The secret empire of Pizza Pizza executive Lorn Austin

Between 1990 and 1992, an additional $425,000 was paid to Lorn Austin from Pizza Pizza’s advertising trust fund, according to an affidavit by forensic accounting firm Lindquist, Avery, Macdonald, Baskerville filed in court on behalf of the franchisees. The affidavit’s author, forensic accountant Michael Beber, stated that he could not determine what services Austin provided to justify the payments and that Pizza Pizza should be asked to provide details.

The Toronto Star
June 26, 1993

The secret empire of Pizza Pizza executive Lorn Austin
A secret web of companies run by senior Pizza Pizza executive Lorn Austin has bled as much as $1.5 million from other people’s pockets in recent years, a Star investigation shows.
Kevin Donovan

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Lorn Austin, executive vice-president of the Pizza Pizza franchise chain, is a the centre of a web of companies - despite his claim to federal bankruptcy officials that he was not running any businesses.

Money has been funnelled into land deals, business mergers and fly-by-night schemes that went nowhere.

Austin even has links to a hard-nosed collection agency – an ironic twist for a convicted conman and racketeer who avoids paying his own bills.

At the centre of this activity is a man who is bankrupt and claims he is virtually penniless.

During a wide-ranging interview yesterday, the 43-year-old Austin described himself as merely “an adviser” with no assets or shares in the myriad of deals and companies he has been involved in.

“The truth of the matter is I’ve done nothing wrong. And all the innuendos in the world won’t change that,” Austin said.

But there are signs the run of luck enjoyed by Austin – a key figure in the vicious battle between Pizza Pizza and its angry storeowners – may be coming to an end:

  • Ontario government investigators have seized the trust accounts of Austin-linked Madison Credit and Collection Services Ltd. after an estimated $300,000 was apparently collected on behalf of many Toronto companies – but not handed over to them.
  • Investors and the Canadian Imperial Bank of Commerce are looking for about $800,000 that has virtually disappeared into Austin’s personal holding company, Edlor Holdings Ltd., over the past few years.
  • Forensic accountants hired by Pizza Pizza franchisees have discovered that an unexplained $425,000 from the franchisees’ advertising trust account was paid to Austin between 1990 and 1992, according to a court affidavit.

For the Toronto native – once called one of Florida’s most prolific white-collar criminals – it promises to be a long, difficult summer.

“Let me tell you what his problem is,” one of Austin’s former associates said in a recent interview.

“It’s like Lorn Austin is still a kid playing in a sandbox. Only, in Lorn’s case, the sand is money. Other people’s money.”

Six weeks ago, The Star published stories detailing Austin’s fraud and racketeering convictions, and his history of personal and corporate bankruptcies.

The same stories pointed out that, as Pizza Pizza’s executive vice-president, Austin helped oversee trust accounts that held millions of dollars ear-marked for advertising, rent and delivery expenses.

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Pizza Pizza franchisees have alleged in a court action that those trust accounts have been mismanaged, costing them millions of dollars in total.

Pizza Pizza officials deny the franchisees’ allegations and have derided The Star stories, telling franchisees that Austin is a reformed man since he was paroled from prison in March, 1989.

He may have been a con man before; but now, they were told, he was simply Pizza Pizza’s executive vice-president, and nothing more.

But that’s not the whole story.

Pizza executive’s other deals

  • * *

The seventh floor of 25 St. Clair East is a place most people would like to avoid. That’s where the business of bankruptcy is carried out.

On Oct. 20 last year, Lorn Austin sat across a modest desk from a federal employee known as an Official Receiver. Austin was swearing an oath that he could not hope to pay the $3.8 million he owed creditors who had caught up to him from the old days before Florida. And so, Austin said, he was bankrupt.

It’s serious work, filling out a bankruptcy statement. The federal government will let a person clear up outstanding debts and start fresh if he can prove he is legitimately broke. Any money or assets a person has must be turned over to a bankruptcy trustee, and divided up to creditors.

And so the usual battery of questions was asked of Lorn Austin. He answered in writing.

No assets beyond a few sticks of furniture. No car. Only a rented house. Just $250 in the bank. Hadn’t carried on a business, owned a business, been an officer or a director of a company since 1984. No job, though he was about to start at Pizza Pizza in the new year, according to the Official Receiver’s report.

Involved in any companies? he was asked again. Not since 1984, Austin replied, signed the sworn statement, and left quickly.

He had business to do, and a plane to catch.

  • * *

Alex Simmons wore jeans that day.

Not the suit he was accustomed to wearing as president of Madison Credit and Collection Services Ltd.

‘We’re after them big time. But right now we don’t know how much of our money they have.’
Price Club official

He staggered under another load of files he was taking out to the rented cube van, with help from an employee.

