B2 O THEGLOBEANDMAIL| WEDNESDAY,MARCH11,2020
The new coronavirus is causing
havoc around the world, but at
least one business is booming –
private jet operators.
Demand for private jets has
soared in recent weeks as com-
panies pull employees out of in-
fected regions and wealthy trav-
ellers seek to avoid mingling
with the public at airports or on
commercial flights. That demand
is expected to increase as major
airlines continue slashing flights
to destinations in Asia and Eu-
rope as the virus spreads.
“We’ve never been this busy,”
said Justin Crabbe, founder of
Jettly Inc., which operates out of
Toronto and New York and func-
tions like an Uber for private jets.
Requests for bookings have dou-
bled to about 6,000 a day, and
the company has tripled its flight
support staff to handle the in-
flux.
“The situation right now is ex-
tremely fluid on an hourly basis
with [commercial] flights being
cancelled, carriers changing pol-
icies and travel bans being im-
posed,” Mr. Crabbe said.
As the virus spread across Asia
and into Europe and North
America, bookings have poured
in to Jettly and other jet charter
companies. Demand is so strong
that some wealthy customers
have been willing to pay up to
three times the going rate – or
US$15,000 an hour – for a last-
minute flight. “Some people are
grouping together with others,
and we are having to co-ordinate
passports and clearances for
large groups of travellers,” Mr.
Crabbe said.
Steven Orfali, who runs New
York-basedJetSet Group Inc.,
said his bookings have jumped
25 per cent in recent weeks be-
cause of the virus, and inquiries
have climbed 40 per cent in the
past five days. “We have been
seeing a spike in interest frompeople who have never flown
private before,” he said. “It’s peo-
ple just not wanting to go mingle
in a public airport or who just
don’t want to be a on a plane
with 300 strangers where they
don’t know what they have or
don’t have.”
Families have hired private
jets to protect elderly relatives or
avoid connecting through vari-
ous cities. One couple booked a
jet to return home to the Chan-
nel Islands directly from Spain to
avoid a stopover in London. A
Los Angeles film studio recently
used a private jet to fly 50 people
out of Tokyo quickly when Japan
became seriously affected by the
virus. Private jets have also been
used to transport surgical masks,
protective overalls and medical
gloves to health-care staff in af-
fected cities.
Private jets aren’t cheap to
hire even at the best of times. An
eight-passenger jet costs about
US$5,000 an hour, while a plane
that can hold up to 16 people
goes for US$12,000 an hour. Mr.
Orfali said a flight from New York
to Chicago on a small jet costs
US$10,000 to US$12,000, while atrip from New York to Los An-
geles on a 14-seater is about
US$30,000. He added that the
price hasn’t deterred customers
such as the family who called
him last weekend to book a jet
after their commercial flight was
cancelled.
The increased demand has
made it harder for some oper-
ators to find planes and crews.
Most private jet companies rely
on a global network of aircraft
and pilots or brokers who source
planes for short-term bookings.
“The biggest factor we see is a
shortage of aircraft and crews, es-
pecially in the areas that are af-
fected,” Mr. Crabbe said. “In
some cases, it’s tough to locate a
crew that is willing to fly into a
red zone to pick up a passenger
or a group of passengers, in fear
of putting themselves or their
family at risk of infection.”
However, demand from busi-
ness clients could fall if the virus
causes a global recession.
“While we’re seeing additional
requests, other clients are
changing or cancelling their trav-
el plans,” said Adam Twidell,
chief executive of London-basedPrivateFly.
“And obviously, the operation-
al logistics of flying in or out of
affected areas is now highly com-
plex, with availability of aircraft
and crews making it more chal-
lenging to fulfill requests in some
areas, or creating longer turn-
around times than usual.”
Private jet operators have to
ensure that their passengers
haven’t travelled to affected re-
gions and that all flight crews
have been screened for the virus.
Some operators have also ex-
pressed concern that, since pri-
vate jets use smaller airports,
their passengers might not face
the same health screening as
those on commercial flights.
