U.S. court issued 2nd subpoena for Nygard company documents in criminal case, Manitoba court hears

The receiver in control of nine companies owned by Peter Nygard says it was ordered to turn over "a wide range of documents and electronic files" as part of a criminal investigation into the 79-year-old fashion designer.

Richter Advisory Group told Manitoba's Court of Queen's Bench it was served a second subpoena from the Southern District of New York court ordering the production of the documents and files.

In a seventh report to the court, which was filed on Friday, the receiver said the subpoena was issued on Aug. 4, and it had been given until Aug. 25 to produce the requested documents. 

"The receiver intends to produce documents on or after Sept. 7, 2020, without reviewing the documents for any [attorney-client] privilege," a motion filed in New York by the Nygard companies said.

Nine Nygard companies have been under court-ordered receivership since March to recoup more than $25 million US owed to American lenders.

One of those companies was served a subpoena from the Southern District court in February for the production of documents as part of a criminal investigation — on the same day the FBI raided the company's headquarters in New York  as part of a criminal sex-trafficking investigation.

Police in Canada and the Bahamas are also investigating Nygard.

The February subpoena covers documents dating back to Jan. 1, 2008, including records related to Peter Nygard's travel outside of Canada, and a list of his employees and how they are paid, as well as copies of company policies on data retention.

It also asks for records related to "day and overnight" guests at four Nygard-owned properties in California, the Bahamas and New York, along with "all documents, records, and communications concerning or reflecting allegations of sexual misconduct, harassment, or assault by Peter Nygard."

Fifty-seven women have filed a class-action lawsuit in New York, saying they were raped or sexually assaulted by the fashion mogul in incidents that are alleged to date back to the 1970s. Several Nygard companies are also named defendants in the civil case, with allegations they paid for, facilitated and participated in a "decades-long sex trafficking scheme."

Last month, a judge put the class-action suit on hold, after the U.S. government was granted leave to intervene.  

No charges have been laid in the case, and Nygard has consistently denied all allegations against him.

In April, the receiver said it hadn't been able to provide any documents demanded in the February subpoena because of the way the Nygard companies carried on their business.

"The Nygard organization … chose to carry on their business in such a way that they intermingle records, electronic files for … [what] looks to be as many as 30 companies, and they've done that for years," Richter lawyer Bruce Taylor said in April.

Richter said Nygard's electronic records are stored on 213 servers and contain 200 terabytes of data, so going through them will require a great deal of time and effort.

Settlement order in claims, disputes

Before the Nygard companies went into receivership, they filed a notice of intention seeking court approval to restructure their finances. They also hired a proposal trustee and paid a retainer.

On Tuesday, Manitoba Court of Queen's Bench Justice James Edmond granted a request to withdraw from the proposed proceedings. 

He also approved a settlement order, resolving a number of ongoing claims and disputes between Richter and two American companies that are not in receivership — Edson's Investments Inc. and Brause Investments Inc.

For the past several months, Edson's and Brause have demanded what they said was more than $300,000 in unpaid rent on several California warehouses that held merchandise for Nygard companies in receivership, according to court filings.

Court records also show that Richter has been fighting with the two companies since March for approximately $500,000 the receiver says Nygard owes for payroll, and for tens of thousands more for the repayment of unauthorized utility bill charges paid by other Nygard companies.

Richter says two days before the court placed nine Nygard companies under receivership, two of their executives used a company credit card to pay more than $104,000 in utilities for property owned by Edson's in California. The receiver said the executives had essentially overpaid one bill by $60,000, and had asked the Los Angeles Water and Waste department to transfer the excess money to Edson's bank account — which it did not do.

"Court approval of the [Edson's/Brause] settlement agreement and the related releases will bring an end to a significant amount of litigation in the receivership proceedings, result in additional funds in the estate and provide the receiver … the certainty required to complete remaining realizations and distributions for the benefit of all stakeholders," Richter said in court filings.

The settlement amount is sealed and can't be made public. 

Court also heard the agreement includes the sale of merchandise to Brause and Edson's that was stored in their California warehouses. 

It also allows the two companies to take over mortgages for Peter Nygard's cottage in Falcon Lake, Man., and a residential property he owns in Vaughan, Ont.

The mortgages were under the name of a Nygard company in receivership, but the receiver agreed they were not intended to be included as collateral to secure repayment of the money owed to lenders.