It was April 16, 1993, and after four years of steady business, the nasty company with a reputation forged by its verbally abusive, tough-guy collectors was no more.

Simmons, Lorn Austin’s brother-in-law, was removing files from the Thornhill offices of Madison, a company set up, financed and overseen by Austin.

The day before, according to provincial consumer and commercial relations ministry registrar Elaine Guigans, the government had “frozen Madison’s trust accounts in the public interest.”

Translation? Government auditors had done a spot audit on Madison’s books, which contained records of money collected on behalf of the 1,300 companies that paid Madison a commission to collect bad debts.

Auditors found Madison’s trust account, which held money collected for companies, had been “tampered with,” a source with the provincial consumer ministry said. Money collected had not been paid out.

From interviews with Madison clients, employees and Madison records obtained by The Star, it appears that more then $300,000 was collected and not paid out.

Many of the companies that dealt with Madison now face an odd decision: Is it worth hiring a collection agency to collect from their former collection agency?

Xerox, owed $14,000 by Madison parent company Edlor Holdings Ltd., had already hired Creditel to collect from Edlor principal Lorn Austin.

Among Madison’s clients were The Price Club, MacMillan Bathurst, giant shoe wholesaler Intershoe, and hundreds of retailers that belong to the Canadian Gift and Retailer Association, which endorsed Madison as its collection agency until Madison’s demise.

The Star contacted about 30 companies at random from Madison’s client list and the majority said they believed Madison had collected money and not turned it over.

“We’re out a few thousand dollars,” said Elaine Steiner of company Parsons-Steiner.

“I know for a fact that Madison collected money for us and did not hand it over,” said Toronto chartered accountant Mel Kestenberg, whose firm was anther Madison client.

“We’re after them big time,” a Price Club official said, asking not to be named. “But right now we don’t know how much of our money they have.”

A provincial investigation is under way.

Alex Simmons would not agree to an interview.

But partial Madison and Edlor records show they were part of a network of 10 companies – many linked in some way to Pizza Pizza – set up and controlled by Lorn Austin since 1989.

None have been mentioned in Austin’s ongoing bankruptcy proceedings.

In yesterday’s interview, Austin downplayed his role in the companies, maintaining he owned no shares in them, and was not an officer or director of any of them.

But provincial records list him as president of four of the companies. And court and business records show he signs as officer of Edlor, the holding company in his wife’s name.

Told of this, Austin said: “So what. An officer of a company and owning a company are two different situations.”

Regarding Madison, Austin said he merely provided advice to his brother-in-law.

When told that Madison financial documents showed $200,000 in loans were advanced from Edlor and other Austin companies to Madison, Austin said he was not sure of the details, but “if in fact that took place,” it was just one family member helping another.

“You have to remember you’re dealing with a youngster who was married to my sister. What did you want me to do, not help him if he asked me for his help?” Austin said.

The companies got rolling in the heady days following Austin’s release from prison in March, 1989.

Madison bank accounts? Not ten cents. I’m absolutely sure I did not. Are you talking personally?
Lorn Austin

According to interviews with Austin associates and investors, who requested anonymity, Austin was determined to make a come-back in the Canadian business world after his jewelry and time-shares schemes of the early-to-mid-1980s had landed him in prison in the U.S.

To finance these ventures, he sought investors and a line of credit from CIBC – about $800,000 in total – in a venture he called Edlor Holdings Ltd., the parent company.

Between 1990 and 1992, an additional $425,000 was paid to Lorn Austin from Pizza Pizza’s advertising trust fund, according to an affidavit by forensic accounting firm Lindquist, Avery, Macdonald, Baskerville filed in court on behalf of the franchisees.

The affidavit’s author, forensic accountant Michael Beber, stated that he could not determine what services Austin provided to justify the payments and that Pizza Pizza should be asked to provide details.

Austin told The Star the money was paid to a company he was involved with as a “management fee.” He would not say why. “That’s none of your business.”

Austin also refused to answer questions dealing with the flow of cash in or out of any of these companies. “That’s not relevant,” he said.

A whirlwind of activity and spending followed the influx of cash.

Small companies were purchased, bigger companies were sought after, plans were even laid for a whole new kind of franchise – this one involving children’s clothing.

One company, Austin and Partners, has been listed with the Toronto Real Estate Board as vendor for part of a 1.6-hectare (4-acre) High Park estate purchased by Pizza Pizza president Michael Overs in 1989 for $3.25 million.

Real estate sources say Overs has, at various times since then, considered selling the heavily wooded property on Grenadier Pond or developing it into a huge Casa Loma style mansion. Houses on the site are now leased out.

