Man fighting for ownership of renowned Sooke Harbour House hotel accused in U.S. Ponzi scheme

The Canada Border Services Agency claims a man fighting for ownership of the internationally-renowned Sooke Harbour House hotel is the subject of an arrest warrant in relation to an alleged Ponzi scheme in the United States.

Timothy Durkin has applied in federal court for a judicial review of a July 2018 CBSA decision to refer him to an immigration admissibility hearing.

According to a copy of the decision filed as part of the case, the CBSA claims Durkin "is alleged to have been a member of an organization that defrauded a number of investors of over 4 million dollars in the United States of America."

Although the 67-year-old came to Canada from the United Kingdom as an infant, he claims he didn't realize until he was 17 that he was not actually a Canadian citizen.

The difference in status is crucial because as a permanent resident, the CBSA argues Durkin can be declared inadmissible on the grounds of serious criminality.

"I have never been convicted of any crime in my life," he wrote in a letter to the CBSA included in the federal court documents.

"I can say unequivocally that I have never participated in or had knowledge of any fraudulent activities or schemes to defraud others of their investments."

Original owners ordered out

In a statement to CBC, Durkin's lawyer said "we have concerns over the lack of disclosure of any evidence in the case and are awaiting the Court's disposition on the concerns we raised in our application."

The allegations are the latest twist in the already tangled tale of Sooke Harbour House.

Two companies led by Durkin — SHH Holdings and SHH Management — are suing original owners Frederique and Sinclair Philip for control of the business the Philips founded in 1979.

The pair built the inn and restaurant to global acclaim, hosting everyone from Robert De Niro and Angela Lansbury to the vice-president of France. Their work won them a Governor General's award for culinary inspiration in 2010.

But by 2014, the business was in danger of defaulting on nearly $3 million worth of loans from the Business Development Bank of Canada.

According to B.C. Supreme Court documents, the Philips entered a share purchase agreement in 2014 with SHH Holdings and SHH Management.

The deal also saw Durkin's companies take over operations.

But by August 2017, the Philips claimed the deal was off. And they allegedly marched into the hotel with uniformed security guards to wrest back control.

The Durkin-led corporations sued, leading to an interim injunction in September 2017 in which a judge ordered the Philips to "immediately quit and leave the business premises."

In her ruling, Justice Joyce Dewitt-Van Oosten noted that lawyers for the Philips had argued against the court giving possession to SHH Holdings and SHH Management over the "express disagreement of the legal owners."

But she cited the state of "chaos" at the hotel and its "potential to snowball into significant financial loss in hotel revenue" as justification for the decision.

A trial to determine ownership is not scheduled until at least 2019.

Ponzi scheme allegations

According to federal court documents, the CBSA was informed about a U.S. warrant for Durkin's arrest in September 2017.

The decision to refer him to an admissibility hearing was written by CBSA acting regional programs manager Steffan Tsetzos.

The decision says Durkin lived in Canada consistently between 1952 and 1980. He told the agency he spent much of the time between 1980 and 1993 travelling while working for an energy company.

"Additionally, Mr. Durkin states that he spent much of his time between 1993 and 2012 working and travelling between London and New York," Tsetzos wrote.

"There is little mention of residence in Canada between 1980 and 2012."

The arrest warrant was issued in absentia in relation to a grand jury indictment issued in 2013 by the U.S. District Court for the Southern District of Alabama.

The indictment claims Durkin and three others convinced investors they had developed a high-speed computerized system that could maximize profits through rapid same-day stock trades.

The three other co-accused were all convicted and sentenced to five years in prison. The charges against Durkin have never been tried.

'No information on these charges from any authority'

A CBSA report included in the federal court file says officers showed up at Durkin's Sooke home in November 2017. He agreed to surrender his passport and report weekly to the Sooke RCMP detachment.

The report says he "maintains no knowledge of or participation in any fraudulent activity or schemes."

"Further he states he does not currently pose a threat to Canadian society, though according to RCMP there are complaints of other questionable financial investment schemes implicating the subject in the last year," the CBSA report says.

In the federal court application, Durkin's lawyer says CBSA failed to disclose the facts which triggered an immigration admissibility hearing.

Durkin claims he has "sought disclosure of the facts underlying the alleged charges against him and the evidence in CBSA's possession that allegedly supports those facts." He claims he was denied procedural fairness.

"Mr. Durkin has received no information on these charges from any authority," his lawyer says in a memorandum of argument.

"He has never been contacted by U.S. authorities regarding these charges for prosecution, extradition or surrender."

'Catastrophic' for community of Sooke

Durkin's lawyer also argues that the fate of Sooke Harbour House, which employs 70 people, should be considered.

"They have encountered tremendous success with their business plan and the hotel is significant to the economy of Sooke," the lawyer writes.

"It would be catastrophic financially for Mr. Durkin's family and the community of Sooke, if he were required to leave Canada and not (be) able to continue to operate the business."

Durkin also made a plea on humanitarian and compassionate grounds, saying: "it would be devastating to my family if I could no longer remain in Canada."

But in the CBSA decision referring Durkin to an admissibility hearing, Tsetzos said the offences Durkin is accused of are "organized, sophisticated and serious in nature."

"I do not believe that the humanitarian and compassionate considerations outweigh the seriousness of the offences and Canada's international obligation not to be a haven for fugitives from justice," Tsetzos wrote.

None of the allegations have been proven in court.