Alberta Court Finds Sunterra Guilty of Extensive Cheque Kiting Operation
In a significant legal ruling that has sent shockwaves through Canada's agricultural and corporate sectors, Sunterra Farms Ltd. and its affiliated companies have been found liable for $35 million in damages to American lender Compeer Financial PCA. The January 27 court decision, delivered by Justice Michael Lema at the Court of King's Bench of Alberta in Calgary, determined that Sunterra engaged in cheque kiting "on an astonishing scale" that resulted in substantial financial losses.
How the Cheque Kiting Scheme Operated
Justice Lema's detailed judgment revealed that Sunterra had been systematically sending multitudes of cheques between the accounts of its Canadian and American entities. This sophisticated scheme exploited the conditional credit or "float" available before cheques were cleared by financial institutions. The company relied on this temporary credit window to cover withdrawals from various accounts, creating a complex web of financial transactions that misrepresented the actual availability of funds.
The judge specifically found that "the Canadian Sunterra entities involved fraudulently misrepresented that south-going cheques were anchored by sufficient funds to be honoured" and that these entities intended Compeer to rely on those misrepresentations. This systematic abuse of banking processes ultimately resulted in Compeer Financial suffering net losses of approximately US$35 million after all available credits were applied.
Personal Liability and Corporate Response
In a notable aspect of the ruling, Ray Price, president and director of the Sunterra group, was also found personally liable for the company's actions. This personal accountability adds significant weight to the court's findings about the nature and extent of the financial misconduct.
Price responded to the ruling with a statement on Thursday, asserting that "at no time did I personally benefit from the matters currently before the court, nor was there ever any intention to do so." He emphasized that all decisions were made with the goal of sustaining the business, protecting employees, and preserving a food system that supports thousands of Canadian and U.S. families.
The Sunterra president further stated: "There were no hidden accounts, no personal enrichment and no diversion of funds for individual use. Any suggestion otherwise fundamentally misrepresents who I am and how I have conducted myself throughout my career." Price indicated he respects the legal process and will continue to address these matters through appropriate channels while focusing on supporting a fair resolution.
Discovery and Immediate Consequences
The elaborate cheque kiting scheme was discovered by Compeer Financial in early February 2025, when the lender conducted a routine review of Sunterra's financial activities. Investigators found that cheques deposited into the company's accounts between January 27 and February 10 of that year amounted to "significantly more than the stated annual revenues of the U.S. Sunterra Entities" by "many multiples," according to the court judgment.
This discovery occurred in connection with the renewal of Sunterra's line of credit, for which the company had submitted income statements to Compeer. Following the revelation of the extensive cheque kiting operation, Compeer immediately suspended Sunterra's cheque-writing privileges, effectively halting the scheme that had been operating undetected.
Broader Implications for Canadian Business
Sunterra's operations extend beyond its legal troubles, including Sunterra Market locations in Calgary, Edmonton, and Red Deer, as well as substantial agriculture business in both Canada and the United States. The company's involvement in the food system that supports thousands of families adds complexity to the case's implications.
The court's ruling represents one of the most significant cheque kiting cases in recent Canadian corporate history, highlighting several important considerations for businesses and financial institutions:
- The serious legal consequences of exploiting banking system vulnerabilities
- The potential for personal liability of corporate officers in financial misconduct cases
- The importance of robust financial oversight and auditing processes
- The cross-border implications of corporate financial operations between Canada and the United States
Justice Lema's characterization of the scheme as operating "on an astonishing scale" underscores the magnitude of the financial manipulation involved. The case serves as a stark reminder of the legal and financial risks associated with improper banking practices, particularly for companies operating across international borders with complex corporate structures.