Then, earlier this year, a parcel of land and house beside that estate was purchased by a numbered company registered to Sybil Hausbach, Austin’s wife using her maiden name, and listing the company’s office as the North York mansion Austin and Hausbach rent for $9,000 a month.

Austin maintained, in yesterday’s interview, that he knew nothing of that company or the purchase.

“But I’m going to find out,” Austin said, laughing.

Land registry records of the Hausbach property show that an agreement was struck between buyer and seller not to list the sale price in a public document. Sources say the property was worth an estimated $500,000.

Despite being bankrupt, Austin has claimed to several people interviewed that he represents a pool of investors who can provide millions of dollars of funding for various ventures.

In one case, on Oct. 21, 1992, the day after Austin gave his bankruptcy statement saying he only had $250 in the bank, he met several businessmen for drinks in a midtown Manhattan hotel.

“He said he represented some millionaires who played poker together and would decide, if they liked a business, to invest a million dollars each,” one of the businessmen told The Star.

Austin would not comment on the trip to New York, except to say: “I don’t represent any investors, I’ve never told anybody I represent any investors, I don’t represent any investors.”

Of all Austin’s companies, none was more established than Madison. And none was more secretive.

Under legislation governing collection agencies – which have access to intimate financial details on people and companies – anyone involved in an agency must be scrutinized by the government and must make full disclosure of past criminal activity.

Austin was convicted of fraud and fined $14, 650 in Canada in 1977. In 1985 Austin was convicted in Florida of racketeering, credit card fraud, grand theft and organized fraud in connection with a $4 million phony gem scam.

He was also convicted of cheque-kiting and a time share condominium fraud. He was sentenced to serve eight years but was paroled in 1989. His parole ends next year.

“It’s likely that, if anyone in the government knew (Austin) was involved, Madison would not have been licensed,” a consumer ministry source said.

Key to Austin’s arms-length involvement in Madison was his right-hand man in this venture, Alex Simmons, his sister’s husband.

Simmons was a senior executive at Creditel, a well-established collection agency based in Toronto. But he left it for a promise of running his own company.

‘He said he represented millionaires who played poker together and would decide…to invest a million dollars each.’
A businessman

Madison financial statements showed the collection agency was provided with $200,000 in loans from various Austin companies.

A source who worked for Austin told The Star that Austin would at times make inquiries about, or decisions regarding, the Madison bank account at CIBC.

“Not a chance in this world. It’s not been anything I can remember,” Austin replied when questioned about this.

“I wouldn’t have any say in the Madison account. If I directed somebody I probably said go ask Alex (Simmons) for the money or (say) Alex why don’t you pay this person. I’ve never directed anybody.”

The Star research shows that Austin, through Edlor, advanced Simmons a $100,000 loan to help buy a $385,000 house in Richmond Hill. Court records show Simmons recently lost the house after not paying his mortgage for nearly two years.

One of Madison’s most important clients was Pizza Pizza. The collection agency took over the assets of two failed Pizza Pizza enterprises, Metropolis newspaper (a Pizza Pizza-Edlor partnership) and printing company Spence and McCartney.

Madison records show that Madison/Edlor sold off assets belonging to those companies, and collected any money owing those companies.

“Whenever Pizza Pizza called Alex (Simmons) it was like, how high could he jump,” a senior Madison employee said.

Cathy Sipkoi, who sold her company Catch-All collections to Madison/Edlor, said part of Madison’s undoing was the way it did business.

“We used to have a really good reputation among clients and debtors as being fair and above board,” Sipkoi said. “But when they took over I heard things were changing…they started to become hardcore.”

In the final few months of operation, many clients dropped Madison. Madison records show complaints that Madison employees were shouting, screaming and unleashing a “verbal onslaught” against its clients – not just the debtors.

Other complaints allege that Madison berated debtors to collect money already paid.

Then, in April, Madison’s trust accounts were frozen after the government audit.

People and banks owed money by Madison, and various other companies connected to Austin, are looking to him for their money back.

But they may be out of luck.

As far as The Star could determine, the only security Austin personally offered to guarantee any of these schemes was a $250,000 letter of credit from a Cayman Islands bank.

Austin said he does not recall that. “It never happened. To my knowledge, 100 per cent.”

It probably does not matter.

When CIBC officials tried to collect, they found the Cayman Islands “bank” was nothing more than a law office.


Risks: Franchisor changes personal names, Lorn Austin, Lorne Austin, Lawrence Austin, Ministry of Consumer and Commerical Services, Ministry of Consumer and Business Services, Ministry of Government and Consumer Services, Ministry of Government Services, Ontario, Convicted fraud artist, Racketeering, Hates publicity, Public perception of sleaze and greed, Advertising fund paid to executives, Check kiting, Canada, 19930623 The secret

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