$150 million lawsuit against Robert Giroux: Ponzi and irregular transactions, expert says

The forensic accountant commissioned by the millionaires who sued Robert Giroux for $150 million in connection with the Huot Group debacle was categorical: the transactions carried out had all the characteristics of a Ponzi scheme, casting doubt on the fact that truly informed investors would have pumped more of money in such a form.

François Fillion is not his first major case. The KPMG expert testified for several days at the trial of Vincent Lacroix, who was convicted in the Nürburg scandal.

According to his analysis, it is clear that some of the transactions observed between Robert Giroux's companies, the private investment funds Q-12 and FIISH, as well as Stefan Hout's companies, have “Ponzi characteristics.”

What is a Ponzi scheme?

“Fraudulent fraud involves taking money belonging to one investor to pay false returns to other investors or simply to compensate investors who want their money back. Fraudsters can therefore give the false impression that the money invested is generating good returns and that there are no problems in recovering the money invested.

Source: Financial Markets Authority

His analysis revealed that the Huet empire had been in deficit for several years and was struggling to pay the interest it owed to the investors who had given it loans. To compensate for this, Robert Giroux had requested another injection of money from the millionaires, new money that according to the expert was used to pay certain interest.

“They were getting money from their interest, so they feel like the wheels are turning. Except they got the money that the investors brought in,” the forensic accountant explained during his testimony.

Image taken from François Fillion's LinkedIn account

The illusion of security

This spinning wheel, François Fillion described during his testimony as an “illusion” that everything is going well for the Huot group, as well as for investors’ money.

“It is an illusion, because these are not amounts resulting from the activities of Stephane Huot,” the forensic accountant said.

In total, approximately $120 million was invested in FIISH loan between 2017 and 2022 to finance Huot Group projects. In his analysis, Mr. Fillion determined that approximately 11% of this amount was used in Ponzi-type transactions, or approximately $10 million.

“This is $6.9 million in interest to investors that was paid out of their investment money. All these payments maintain the illusion that the system works,” the financial expert insisted.

For the FIISH and Q12 loans together, the latter detected $40 million worth of irregular transactions.

Construction site of one of the phases of the Ariela project

Photo by Vincent Debiens, Journal de Québec

Even if they knew

These maneuvers were necessary according to Mr. Fillion to keep Stefan Hout's ship afloat. Since the illusion worked, no one looked any further when it came time to pump in more money, prosecutors say.

But the deficit was already there. (See box below)

Was the Jiro Group aware of these setbacks? This is the question that the Master asked many times.^H François Valin, plaintiffs' lawyer, told a KPMG expert.

“Well yes, that's for sure. They were the ones who managed the loan and who generated part of the loan fee income,” explained François Fillion, who himself raised a fundamental question in this whole case.

“If investors had known it was in deficit from the beginning, would $58 million have been added to the fund? We have to ask ourselves that question.”

Robert Giroux confirmed during his testimony that he had informed the sponsors of what he described as “the temporary liquidity problems experienced by Stephane Hout.” For their part, the millionaires testified that they “fell off their seats” when they learned of the Haute Group debacle, which culminated in bankruptcy resulting from debts of more than a billion dollars.

Haute Group: Chronic financial problems, according to the expert

If Robert Giroux repeatedly insisted in his testimony on the fact that Stephane Hout's problems were just “temporary liquidity difficulties”, the KPMG expert who analyzed the case of deceived investors paints another very clear picture.

“For me, this is not temporary at all. It has been chronic financial difficulties [du Groupe Huot]», was repeated several times by François Fillion, the forensic accountant assigned in the $150 million lawsuit against Robert Giraud.

Since 2017

According to the expert's analysis, Stefan Huth and his companies have been suffering from liquidity difficulties since 2017. To compensate for this, the businessman requested several loans, in large amounts, that came with high interest and accumulated administrative fees.

Photo by Stephen LeBlanc

Between 2017 and 2022, François Fillion explained that the Huot Group had liabilities of $98.4 million in interest and fees on these loans. This is a much higher amount than what his activities brought in.

“This is a lot of money. When you consider that your real estate operations generate $56 million, there is a problem. Your income cannot be less than expenses,” the expert described, explaining that what was “unprofitable” for the Huot Group was the weight represented by the associated liabilities With its many loans.

“The FIISH loan was extremely burdensome on Stéphan Huot’s operation in terms of its profitability and solvency.”

Huot-Giroux partnership: profitability in one direction

If we had to find a picture to illustrate the impact loans from the FIISH and Q-12 Fund, run by Robert Giroux, have had on Stefan Hout, a lifebuoy with a ton of bricks attached to it would probably do the trick.

Because the numerous loans that allowed the Huot Empire to temporarily keep its head above water came with fees that ultimately led to its downfall. And Robert Giraud, compiled according to François Fillion, a forensic accountant.

“All this is 100% in favor of Robert Giroux,” the KPMG expert concludes.

According to his calculations, 75% of the revenues of Robert Giroux's various companies from 2017 to 2022 belong to the Huot Group, amounting to $71.8 million. Of this amount, only $44 million came from processing fees, financial services, administration and management of various loans.

From 2017 to 2022, the personal assets of Robert Giroux and his companies had jumped by about $50 million, mainly because the Huot Group was paying for him.

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Image taken from Robert Giroux's Facebook page

Snowball effect

Many witnesses have spoken since the beginning of the $150 million trial about the snowball effect. We now understand that this snowball turned into the avalanche that swept through the Huot group.

“The snowball is the interest amounts,” forensic accounting expert François Fillion explained in testimony last week.

As the years passed and the deficit accumulated, Stefan Huot had no choice but to take out new loans to continue his operations. Each of his loans came with interest, management fees and new services.

As the months passed, the snowball grew.

After all, in 2022, Stefan Hout owed a whopping total of $20 million a year in interest and fees on his $118 million FIISH loan.

“Every fee we add reduces Stephane Huot’s ability to pay,” François Fillion concluded.

“One day, everything will stop.”

The defense is coming in the fall

The testimony of François Fillion this week may seem damning to Robert Giraud, to whom the forensic accountant attributes part of the responsibility for the Haute Group debacle and the resulting losses to millionaires who lent large sums. But the businessman's lawyers will have heard their own expert in the fall.

Luc Marcel, LMD's forensic accountant, performed the same function as his counterpart, but for the defendants. Obviously, his conclusions are likely to be different.

In the interrogation M^H Sylvain Rigaud, Robert Giraud's lawyer, stated several times that “we will see in the fall.” Ponzi scam? He stressed: “We think this is wrong, but we will defend it in the fall.”

The $150 million experiment is scheduled to last about six weeks, three this spring and another three in the fall. Robert Giroux responded with a $25 million countersuit.