Text of Harold Backer’s letter to several of his clients, sent before he disappeared. It was provided to the Times Colonist by one of his clients and does not include the list of clients that was originally a part of the letter.
October 2015
Financial Backer Corporation started in 1996 to address my belief that standard investment practices were overly sales-based rather than driven by appropriate motivation to deliver better-than-average investment returns. In Financial Backer funds, there are no fees unless the funds outperform their benchmarks, so the motivation was on good performance instead of sales volume. I still believe the industry should operate like this.
The funds had some very good years, in part due to rising technology markets. Rather than spending the fees payable to me for exceptional investment returns, I started an Internet/Computer business, which, if I had made the decision in 1999, could have sold for $500,000. That was an expensive timing mistake, but another mistake has had a far greater effect since that time. I will never be able to fix the colossal mistake I made when my market-based Funds lost between 25% and 45% of their market value in the dot-com crash. My mistake was not telling my investors about the loss. I decided instead that I would be able to make the money back by forgoing any future fees until the losses were covered. I took it on as a personal debt and kept my investors’ fund values at their 1999 levels and grew them on paper at a general market rate of return.
Since then, some years have been net gains, but others have not, because my fees could not keep pace with the growth I had to maintain. Compound growth is inexorable, whether it’s positive or negative. In 2005 to 2007, I used a tax scheme named Synergy (introduced to me by a friend and client) to try to accelerate the gains in the Funds. The validity of Synergy is to be decided in Tax Court, with no end in near sight. If money ever comes from Synergy, It belongs to Financial Backer Investors, even though I took full responsibility for the loans.
Moving forward to today, I am aware that I am running a pyramid investment. I will not keep doing it. Even though I still consider the missing money in my corporation’s investment funds as my personal debt, I realize there is no way in my lifetime that I could pay it back to my investors. My path through these decisions is unconscionable, and I am deeply and truly sorry for the effects of my poor decisions.
My investors have been my friends, and I have done a terrible thing to my friends. My choice at this point is to do anything in my power to cover the investment losses I have created. If admitting to fraud would help restore the losses, I would accept the criminal penalty.
I have a Transamerica Life insurance policy, payable to Financial Backer Corp., with a face value of $1,500,000. This amount should be divided among my investors in a pro-rated fashion, either by the Grand Totals from the most recent investor statements, or by using the original amount invested (subtract Total Gain from Grand Total). This should cover almost all the amount outstanding using the second valuation method.
Thank you for your undeserved friendship. I am eternally sorry for my financial decisions.
Investments through Investia Financial Services are not connected to this in any way. If you have money invested through me through Investia in any Mutual Fund company, your RRSP/RIF/RESP money is absolutely safe, and since my Investia commissions are paid to Financial Backer Corp (part of my repayment plan), it may be best to leave it that way, because there will be more money in the Corporation to distribute to investors. Investia will eventually assign another advisor to your accounts, or you can move them if you wish. If Investia learns of my activities with Financial Backer Corp, they will have to report them to the BC Securities Commission, which will create a news event and would affect any insurance payout, as proceeds would have to run through an investigation. It makes no sense for lawyers to get investors’ money.
Legally, Financial Backer Corp is a private corporation, with the investors listed below as the holders of common shares. There are different share types to match the different fund types. Common shares are non-voting, but full-ownership shares. I own all of the voting shares, which will become part of my estate. When that is settled and the various insurance payments are made, the money in the corporation should be divided as detailed above.
