WATERLOO — A Waterloo-based gun wholesaler has been placed in receivership amid allegations of fraud totalling close to $50 million.
The allegations against Trigger Wholesale, Inc. by Clearflow Commercial Finance Corp. include falsified invoices and purchase orders, falsified real estate documents, impersonating executives at Canadian Tire and Home Hardware, forged cheques and falsified government documents.
Clearflow is seeking approximately $48.6 million in its civil suit against Mark and his spouse Jaimee Lynn Gdak, as well as three companies: Trigger (both Gdaks are directors), En Cadre Group Inc. (which lists the Gdaks as directors, Clearflow claims) and Jaimak Real Properties Inc. (owned by Jaimee Lynn Gdak, Clearflow claims).
The accusations have not been proven in court, but were enough for a judge to grant Clearflow an interim receivership order on Oct. 13 against Trigger Wholesale and the Gdaks to freeze assets.
The claim alleges “a long-standing, organized pattern of fraud on the part of Trigger and Gdak that has come to the attention of Clearflow very recently, based on multiple instances of clear and convincing evidence from different and independent sources.”
Mark Gdak and his lawyers did not respond to interview requests from The Record. The lawyer for Jaimee Lynn Gdak declined to comment, and in an affidavit dated Nov. 13 Jaimee Lynn Gdak said she is not a guarantor of Trigger and denies any knowledge of, or participation in, the alleged fraud.
According to the Trigger Wholesale website, the company is an importer, exporter and wholesale distributor of firearms to federally licensed dealers, retailers, law enforcement and government/military agencies across Canada. It does not sell to or deal directly with the public.
The business relationship between Trigger and Clearflow described in the court documents is known as “factoring.” Trigger would sell guns, ammunition or gun accessories to its customers and provide Clearflow with a monthly list of all outstanding invoices. Clearflow then had the option of purchasing all or a portion of the invoices, at a discounted rate of 85 per cent.
Factoring is often used by companies to help improve cash flow, to aid in expansion, or to purchase more inventory.
Court documents indicate the factoring arrangement between Trigger and Clearflow was unique, however, since most factoring deals involve the customer (Canadian Tire, for example) sending payments directly to the new owner of the invoice (in this case, Clearflow).
Clearflow alleges Mark Gdak said federal regulations around the sale of firearms meant only Trigger could collect and handle payments.
All funds advanced to Trigger by Clearflow were considered loans until the invoices were completely paid.
Customers would pay Trigger on 30- to 60-day payment terms, and Trigger would relay the money back to Clearflow to settle the invoices.
Clearflow claims Trigger was “perennially late” in making its required financial reporting, and Gdak always seemed to have an excuse. Clearflow believed Trigger’s rapid growth and lack of experienced management were to blame.
Their business partnership began in 2015 and court documents submitted by Clearflow claim that based on information provided by Gdak, Trigger’s sales went from approximately $100,000 per month in December 2015 to more than $1 million per month at the end of June 2017. Just three years later in June 2020, reported sales reached $16.3 million per month.
Clearflow now suspects many of Trigger’s invoices were fraudulent, and the wholesaler either had no business at all with Canadian Tire and Home Hardware, or had a much smaller volume of business than the invoices suggested.
“Of the 22,149 invoices factored by Clearflow since the inception of the relationship with Trigger, it appears that the large majority of these invoices were falsified,” court documents claim.
Early this year, Clearflow claims it saw a spike in the number of Canadian Tire and Home Hardware accounts that were 90 days overdue, and Gdak was unable to provide a satisfactory explanation.
In July, Gdak allegedly provided Clearflow with names and contact information for executives at Home Hardware and Canadian Tire, but Clearflow claims the email addresses were fake and do not follow the email format for either company. Clearflow also alleges someone impersonated Canadian Tire and Home Hardware employees via email and during conference calls.
Clearflow had a field auditor contact Canadian Tire and Home Hardware stores that had purportedly ordered products from Trigger.
Clearflow claims the auditor contacted 40 stores in early October that had collectively ordered more than $1.3 million worth of products over the previous month according to the invoices allegedly provided by Trigger
The auditor’s report claims 28 of those stores, representing $939,321 worth of invoices, said they don’t sell rifles or shotguns for hunting and only have compressed air pellet or BB guns. The other 12 that do sell rifles or shotguns don’t carry many of the firearms listed on the invoices, Clearflow claims.
On Nov. 11, a Home Hardware spokesperson told The Record the company has never been involved with Trigger Wholesale and declined an interview. A Canadian Tire spokesperson told The Record it is not part of the ongoing litigation and also declined to comment.
When Clearflow asked Trigger how it planned to repay at least a portion of its debt, Gdak allegedly claimed a 90-acre property in Waterloo owned by En Cadre Group Inc. was in the process of being sold for approximately $48 million, according to documents.
