Harry Stinson, accused of securities fraud in Canada

Ontario securities regulators are accusing Buffalo Grand Hotel owner Harry Stinson of improperly soliciting more than $19 million from Canadian investors for an aborted condominium conversion at the hotel, and then using some of those funds for other projects and purposes.

The accusations from the Ontario Securities Commission – if proven – could mark a potentially significant blow to Stinson's multi-million-dollar effort to redevelop Buffalo's largest hotel property. The hotel was recently rebranded as a Ramada before suffering well over $10 million in arson damage from a fire late last year during extensive renovations.

Stinson purchased the 486-room hotel in July 2018 for $17 million, before undertaking a "radical" $24 million renovation and redevelopment of the 600,000-square-foot complex on Church Street.

That plan has focused mostly on the banquet and entertainment areas, but has also morphed several times to include proposals for a new Frank Lloyd Wright-inspired wedding chapel, apartments and a 25-story condominium tower – none of which have been done.

Now his efforts to finance his grand plans are under scrutiny, although Stinson rejects the regulators' allegations.

“We obviously disagree with it, and we intend to contest it. These numbers are mysterious to us. We didn’t even pay that for the hotel,” Stinson said. “In the meantime, we are discussing with them a potential settlement. We hope to announce a resolution in the near future.”

In papers filed this month, officials at the Canadian agency charged that the Hamilton developer, several of his companies and one of his hotel employees misled 207 investors.

Regulators accuse Stinson of illegally promoting the unauthorized purchase of company shares or debt in the hotel project, with the purported opportunity to eventually take ownership of a converted condo suite while sharing in the hotel's profits.

That marketing effort began in November 2016 – nearly two years before he even owned the hotel. According to a regulatory filing, Stinson and the other defendants claimed in their promotional materials that the securities investments were registered and approved for sale, even though they weren't. They also failed to provide a formal prospectus to investors, as required by law, and didn't vet the investors as qualified.

Regulators also said Stinson drafted or approved promotional materials indicating that the investments would qualify for Canadian retirement savings plans and tax-free savings accounts, which was false. And they said he claimed that the investments and hotel conversion would be backed by a new $40 million mortgage and a 10% interest reserve, when no such loan or reserve existed.

Finally, they said, the investor funds were "comingled" with money in bank accounts from other projects, without adequate record-keeping, and were used to pay for other projects or went toward other bank accounts and credit cards.

This would be the second time in 15 years that Stinson "breached the registration and prospectus requirements of the Securities Act" with an unregistered hotel condominium conversion, according to the complaint against him. Stinson settled similar charges in December 2006.

Yet he continued to issue shares to Buffalo Grand investors, even after the Commission ordered him to stop in March 2020 and four times after that, regulators asserted.

The Commission's enforcement staff asked the Commission to order Stinson and his companies to give up any money that was raised and pay several million dollars in fines.

Staff also want the Commission to demand that Stinson and the hotel's manager of client services, Stephen Kelley, resign from any officer or director positions at public companies and to prohibit them from serving in such roles or acting as a promoter at any company that issues investments or is registered with the agency.

Kelley had solicited money as an "investment coordinator," but was not registered and had no education, training or experience.