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The owners of the world's largest mall, who once proposed to build a mega-mall in Niagara Falls, N.Y., are facing allegations that they bribed officials of the Alberta government to get favorable loans for the massive West Edmonton Mall.

Opened in 1981, the West Edmonton Mall gained international exposure for its massive incorporation of more than 800 shops, services, amusement parks, water rides and theme "streets" into its 5.2 million square feet of space. Since then, the mall has added a 354-room hotel and plans to open another extension.

But now, its creators and operators, the four Ghermezian brothers, are facing allegations they bribed the former head of the Alberta Treasury Branches to obtain loans equaling the current equivalent of $286 million in U.S. dollars to maintain their hold on the mall.

Elmer Leahy, the former superintendent of the government-backed bank, is accused by his former employer of spending his last days with the bank shredding documents said to implicate him in the bribery scheme.

Court documents filed by the bank claim that when Leahy left Alberta Treasury Branches in 1996, the organization was unaware of the scope of the deals he had arranged for the Ghermezians.

Those deals, bank lawyer Paulina Hiebert said, are utterly devoid of any valid commercial purpose and contain "terms and conditions which no commercial lender acting rationally or prudently would agree to."

The government lender also alleges that one of the brothers, Eskander Ghermezian, had offered Leahy's predecessor a $325,000 bribe, which he refused, and that a bribe of more than $1 million was offered to the vice president of a lending institution that was set to take control of the mall from the Ghermezians in 1989.

Though the bank claims the Ghermezians are in default on its loans, not because they have missed payments but because the value of the mall's assets have declined, the mall's general manager disagrees.

"I can guarantee the mall's value has increased since (the loans were negotiated in) 1994," Gary Hanson said.

The mall, he said, is running a profit of nearly $12 million, and its attractions are showing the best year ever.

But the bank alleges there was no sound business reason for changing the original plans, which called for removing the brothers from control until their loans were repaid.

The Ghermezians, who came to Canada from Iran in the 1950s, launched their careers importing high-end carpets from the Near East.

Twelve years after the 1981 opening of the West Edmonton Mall, the Ghermezians were in financial trouble. They had defaulted on a $32.5 million second mortgage they had taken out in 1989, so they turned to the province for help.

At the time, the bank was negotiating a deal with Gentra, a consortium of Ontario lenders who were to assume 60 percent ownership of the mall, with the bank holding the remaining shares and the Ghermezians left as mall managers until the loan was repaid.

However, that deal fell through, allegedly because of the $1.3 million bribe offered to Gary Whitelaw, Gentra's then-executive vice president.

Instead, a deal was struck with the Toronto Dominion Bank to provide a 10-year, $230 million loan with the ATB bank kicking in an additional, 30-year, no-interest loan of more than $42 million.

The bank, under Leahy, also agreed to guarantee the Toronto Dominion loans and payment of the outstanding balance at maturity.

The Alberta bank contends that, at the current rate, paying back the loan, which is due in 2004, will take 190 years. As a result, the bank will be liable for the balance of the money owed.

Now, the Alberta bank has asked the Alberta Court of Queen's Bench to appoint a receiver to manage the mall while it fights to have the loan agreements nullified.

So far, no date has been set for a hearing into the request for a court-appointed receiver.

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