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National Cancer Center in Tblisi, Georgia.

The National Cancer Centre in Tblisi, Georgia, is filled with rubble. Many of the nine-storey building's floors are covered in broken cement or bare dirt, and rooms stand empty with unpainted cement walls or fractured plaster that has been torn apart and never replaced.

The once-functioning treatment centre, serving the former Soviet republic's citizens, is now a renovation disaster story, with only a portion of the building still in use to treat patients.

Its downfall can be traced directly back to Canada and an ill-fated deal between the Georgian government and a Vancouver-based company that stands accused of fraud over its failure to rebuild Georgia's cancer infrastructure.

The British Columbia Securities Commission has accused Pegasus Pharmaceuticals Inc. and founder Winter Huang of defrauding investors after the company raised funds for the Georgian renovation project but spent it on other purposes, including paying off earlier investors.

Investors are not the only ones with dashed hopes. In Georgia, the centre's problems have set back modernization of the country's medical system by years, says Teimuraz Barabadze, the former general director of the National Cancer Centre.

"Pegasus's [involvement] has detained development of our centre, and of the quality of cancer care in Georgia generally," he told The Globe and Mail.

Mr. Barabadze said there were only two clinics that provided a full range of cancer treatment services in Tblisi, so the problems at the National Cancer Centre reduced the "speed of development of their field of medicine in our country."

It all looked far brighter in November, 2010, when Pegasus – a small Vancouver pharmaceutical development company – announced it had closed an unlikely deal to purchase Georgia's National Cancer Centre. Mr. Huang had set up a subsidiary in Georgia in 2006 to work with the centre on clinical trials of its cancer drugs, but it had never operated a hospital or done a renovation project on the scale of the Georgian deal.

The Georgian government, headed by then-president Mikheil Saakashvili, had come to power in 2003 with a promise to Westernize Georgia, which included a program to privatize the country's health care system by selling hospitals to private owners who could invest in modernization. There was no public auction for the National Cancer Centre, according to a Georgian media report.

Pegasus took control of the building and a large piece of surrounding land based on a promise to spend $20-million (U.S.) in renovations to create a "world-class medical system" that met European Union standards, according to the deal announcement. A glossy book produced by the company showed renderings of a gleaming institution, which was to have state-of-the-art treatment equipment.

Pegasus started work, moving the cancer operations into a small building on the same property so that it could launch work on the main building. But after much of the main building was torn apart but not rebuilt, doctors from the hospital began to raise alarm bells.

Shortly after Mr. Saakashvili's government was defeated in 2012, the centre's doctors appealed to the prosecutor-general's office in Georgia for a review of the deal, according to a 2013 article in The Georgian Times newspaper.

The alarm in Georgia was heightened by a warning issued by regulators in British Columbia in 2012, alerting investors not to invest in Pegasus because it was selling securities to raise funds for cancer therapy clinics without issuing a prospectus or being registered with the commission, and with promises of returns as high as 100 per cent annually.

At first, Pegasus told the Georgian government that it wanted to move ahead, and sought an extension on its time to complete the promised work. But the government asked for larger bank guarantees to back the investment obligation, which became a sticking point in negotiations, according to a report by Georgian television network Rustavi 2. In the end, the deal collapsed and the government took back control of the building.

Last month, the B.C. securities regulator unveiled a case against Pegasus and Mr. Huang, alleging they fraudulently raised $63-million (Canadian) from investors, including $26.5-million to finance projects in both Georgia and China, as well as $36.4-million raised from promissory notes signed by his sister, Vicky Dancho, who is also accused of fraud.

The BCSC alleged Pegasus raised $15.4-million from investors to invest in construction work on the National Cancer Centre in Georgia as well as construct a pharmaceutical manufacturing plant in Georgia, which was never built.

"Only approximately $1.4-million was put towards the Georgian projects," the BCSC alleged.

Instead, Pegasus is accused of using approximately $14-million of the funds "to make payments to earlier investors, pay commissions to Pegasus bonds sales agents, and for Pegasus's operational costs unrelated to Georgia," the regulator said in a statement of allegations.

Owais Ahmed, a Vancouver lawyer representing Mr. Huang and Pegasus, said his client has no comment on the allegations.

The Georgian government now hopes a new deal will revive the building, which now houses a successor institute renamed the Universal Medical Centre, which offers cancer treatment facilities. AlphaMedic GmbH of Vienna is promising to invest over $100-million to redevelop three hospitals in Tblisi, including the Universal Medical Centre, into one modern complex.

Until the AlphaMedic contract is finalized, however, the building remains untouched. Mr. Barabadze said the Universal Medical Centre is occupying a space one-third the size of the original National Cancer Centre and sees a reduced number of patients as a result.

Mr. Barabadze said leading specialists have left for better facilities.

"The building is not destroyed, but it is dismantled and is of no use for any activity, including medical services," he said.

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