For now, private jet companies
are enjoying the extra lift and
hoping that even if the outbreak
is short-lived, they’ll be able to
convert some new passengers in-
to regulars.
“That’s the hope,” Mr. Orfali
said. “That they are kind of just
dipping their toe in and seeing
the difference in flying privately
and not. ... Hopefully they’ll
continue and it will become a
habit.”Virusgivesboosttoprivatejetoperators
Companiesandwealthy
travellersarespending
biginbidtoavoid
commercialflights
PAULWALDIE
EUROPECORRESPONDENT
LONDON
| REPORTONBUSINESSInvestors in the Paramount Group, which sold pooled mort-
gage products until it was shut down in 2017, were provided
with “stark” and “persuasive” misrepresentations about how
their money was being used, a lawyer for the Ontario Securi-
ties Commission charged at a hearing on Tuesday.
Mark Bailey, a senior litigator for the OSC, said the more
than 500 people who pumped $78-million into two funds of-
fered by Paramount were repeatedly told that their money
was being used to fund second mortgages on residential
homes. In fact, the money was used to fund highly specula-
tive development projects, and in some cases was either di-
verted to other investors or used to pay undisclosed fees to
Paramount, Mr. Bailey said.
Mr. Bailey described Paramount investors as atypical of
the usual, unsophisticated investors who get taken in by a
fraud. “They asked the right questions. They read the fine
print. They understood the risk. ... The problem was what
they were told was not true.”
The remarks were the OSC lawyer’s opening salvo in what
is expected to be a nine-day hearing into the allegations
against the group of companies, which includes Paramount
Equity Financial Corp.
None of the three principals of Paramount, which was tak-
en over by a receiver at the request of the OSC in 2017, ap-
peared at the hearing, including its founder and former chief
executive, Marc Ruttenberg. Mr. Bailey detailed for the panel
of adjudicators the difficulty investigators have had in locat-
ing Mr. Ruttenberg to make him aware of the latest allega-
tions and potential penalties.
Someone who answered the door at an address where the
OSC understood Mr. Ruttenberg was residing informed the
commission that they didn’t know Mr. Ruttenberg, Mr. Bailey
said. The only up-to-date contact information that the OSC
has for Mr. Ruttenberg is a post-office box at a Toronto UPS
store, Mr. Bailey said.
It was only about five years ago that Mr. Ruttenberg was
prominent and in demand in the Greater Toronto Area, ap-
pearing on promotional YouTube
videos and at real estate investor
forums touted as “4 Hot Ways to
Profit Big in Real Estate.” In a 2018
transcript of an interview with
Mr. Ruttenberg, which was con-
ducted by a lawyer for the court-
appointed receiver, he described
how he came up with the concept
for Paramount. It was an effort, he
said, to offer clients an opportuni-
ty to invest in second mortgages
without the time-consuming has-
sle of investors having to find the
right borrower and complete the
requisite onslaught of paper-
work.
But the OSC has charged that,
by selling such products, Para-
mount and Mr. Ruttenberg were
legally required to register with the commission and offer a
prospectus to investors – something they never did.
What’s more, Mr. Bailey alleged on Tuesday, Paramount
misled investors about how their money was being used,
with $50-million of the funds directed to various prospective
developments, all of which were owned through companies
controlled by a Toronto businessman named Enzo Mizzi.
Mr. Mizzi has not been accused of any wrongdoing by the
OSC. He is being sued civilly by the receiver for Paramount,
which has alleged that he diverted $18.8-million of the funds
for his personal benefit. Mr. Mizzi has not filed a statement of
defence and none of the allegations against him has been
proved in court. A lawyer for Mr. Mizzi did not respond to an
e-mail request from The Globe and Mail.
Mr. Bailey likened Paramount to a piece of candy, wrapped
in shiny packaging and labelled “residential mortgages.”
When investors opened the first wrapper, they discovered
more packaging, he said. And when they opened the second
wrapper, “what was there was not even edible,” he said.
