Companies owned by a Port Moody couple who appeared on CBC’s Dragons’ Den in 2010 to pitch their automated remittance business are being investigated for alleged money laundering and sweepstakes fraud.
Although the investigation is ongoing and no charges have been laid, the BC Supreme Court has authorized that the bank accounts of CNM Communications Inc. and Easy Padala Inc. be frozen as part of a civil forfeiture action.
The companies are owned by Francisco and Zeala Cortes of Port Moody.
The $101,403 seized is a fraction of the US$1.2 million that Port Moody Police discovered had been wired to CNM Communications by victims of a sweepstakes lottery scam.
One 84-year-old woman from New Jersey alone sent US$92,500 to CNM, according to court documents, which were posted online by the Filipino-Canadian news agency MetroVan Independent News.
In approving the freezing of bank accounts belonging to CNM and Easy Padala, the court said the activities constituted fraud and laundering proceeds of crime.
When contacted by phone, Zeala Cortes said, “We’re kind of like a victim,” and that “there is no case with Easy Padala.”
She referred all questions to her lawyer, who did not respond to a request for an interview.
Christine Duhaime, a Vancouver lawyer who specializes in anti-money-laundering law, said she is surprised that TD Bank (TSX:TD) didn’t see any red flags when large amounts of money started flowing into the companies’ accounts from the U.S.
“A little new startup, especially one that has to go on Dragons’ Den and pitch, does not have the volume of business to be able to conduct financial transactions of [$1 million] or more in a short period of time, a fact that any bank conducting anti-money-laundering surveillance would or should have caught.”
Duhaime added that banks are required by law to “be alive” to potential cross-border activities that might be illegal.
“Usually banks shut down the customers’ accounts and send them to bank with someone else, and report the activities to Fintrac,” she said.
In 2010, Francisco and Zeala Cortes appeared on Dragons’ Den, asking for $100,000 for a 10% share in their Easy Padala startup.
As immigrants from the Philippines, they had identified a business opportunity: an automated remittance platform that would make it easy for Filipinos in Canada to send money back home electronically.
Canadian investment banker Brett Wilson offered them $25,000 for 50% of their business, plus a $75,000 loan, which they accepted.
Wilson confirmed in an email to Business in Vancouver that the deal never went through, saying, “They decided not to proceed.”
The Easy Padala electronic remittance service appears to be offered on a website called Kaplaza Co-op, a social enterprise platform that lists member companies as CNM Communications, Easy Padala, Filipino Star Magazine and Elan Foods Group.
The Kaplaza website offers an online email transfer service. The news feed for Filipino Star Magazine’s Facebook (Nasdaq:FB) page heavily promotes Easy Padala.
After analyzing Easy Padala’s electronic remittance site, Michael Gokturk, CEO for the electronic payment processor Payfirma, concluded that it’s not really an automated platform, but simply a WordPress site with a plug-in that allows it to collect banking information and then do electronic transfers through regular banks.
“Just a cursory inspection of their website shows they’re using off-the-shelf – and free – software to take extremely confidential and sensitive information,” he said. “On top of that, data is leaking to Facebook and other sites via cookies.”
Among Kaplaza’s business ventures are condominium investments in the Philippines and an organic farming project in the Philippines in partnership with an organization called LORPP Cooperative.
None of the companies owned or controlled by the Corteses mention lottery sweepstakes, but it appears that that venture generated more than US$1 million.
In June 2016, after receiving a complaint, the Port Moody Police Department launched an investigation. One of the alleged victims was an 84-year-old New Jersey woman who was told she had won US$1.5 million in a sweepstakes. To collect, she was told she would need to pay the taxes on the winnings. She ended up sending US$92,500 to CNM in two separate instalments.
After getting a production order on CNM’s bank account, the Port Moody police learned that a total of 25 transfers worth US$1.2 million had been wired to CNM. Thirteen transfers totalling US$715,060 were from American accounts.
The police investigation revealed that funds were transferred between three companies owned by the Corteses – CNM, Easy Padala and Elan Wellness Group – which could constitute money laundering.
“In this matter, none of the identified victims have received any winnings and the investigation has confirmed that no legitimate organization exists to pay out winnings even if this lottery existed,” Sgt. Travis Carroll of the Port Moody police said in an email.
