an investigation that lasted two years.

Galbraith called only one witness – Ken Hoffman of Heidelberg.

Hoffman and his wife invested $125,000 in September, 2007, and got 300 breeding pairs of pigeons. 

Pigeon King investor and salesman Ken Wagler joined him to place another 300 breeding pairs in his barn.

Hoffman said he asked for a joint venture to reduce his risks and testified that he was fully aware that the venture came with risks.

But in cross-examination, he said he did not have full information about the extent of Pigeon King’s contracts and had he known there were so many, he probably would not have been so optimistic.

He also confirmed during cross-examination that he had told police investigators that he felt the risks were so high that his 10-year contract might collapse in five years.

By then he felt he would have recouped his investment and have made some money.

He also testified under questioning by Galbraith that he knew the market for breeding stock would run out and that the success of the business would depend on processing young pigeons to market as squab.

He said Galbraith told him about plans to cross-breed the "sport pigeons" he was selling investors with a strain that grows larger with more meat and would be prolific. Hoffman said he never saw any of those meat birds, but he felt the idea was sound and he trusted Galbraith.

Although the price for the pigeons he would sell for meat would be much lower, Hoffman said his costs would also be significantly lower. Instead of raising breeding stock to 20 weeks old, squab would be “sold out of the nest” at four or five weeks age, they would not have to be fed and mortality losses would be negligible.

He estimated that he could make as much money per square foot of barn space raising meat birds as breeding pairs to be sold back to Pigeon King.

When Pigeon King went into bankruptcy, he said he had 2,200 birds. He was able to sell about 1,000 for $2 each at the rate of 20 each to Asian friends and euthanized the rest.

Hoffman also testified about his experiences growing up on a farm that marketed hogs and beef cattle, about raising veal and rabbits when he was young, working for a local livestock auction market and raising calves for a dairy farmer. In other words, he's familiar with farming risks.

He said he was aware that Pigeon King was still in the development stage, that the risks were relatively high, but said he trusted Galbraith and said he feels he has always dealt with him honestly.

He repeatedly answered Galbraith and Robinson that he does not consider Galbraith a criminal or guilty of fraud.