Maple Leaf, Protos put in receivership
Winnipeg Free Press
Tuesday, January 17th, 2006
By Dan Lett and Geoff Kirbyson
THE corporate empire built by entrepreneurs David Wolinsky and Costas Ataliotis -- which once employed hundreds of Manitobans and controlled tens of millions of dollars in assets -- has been dealt a major blow as two of their key businesses have been put into receivership.
A Manitoba Court of Queen's Bench judge ordered a receiver last Friday to take control of Maple Leaf Distillers, a blender and bottler of alcoholic beverages, and Protos International, a holding company with interests in a diverse range of businesses including Salisbury House Restaurants.
The motion to appoint the receiver came from Astra Credit Union, the sixth largest credit union in Manitoba, which claims it is owed more than $6.4 million by Maple Leaf Distillers and another $1.1 million by Protos International.
Maple Leaf Distillers has been under severe financial pressure for at least two years and owes significant sums of money to a variety of creditors, including Assiniboine Credit Union, and the province through the Manitoba Industrial Opportunities Program.
Crocus Investment Fund also invested more than $7 million in Maple Leaf and still retains preferred, non-voting shares in the company.
Sources from the Protos group of companies claimed millions more are owed to individual, unsecured creditors who include some of Winnipeg's most prominent citizens.
Astra CEO Ian Dark said the credit union decided to ask the court to take control of the companies from Wolinsky and Ataliotis because of a series of delays in completing a sale of the assets of Maple Leaf Distillers to Angostura Ltd., a Trinidad-based rum and bitters company.
Astra is first in line to reap any proceeds of the sale, Dark said. To protect this position, Ernst & Young Inc. was appointed receiver and manager of both companies, and as a first order of business will attempt to complete the sale of assets to Angostura, Dark said.
"We called (Ernst & Young) in to protect our interests," said Dark. "That move was really made on behalf of all creditors."
Rob McMahon, senior vice-president of Ernst & Young, said he expects to complete the Angostura sale in the near future.
"The indication we get is that they (Angostura) want to proceed with the sale," said McMahon. "We believe this is in the best interests of all shareholders."
McMahon said Ernst & Young will conduct a detailed analysis of all assets owned by the two companies, to see what kind of return can be realized for all creditors, secured and unsecured.
Robert Tapper, a lawyer representing Wolinsky and Ataliotis, said the two companies did not consent to the appointment of a receiver. "I don't know that they were asked to agree to it," Tapper said, but added, "it wasn't an opposed motion."
Tapper said he and his clients are still looking forward to completion of the Angostura sale. Tapper added that the receivership should not affect the ownership or control of any related companies, such as Salisbury House.
Ernst & Young has been working since late October on Astra's behalf to monitor business affairs and records at Maple Leaf and Protos, court documents show.
Ernst & Young were called in shortly after Astra launched a special audit of accounts held by Maple Leaf Distillers, Protos International and Salisbury House Restaurants after discovering irregularities involving million of dollars of commercial loans stretching back over two years.
In its claim, Astra alleges Maple Leaf and Protos, and "parties affiliated" with both companies, "implemented a plan to obtain credit from Astra in excess of... authorized credit limits."
In a previous interview, Dark said Astra's board of director became aware in October 2005 it had been provided with "incorrect" reports on transactions involving large corporate loans. A senior loans manager has been suspended pending the results of the special audit.
Although Dark would not identify the companies involved, a Free Press investigation confirmed they included Maple Leaf Distillers and Protos International.
Astra still has outstanding claims against Salisbury House Restaurants, another company related to Maple Leaf and Protos, which is also significantly overdrawn on its line of credit.
In a December 2005 letter, filed in support of the receivership, Dark wrote that Astra had agreed to delay any action against Salisbury House in exchange for a pledge of security by Greener Pastures Investments Inc., a company controlled by Wolinsky. According to the letter, Greener Pastures has pledged "all of their present and after-acquired real and personal property" including lands on which Green Gates restaurant is located.
The Maple Leaf and Protos receivership mark a significant setback for Wolinsky and Ataliotis, dynamic figures in the Manitoba business scene who set international goals for themselves and their companies.
Maple Leaf Distillers was the first significant business enterprise in the Wolinsky-Ataliotis partnership. Founded in 1999, the blender and bottler of creme liqueurs and spirits would grow to sales of more than $4 million annually. However, the company spent massive amounts of money trying to grow into lucrative foreign markets, and ended up losing millions of dollars each year.
In 2001, company literature stated Protos "led a consortium of local investors in repatriating" the Salisbury House restaurant chain by purchasing it from its Montreal owners. With Maple Leaf Distillers and Salisbury House leading the way, Protos claimed its companies employed more than 800 people. One investors has filed claims in court documents that Ataliotis and Wolinsky estimated that Maple Leaf Distillers alone was worth as much as $50 million.
Wolinsky and Ataliotis raised money for their enterprises from a variety of investors, including Crocus Investment Fund. In May 2005, a report by Manitoba's auditor general concluded Crocus officials continued to pump millions of dollars into Maple Leaf Distillers despite concerns raised by Crocus staff of poor management and questionable financial practices.
Manitoba's deputy attorney general ultimately decided to ask the RCMP to investigate "questions of impropriety" involving Maple Leaf Distillers that were raised by the auditor general.
Maple Leaf and Protos International were a lightning rod for Winnipeg's rich and famous. Investors included rock star Burton Cummings, Dickie-Dee ice cream magnate Earl Barish, star criminal lawyer Hersh Wolch, hockey legend Thomas Steen, Mayor Sam Katz and a host of doctors, lawyers and entrepreneurs from the heights of Winnipeg society.
Astra and other secured creditors of Maple Leaf Distillers had been in a holding pattern for the last four months as Ataliotis and Wolinsky tried to negotiate a transaction involving Angostura Ltd., a Trinidad-based distiller of rum and bitters.
Ataliotis and Wolinsky announced in December they had completed a sale of the business to Angostura that would allow Maple Leaf to continue operating. Angostura officials said the transaction was for the purchase of Maple Leaf assets only.
Before that deal could close, Maple Leaf, Protos and its principals were hit with a wave of lawsuits. Dr. Selvin Passen, a wealthy Florida businessman who invested heavily in Maple Leaf and Protos, filed three statements of claim in Manitoba alleging he was owed more than $3.2 million. Passen also filed suit in Florida alleging Wolinsky, Ataliotis and Protos International defrauded investors and misappropriated a corporate asset -- a $1.4-million US Florida condominium -- for personal use.
Maple Leaf and Protos have filed statements of defence in the three Winnipeg lawsuits denying the allegations and alleging that Passen is himself in breach of a $1 million obligation to Maple Leaf. The statements of defence claim a deal was worked out in November 2005 that relieved Wolinsky, Ataliotis and their companies from monies owed to Passen.
No response has yet been filed to Passen's allegations in the Florida lawsuit, and Passen's allegations have not yet been dealt with by the Florida court.
dan.lett@freepress.mb.ca