Hundreds of British Columbians have been saddled with surprise tax bills after taking out what they thought were loans against their RRSPs from a Surrey-based company.

George Pankratz applied for a loan with Pacific Financial Corporation -- also known as iFinance -- three years ago, when he wanted to invest $240,000 in a Saskatchewan real estate development called Clear Vistas.

The 60-year-old was impressed by a slick video promising thousands of homes on 700 acres near Regina, and a salesperson for the project told him that Pacific Financial would be a good place to go for the cash. All he had to do was transfer his RRSP into a different RRSP account and purchase bonds from the firm.

"I thought it was a good deal," Pankratz told CTV News. "I was hoping I'd be able to retire."

He says he was told that his investment in the development would give him eight-per-cent returns in the first two years and then jump to 24 per cent.

For those first two years, Pankratz received the returns and made his loan payments, but in 2010, when the higher rate was supposed to kick, he says the returns stopped coming. He was still faced with loan payments, but no money was flowing in.

"I can't afford $1,800 a month," he said.

Clear Vistas President Ken Lagasse says it's taken longer than expected to get the lots at the development ready to sell.

"As it turned out, the recession hit, and it takes more time to raise money, and it takes more time to coordinate building a city," he said.

But the problem was compounded for Pankratz when he received a letter from the Canada Revenue Agency telling him he owed $110,000. The tax agency said the loan scheme at Pacific Financial was a "sham."

When Pankratz defaulted on the loan, Pacific Financial sued him, charging 48-per-cent interest as allowed in the loan agreement.

"I'm bankrupt now," he said. "I'm a victim -- that's how I feel. I trusted them and they violated my trust."

He works full time as a bus driver and says his dream of early retirement has been crushed.

Mike Duffy, the president of Pacific Financial, says that the legal opinion the company received at the time of the arrangement showed that it was fine, and not the "sham" the CRA says it was.

"We consider them to be wrong, and that's being dealt with" he said.

He added that his company isn't responsible for how clients' investments turned out.

Close to 1,000 people in B.C. have done business with Pacific Financial, and several have filed lawsuits.

In one claim, the loan company is accused of giving customers, "their own money, claiming it was a loan with fees and interest charges."

The investors claim the company, "made negligent misrepresentations" about the tax implications and the value of the bonds.

Duffy denies that his company misled its clients, and says that the offering memorandum included a warning about the risk of the CRA reassessing their taxes.

"I sympathize with them -- I really do -- but it's not of our making," he said.

Many Pacific Financial clients are appealing the decision from the CRA, and the loan company is funding their legal battle.

Developer Clear Vistas says it doesn't have anything to do with the loan arrangements or Pacific Financial.

If you have a story for The Investigators, e-mail them at investigate@ctv.ca or call 604-609-6333.