Feb 11, 2011
MacGillivray Law
Lawyer seeks to join Keybase cases
Nine couples lost more than $2m in mutual fund matter, says lawyer
By CHRIS LAMBIE Business Editor
Thu, Feb 10 - 4:54 AM
A lawyer representing nine couples he estimates lost more than $2 million through the actions of a mutual fund dealer that persuaded them to borrow far more than they could afford is pushing to consolidate their legal cases.
The separate cases all involve Keybase Financial Group Inc., and John Allen, who was working in Nova Scotia for the Ontario company as an investment adviser in 2007.
"He was just on a rampage to get commissions and put all these applications through to the loan companies," Jamie MacGillivray, the lawyer representing the nine couples, said in an interview Wednesday.
Seven suits filed in Nova Scotia Supreme Court allege Allen filled out paperwork on loans where his clients’ assets were greatly exaggerated so they could borrow large sums to buy mutual funds.
"There are two more (suits to come), so there will be nine in total that we’re filing," MacGillivray said.
The New Glasgow lawyer said he hasn’t had any luck tracking down Allen.
"But we think that the firm Keybase is responsible for the conduct of its broker . . . because they also received a financial benefit from all of these activities."
The nine couples MacGillivray represents live between Halifax and New Glasgow.
"It won’t be a class action, but it will be a consolidated action with 18 plaintiffs or nine families. Keybase will contest it because they want to deal with the allegations, I suspect, in isolation, where we want people to see the full picture."
The newest case involves a New Glasgow couple that is suing Keybase and John Allen, who met David and Sharleen Bateman in 2007. Their suit, made public Wednesday in Nova Scotia Supreme Court, alleges Allen used "fraudulent misrepresentation" when he obtained $575,000 in loans for them from B2B Trust, a subsidiary of Laurentian Bank. The money was then used to buy mutual funds.
"In these (loan) documents, John Allen misrepresented the plaintiff’s financial information without the knowledge or consult of the plaintiffs," said the statement of claim.
Allen would often ask the Batemans "to sign forms in blank and they would comply, trusting that he was completing the forms accurately and in their best interests," said the lawsuit.
In a May 2007 application, Allen misrepresented their assets, saying the couple had other investments of $250,000, when they "had no such investments," said the lawsuit.
On July 9, 2007, Allen doubled their assets to $500,000 in another loan application. That same day, Allen made another loan application for the couple, saying they had $550,000 in assets.
Allen used the proceeds of the loans to buy mutual funds for the couple. He got commissions for the purchases, as did Keybase.
Allen’s actions in the spring and summer of 2007 resulted in the Batemans "borrowing heavily and well beyond their means to purchase investments," it said.
The lawsuit alleges Allen "used fraud to obtain leveraged investment loans" for the Batemans and misrepresented their investment experience, income, assets and risk tolerance.
They claim "John Allen’s dishonest conduct, acting within the scope of his employment, has caused them substantial economic loss, which is ongoing and worsening," said the lawsuit.
It claims Keybase was negligent in that it "failed to adequately supervise or monitor the investment decisions and transactions made by John Allen" on the couple’s behalf.
The Batemans are seeking "general and aggravated damages for mental distress and psychological injury," special damages, "repayment of all fees and commissions improperly incurred, "disgorgement of all profits made as a result of each defendant’s negligence and fraud, punitive damages to punish and deter the defendants’ conduct," legal costs and prejudgment interest.
None of the allegations have been proven in court.
Credit: The Chronicle Herald
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