Email to Mr. Doug Weber, Deputy Ombudsman, Ombudsman of Banking Services and Investments, OBSI

Reflecting upon our experience as we enter our thirteenth month of inquiry of a Canadian financial institution, we fail to see any difference in the way that the OBSI and the CIBC has dealt with us. The levels of good faith, fair dealings and selective half-truths are comparable.

It gives me no pleasure whatsoever to report these conclusions regarding OBSI's level of discernment. Please forward your decision letter.

Email to Mr. Doug Weber, Deputy Ombudsman, Ombudsman of Banking Services and Investments

To: Mr. Doug Weber, Deputy Ombudsman, Ombudsman of Banking Services and Investments
From: Mr. Andrei Oudovikine
Date: June 7, 2005

Dear Mr. Weber,

We would appreciate a clarification of a few points regarding your June 7, 2005 email (see below).

You stated that the loan applications were dated July 11, 2003 and signed on August 19, 2003.

However, the only documents that we have are dated on August 8, 2003. Mr. Jeff Brown of CIBC gave us those documents in the fall of 2004 and stated in an email on November 9, 2004. He said, at that time, that those papers were a complete copy of our file.

Further, my father and I only met with Ms. Sue Fedorink, CIBC once. The August 8th documents are the only ones we have seen which bear both my father's and my signatures. I assume the documents that you are basing your decision on have both of our signatures.

Please provide us with the signed documents that you are basing your decision on because our experience leads us to question CIBC's reliability.

Due Diligence
I take from your refusal to decide that it is the OBSI's judgment that CIBC reviewed and maintains the documents necessary to fulfill their fiduciary responsibilities and statutory obligations under the Bank Act and the Canada Small Business Financing Act, Regulations and Guidelines.

On the Industry Canada loan application that we have dated August 8, 2003, Ms. Fedorink certified that that due diligence was done and that federal law was obeyed.

CIBC Legal Obligations
You state that CIBC transferred money from our current account without our verbal or written permission.

However, you say that is validate that action by saying a separate contract, as defined by a franchise agreement between us and a franchisor, gives them that authority. Please explain how, under federal or common law, CIBC had that right.

Further, please provide the necessary documents so the Canada Revenue Agency will accept our 2003 corporate tax return.

Please explain the statutory authority that supports the OBSI's decision to refuse to review the actions of CIBC's Ombuds Office. Without an explanation, we are forced to conclude that all financial services ombuds officers have immunity from their obligations as a bank official under federal law.

Ongoing Investigations
Please be advised that the following agencies have active investigations into CIBC actions: Office of the Privacy Commissioner of Canada (three), Financial Consumer Agency of Canada and the Royal Canadian Mounted Police, Greater Toronto Area, Commercial Crime Section.

OBSI Conclusion
We had anticipated an OBSI investigation and decision based on documentary evidence, common sense and the law. We had hoped that this issue would be dealt with in an impartial, effective, and timely manner.

We had hoped that the OBSI was not just a potemkin village for your self-regulating funding partners. We had faith that our issue would be evaluated on its own merit and not on the basis of caste.

Reflecting upon our experience as we enter our thirteenth month of inquiry of a Canadian financial institution, we fail to see any difference in the way that the OBSI and the CIBC has dealt with us. The levels of good faith, fair dealings and selective half-truths are comparable.

It gives me no pleasure whatsoever to report these conclusions regarding OBSI's level of discernment. Please forward your decision letter.


Mr. Andrei Oudovikine, B.Eng.

Hon. Ralph Goodale, P.C., M.P
Minister of Finance

Mr. Nicholas Le Pan
Superintendent of Financial Institutions

Peggy-Anne Brown, Ph.D.
Ombudsman for Banking Services and Investments
Centre for the Financial Services OmbudsNetwork

Mr. Pierre Gravelle, Q.C.
Centre for the Financial Services OmbudsNetwork

Hon. Jim Watson
Ministry of Consumer and Business Services

From: Doug Weber []
Sent: Tuesday, June 07, 2005 3:43 PM
To: Oudovikine, Andrei
Subject: RE: An Update regarding the sales and expense projections and our views

CIBC has still not yet located the sales and expense projections and we have to assume that they will not locate the projections. We have completed our assessment of the fact that these projections are not available to us and we concluded the following with respect to the due diligence that CIBC conduct in 2003 when your company applied for the loan.

• The missing projections are only projections and as CIBC has informed us were only one of several factors considered at the time of the loan application.
• You advised us that the projections that you provided to us that show losses and therefore the loan should not have been approved. You also informed us that the expenses on your projections are actual expenses. We also cannot solely rely on the projections received from you.
• Even if we accept that the sales and expense projections provided to the bank at the time of application showed a loss, most new businesses take a few years before profits are realized and that is why they are not the only factor taken into consideration when a customer applies for a loan. Very few new businesses realize a profit in the first year of operation.
• CIBC ‘s concern was assessing the ability to service (to repay) the debt and therefore also took into consideration your credit reports, the confirmations of income earned from self employment, your resumes, your personal guarantees, Notices of Assessments from CRA, confirmation of your investments, in addition to the sales and expenses projections.
• CIBC was concerned with Alexander’s credit report due to a derogatory comment on his report that was found to be an error and was concerned with your net worth. However, once documentation was received to confirm that the derogatory comment was an error and once confirmation of investments were received, these concerns no longer remained and CIBC Risk Management approved the loan that the branch had recommended.
• CIBC felt that even if the business did not generate sufficient income to service the debt that there was sufficient investments and other sources to fall back on and service the debt.
• We found no evidence of two loan applications each in the amount of $125,000 or that the same sales projections were use to approve two loans each in the amount of $125,000. CIBC Risk Management was fully aware of the total amount of credit being applied for and that sales projection was $473,508.
• The initial application was dated July 11, 2003 and credit of $232,000 was subsequently approved. The $232,000 was split into operating line of credit $2,500 plus two loans for $100,000 and $129,500. The applications for the two loans were signed on August 19, 2003. The reason the loan was split was so that a lower interest could be given on $100,000 as it was considered to be a job creation loan.
• The OPP advised us that they closed their investigation in October 2004 and that they did not find evidence of a fraud or that CIBC conspired to commit a fraud

Further details are in our letter being sent to you.

With respect to the use of the loan proceeds we are satisfied that the loan proceeds were used to close the purchase of the franchise with Country Style and were paid pursuant to the agreements that you signed with Country Style that state amounts due under the agreement must be payable to Country Style. This is the documentation that CIBC relied upon to issue the bank drafts to Country Style.

With respect to your allegation of breach of confidentiality by Sue Fedorink discussing your personal finances and your company’s finances with Roger Noble of Choice Corporation, we are not able to complete our investigation of this allegation without Roger Noble’s input and therefore we cannot formulate any conclusions.

You should receive our letter in a couple of days that concludes that we are not making any recommendations to CIBC Thank you for bringing your complaint to our attention.

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