Mr. Bailey said that one of the defences raised by Para-
mount at the outset of the OSC’s probe is that some of the
developments were slated to house apartments, or “multire-
sidential” dwellings which, Paramount argued, made such
investments consistent with the funds’ stated objectives. Mr.
Bailey said that was incorrect, and that investors were told
they were funding houses with real people living inside them- not a proposed building that didn’t exist yet. Some of par-
cels of land mortgaged by Paramount were unoccupied
swaths of land with no dwellings whatsoever, he said.
“There’s no one living on raw pieces of land.”
The hearing is scheduled to take place two more days this
week and six days later in March. A former Paramount senior
vice-president, Matthew Laverty, is scheduled to testify on
March 26.
Paramountexecutives
misledinvestorsonuse
offunds,OSCargues
GREGMcARTHUR
SECURITIESREGULATIONREPORTER[Paramount
investors] asked
the right questions.
They read the
fine print. They
understood the risk.
... The problem was
what they were told
was not true.MARKBAILEY
SENIOR LITIGATOR FOR
THE ONTARIO SECURITIES
COMMISSIONA week ago, the BoC cut its rate
by half a percentage point, to 1.25
per cent, matching the half-point
cut that the U.S. Federal Reserve
had announced 24 hours earlier.
The situation has deteriorated
since then, raising the alarm fur-
ther. “What changed for us was
the oil price shock,” Mr. Porter
said.
The plunge of U.S. benchmark
West Texas Intermediate crude to
barely above US$30 a barrel pre-
sents a considerable blow to Can-
adian growth forecasts, which
generally assumed oil would av-
erage more like US$50 to US$60
for the year.
Basing its new forecasts on a
US$40-a-barrel average, BMO
now anticipates the economy
will contract by a sharp 3.5 per
cent annualized in the second
quarter – expected to be the peak
quarter for COVID-19’s impact –
compared with its previous fore-
cast, from last week, of a 0.6-per-
cent decline. It predicts that
growth for all of 2020 will be 0.5
per cent.
The BoC’s most recent quar-
terly outlook, issued in January,
projected full-year growth at 1.6
per cent, matching 2019’s pace.
The central bank will issue new
forecasts in conjunction with its
April rate decision.
The U.S. Federal Reserve could
set the bar for the BoC next week,
when it meets again to decide on
rate cuts. The pricing of interest-
rate derivatives in the bond mar-
ket indicate that traders are now
betting the Fed will cut by 75 ba-
sis points, although many econo-
mists still think a repeat of last
week’s 50-point cut is more likely.
Beata Caranci, chief economist
at Toronto-Dominion Bank, says
she believes the BoC will want to
keep pace with the Fed for the
time being, as it won’t want to
draw currency investors to the
Canadian dollar by offering more
attractive rates than its U.S. coun-
terpart. A weaker loonie in times
of depressed commodity prices is
considered a valuable stabilizer
for the Canadian economy, as it
makes non-resource exports
more price-competitive in for-
eign markets.
“If the Fed goes 50 [basis
points] next week, we’ll probably
follow,” she said.
Another key determinant for
the BoC will be what the federal
government announces in the
way of spending – fiscal stimulus- to support the economy, which
would take some of the pressure
off interest rates to do all the
work. Prime Minister Justin Tru-
deau said Tuesdaythe govern-
ment will announce measures
“very soon” to address some of
the economic fallout from the
COVID-19 outbreak.
Ms. Caranci said she and her
colleagues at TD are holding off
predicting further rate cuts be-
yond April, until she sees what
Ottawa delivers.
“We’re expecting a significant
amount of fiscal assistance,” she
said. “We’re not putting it all on
the Bank of Canada.”
BoC Governor Stephen Poloz
has previously estimated that $5-
billion in fiscal stimulus has
roughly the same economic im-
pact as a quarter-point rate cut.
But so far, Ottawa has given little
indication of what it has in mind
in terms of fiscal support.
