It’s been quite a saga and the final scene won’t play out until October 9, but former Metafore chairman Joe Vos pleaded guilty and was convicted Wednesday of fraud over $5,000.
Other charges of falsifying books and documents, uttering a forged document and issuing a false prospectus, were dropped. The Crown and Vos also submitted an agreed-upon statement of facts to the court.
Past reports have the story beginning in 2000, when Toronto’s CTI Technologies, controlled by principals James Alexander and Martin Lerman, merged with Microage Calgary and Vos’ Microage Southwestern Ontario to form Metafore Inc. The alleged wrongdoing was principally considered to have occurred at the time of and directly after the merger.
In fact, Vos had been engaged in fraudulent activities since 1993. Incredibly, during 1993-1995 Joe Vos defrauded his brother and then business partner Ed Vos of $11.5 million dollars. A Deloitte and Touche audit exposed him, and $9 million was returned to the company, with the remaining $2.5 million treated as an “income bonus” for Joe Vos.
It didn’t stop there. Between 1996 and 2000 Vos took $29 million out of Microage Southwestern Ontario “without permission for personal purposes.” All but $8 million was subsequently returned.
The significance of this is that Vos entered into merger negotiations with CTI’s Lerman and Alexander under false pretences. He pushed for a go-ahead without the usual due diligence, resulting in a merger of equals by way of asset purchase. The court heard as fact that “The accused misled the other partners…by fraudulently misrepresenting his accounts receivable as legitimate.”
In the first year of Metafore Inc., Vos used a shell company to remove $1.7 million by issuing fake invoices. He dodged audit committees and the concern of his partners until October 1, 2001, when he was found out.
In the end one of Metafore’s six partners, Harry Hart, through his company Hartco, paid off $10 million in debt to Deutsche Bank, a secured lender for Metafore. Hart remains chairman and CEO of Hartco, which still operates under the names of Metafore, MicroAge, Microserv and CompuSmart.
Outside the courthouse Wednesday, Alexander expressed his satisfaction with the conviction.
“Mr. Vos has been found guilty,” he said. “I’m very grateful to the Crown for persisting in this.”
The victory is bittersweet, however. Lerman, who works as a general manager for a VAR, and Alexander, who is employed by Info-Tech Research Group, were defrauded not only of their livelihood at the time, but also of a significant business opportunity that, as Hart has shown, could have been lucrative over the long-haul.
The last words of the statement agreed to between Vos and the Crown state: “Lerman and Alexander have suffered considerable losses of hundreds of thousands of dollars.” This is a cautious assessment, and is due to the fact that the conviction is limited to Vos’ misstatement of the profitability of Microage, thus resulting in Metafore unknowingly assuming fraudulent receivables.
The public will now have to wait until October 9, when the court reconvenes, to hear the contents of Alexander’s and Lerman’s victim impact statements as well as possible restitution.