But Clearflow claims there is no evidence the “raw land located in an agricultural area” is owned by En Cadre or has any connection to Gdak.
Clearflow also claims properties in Waterloo and Huron County listed as being owned by Jaimee Lynn Gdak and Jaimak Real Properties Inc. were placed in those names “in an effort to shield assets from the reach of Clearflow and other creditors in the event that the fraudulent scheme was discovered.”
Martin Rees, an employee of Clearflow and main contact for the Trigger account, said in an affidavit there is “no direct evidence that Gdak himself has personally benefitted” from the alleged fraud, and there is no obvious motive.
Clearflow director Glenn Petersen claims in an affidavit that he obtained legitimate purchase order forms from Home Hardware and Canadian Tire to compare to the ones supplied by Trigger.
Petersen alleges the invoices from Trigger are missing key information present on authentic forms, including delivery method, UPC codes for the products, store numbers and the vendor numbers.
A Home Hardware order form allegedly supplied by Trigger also included at least three spelling errors, Petersen claims.
Alexandra Kanichis, Clearflow’s director of operations, stated in an affidavit that they obtained copies of a series of Canadian Tire and Home Hardware cheques allegedly deposited into Trigger’s bank account during July and August 2020.
Loading…
Loading…Loading…Loading…Loading…Loading…
The cheques were suspicious, she said, as the bottoms of the cheques including account numbers and other information were allegedly cut off in the photocopy provided by Gdak.
The name of the Canadian Tire executive on the cheques was also allegedly spelled differently than in the email address provided by Gdak earlier — suggesting one or both were fake.
On Oct. 13, Clearflow was granted its interim receivership request from the court, and on Oct. 21 the interim receiver, Grant Thornton Limited, filed its first report.
That report contains additional allegations against the gun wholesaler. On Oct. 22, the interim receivership was converted to a full receivership by the court.
According to the first report by interim receiver Grant Thornton, the firm contacted Gdak on Oct. 13 to inform him of the interim receivership and request access to the facility.
Gdak complied, the report states, and provided a tour of the building, but said he was not prepared to answer any additional questions without speaking with his legal counsel.
The report says Trigger informed Clearflow in September it had approximately $6 million worth of inventory at its Waterloo warehouse, but based on the inventory on the premises and its condition when they arrived, Grant Thornton estimates the value was “significantly less” than $6 million.
Numerous boxes of rusted and unusable handguns of little value were found, as well as boxes of rifles that appeared to be in new condition, the report states.
The Chief Firearms Office of Ontario (CFO) — the provincial agency responsible for firearms licensing — told Grant Thornton investigators the last site audit was in December 2019.
The interim receiver said Clearflow provided two CFO audit reports from March and May of this year they claim were supplied by Trigger. When the interim receiver asked the CFO about those reports, the CFO said the one from March 5 was for the December 2019 audit but had been “substantially” altered.
Some of those alterations, according to the Grant Thornton report, included increasing the number of restricted firearms located at the premises from 1,114 to 31,114, changing the number of reported cameras on the premises from 16 to 32, and changing the number of motion sensors in the warehouse from 11 to 14.
The CFO also allegedly told the interim receiver the audit detailed in the second report, dated May 11, 2020, never occurred.
In a statement sent to The Record on Nov. 17, the CFO confirmed it had been contacted by the interim receiver, had inspected the firearms at Trigger’s Waterloo location, and “continues to work with the receiver to ensure all regulatory steps are being followed in relation to the liquidation of assets.”
Waterloo Regional Police and the Ontario Provincial Police told The Record they are not investigating Trigger.
As part of its search of the Trigger building, the interim receiver said it found emails from a Trigger employee and Mark Gdak to the company’s IT provider in August requesting new email accounts be “urgently” created — the same accounts Clearflow claims were used to impersonate employees at Home Hardware and Canadian Tire.
The interim receiver said it also found two laptops inside the Trigger office still logged into two of those email accounts.
“It would appear that Mr. Gdak and/or Mrs. Gdak were using these computers to impersonate Canadian Tire and Home Hardware employees,” the report states.
A total of 27 uncashed cheques from apparent Trigger customers totalling more than $1.6 million were found inside the office, and the receiver said the cheques were drawn from accounts at three different banks but all appeared to use the exact same background and font. Boxes of paper with the same cheque stock were also located.
The Grant Thornton report said “it appears that Trigger created cheques in the names of certain customers to provide to Clearflow in support of deposits” it was making.
The interim receiver also said “that in order to understand what happened to Clearflow’s advances and the use of those funds, a more extensive investigation will be required, including, but not limited to, a full review of the debtor’s banking activity and reconciliation of customer balances.”