“It’s not at all clear what order
of magnitude they’re talking
about,” Mr. Porter said.Rates:BMOexpectsCanadianeconomy
tocontractby3.5%annualizedinsecondquarter
FROMB1TheBankofCanada,seeninOttawaonTuesday,willissuenewforecasts
alongwithitsAprilratedecision.DAVE CHAN/THE GLOBE AND MAILEnbridge Inc.will hold its annual
shareholder meeting online this
year, making it one of the first ma-
jor Canadian companies to scrap
plans for an in-person event as
the coronavirus outbreak pro-
vokes concern about large gather-
ings.
The Calgary-based pipeline op-
erator said in a regulatory filing
on Monday that it will forgo an in-
person meeting on May 5. In a
joint letter, chairman of the board
Gregory Ebel and chief executive
officer Al Monaco said Enbridge
made the decision out of an
“abundance of caution,” and to
“proactively deal with the un-
precedented public health im-
pact” of the spread of the virus,
which causes the disease known
as COVID-19.
In a filing last month, Enbridge
said it would hold its annual gen-
eral meeting in Toronto, but it
now says it will conduct it online
to “mitigate risks to the health
and safety” of its workers, share-
holders and other stakeholders.
For some large companies,
AGMs are elaborate affairs, com-
plete with refreshments and vid-
eo presentations, and attract hun-
dreds of current employees and
pensioners. Travel is also a com-
mon feature, as some businesses
seek to highlight their national
footprint with meetings in differ-
ent cities. Enbridge operates a nat-
ural gas distribution business in
Ontario and Quebec and though
it typically holds its AGM in Cal-
gary, it held the meeting in Toron-
to in 2015.
Spring is prime AGM season
and lawyers say that amid the cor-
onavirus outbreak, many of these
factors – large gatherings, serving
food and drink, and the need for
potential travel – are prompting
businesses to look for alternatives
to in-person meetings.
“Enbridge is obviously a major
player and I would suspect that
other large issuers may follow
suit,” Trevor Zeyl, a securities law
partner with Norton Rose Ful-
bright Canada LLP, said Tuesday.
“We’re certainly talking to our cli-
ents about the capabilities of [vir-
tual meeting] platforms and what
best practices are.”
A move toward virtual meet-
ings could accelerate a trend in
Canada that has already taken
hold in the United States, where
online AGMs have become in-
creasingly common.
“While historically extremely
rare in Canada until recent years,
electronic meetings have been a
growing feature of the U.S. proxy
season since 2009,” Andrew Mac-
Dougall and John Valley, corpo-
rate law partners at Osler Hoskin
Harcourt LLP, wrote in a com-
mentary published for clients.
They said in recent years, someCanadian companies have held
meetings fully online, including
Canada Goose Holdings Inc. and
Brookfield Property Partners LP.
Others have used a “hybrid” op-
tion, with certain managers and
directors present in person and
others tuning in over the internet,
including Goldcorp Inc. (now
Newmont Corp.), Barrick Gold
Corp., TMX Group Ltd. and
OceanaGold Corp.
The Osler lawyers noted that
Broadridge Financial Solutions,
one of the main service providers
that facilitate online meetings,
said it conducted 326 electronic
meetings in the U.S. last year
alone.
Whether Canadian companies
can hold virtual meetings de-
pends in part on the relevant pro-
vincial legislation, they said,
pointing out that Ontario law per-
mits the practice and deems sha-
reholders who vote online to be
present, which is essential for es-
tablishing quorum. Other prov-
inces are not as flexible. Compa-
nies must also consider their own
corporate bylaws and may have to
amend them to hold an electronic
meeting.
Critics of virtual meetings say
they can drastically reduce per-
sonal connection and sharehol-
ders’ ability to meet or ask ques-
tions of company management.
Enbridge said shareholders will
have the opportunity to ask ques-
tions during its online meeting.Enbridgemovesannualgeneralmeeting
onlineovercoronavirusconcerns
CHRISTINEDOBBY
CORPORATELAWREPORTER