Montreal

Details are sketchy, but according to Quebec’s security regulator, an unlicensed “advisor” based in Montreal may have committed one of the worst financial frauds in Canadian history.

Bertram Earl Jones, the principal owner of a west-Island based advisory practice called Earl Jones Consultant and Administration Corp. — not to be confused with the large advisory company Edward Jones — is missing and so is as much as $50 million in client funds, according to the l’Autorité des marchés financiers (AMF).

On Friday, the AMF announced they were freezing Earl Jones’s personal and business accounts. However, these accounts are virtually empty. The AMF notes that Jones’s firm has all the hallmarks of a Ponzi scheme where new investor money is misappropriated to pay out distributions for existing clients.

There is no specific information about what happened to the money or how a fraud of this magnitude could have been perpetrated. Clients started to become worried about their investments after cheques from the firm bounced and a cryptic message was left on Jones’ business voicemail.

“If you are calling regarding your account with us, we are not in the position to remit your funds,” the voicemail said. “In the meantime, phone calls and mail will not be answered.”

The AMF believes around 50 people are victims of Jones’ scheme, with an average loss between $500,000 and $600,000. Most are Anglophone clients based in Quebec, but there are also clients in the rest of Canada and some in the United States.

On the weekend, more than 100 people packed a Montreal hotel to attend a client information session about Jones. Many of Jones’s retired clients appear to have lost the bulk-sum of their retirement savings. Surprise overdue income tax payments and even leveraged investment schemes using home mortgages are also coming to light.

Reminiscent of the scam perpetrated by Bernie Madoff in the United States, many of the clients had longstanding relationships with Jones. Some clients reported knowing Jones for more than 40 years and considered him a friend.

Like Madoff, clients invested their money based on word of mouth and recommendations from other friends and family. Once he was their advisor, Jones developed a strong rapport with his clients — even being granted power of attorney by over some elderly clients, according to one report.

The AMF did not release any information about how long the alleged fraud was perpetrated for.

If true, the $50 million fraud would probably be the most notorious case of fraud perpetrated by someone posing as an advisor. This is even worse than the well-publicized fraud committed by B.C.-based advisor Ian Thow.

Unlike Thow, though, there will be no myriad or regulatory oversight to double-check and question. Jones was not a licensed advisor with any organization or dealer and was therefore not registered with the AMF to sell securities. This makes the fraud even more devastating for clients, because there are no secondary means for clients to get their money back from industry apparatuses such as the Canadian Investor Protection Fund.

Efforts are being made to determine where the money went and if it can be retrieved, according to Neil Stein, a lawyer specializing in bankruptcy, who attended the meeting. Stein is one of the people who initiated bankruptcy proceedings against the company.

Charges are likely pending, if and when Jones, a resident of Dorval, Quebec, is found. Montreal police were at the hotel meeting on the weekend. A spokesperson for the Montreal police says they are the early stages of an investigation.

(07/13/09)