Feb 08, 2011
MacGillivray Law
Mutual fund dealer faces lawsuit
Chris Lambie Business Editor
A Stewiacke trucker and his late wife's estate are suing a mutual fund dealer "for deceit, fraud and fraudulent misrepresentation," in a case where John Allen allegedly filled out the paperwork allowing the couple to borrow $335,000 to invest.
And their lawyer says they are not alone.
"There's actually six different families we represent who had the same guy - that John Allen," Jamie MacGillivray said in an interview Friday.
"They're all winding their way through court. . . . They're six families and they're out hundreds of thousands each. . . . They weren't stupid people. They just kind of got roped in."
Martin Douglas Andrews and Sheila Rebecca Andrews, who "worked parttime as a cashier at a hardware store, before she succumbed to cancer on April 1," met Allen in March 2007 when he was working for Keybase Financial Group Inc., an Ontario company also named as defendants in the suit.
Allen developed a financial plan for the couple and then made investment loan applications with B2B Trust, a subsidiary of Laurentian Bank, and AGF Trust Company in their names, said a statement of claim made public Friday in Nova Scotia Supreme Court. "In these documents, John Allen misrepresented the plaintiffs' financial information, without the knowledge or consent of the plaintiffs," says the statement of claim.
The couple signed the applications "without issue given the relationship of trust" they'd developed with Allen, say court documents.
"The plaintiffs had little knowledge or understanding that large loans were being taken out and essentially trusted that John Allen was acting in their best interests. Often, John Allen would ask the plaintiffs to sign forms in blank and they would comply trusting that he was completing the forms accurately and in their best interest."
The B2B loan was for $90,000. The AGF loan was for $245,000.
On their own, the couple also took out a $30,000 loan from Scotiabank using their home equity. According to the lawsuit, all of the money went into mutual funds.
In the B2B application, Allen misrepresented the couple's assets as $100,000 in other real estate and $10, 000 in other investments, says the suit, the lawsuit alleges. Allen "also fraudulently represented" their employment, saying Sheila was employed by municipal government, making $28,000 annually.
"In fact, she was employed part-time at a local hardware store making minimum wage, approximately $12, 000 annually," says the lawsuit.
"John Allen stated that Mr. Andrews had been employed by Marwood for thirty years making $65,000 annually. In fact, Mr. Andrew made $60,000 annually and only commenced employment with Marwood in November 2000."
For the AGF loan, Allen asked the couple to sign the application, "and advised that he would take care of the little details," says the suit.
Allen told AGF the couple had a net worth of $572,000, including $55,000 in RRSPs and $503,000 in other investments, say court documents.
"In fact, the plaintiffs did not have any of these assets. John Allen also fraudulently represented the plaintiffs' employment, indicating on the application that Mr. Andrews was employed with Marwood for 25 years as a manager making $86,000 annually," say court documents. "The application stated that Ms. Andrews was employed by Marwood in administration for nine years making $36,000 annually."
Allen also indicated in the AGF loan application that the couple had $12, 000 in annual investment income, say court documents.
"The plaintiffs had no knowledge that their financial information was misrepresented in the loan applications, nor were they aware of the amount of the loan that John Allen was obtaining on their behalf."
Allen's actions in the spring and summer of 2007 resulted in the couple "borrowing heavily and well beyond their means to purchase investments. The plaintiffs did not understand the details of these transactions and trusted that John Allen was acting in their best interests."
In September 2007, the couple "received a letter from Keybase informing them that John Allen's employment had been terminated for breach of fiduciary duty," say court documents. "This letter further advised the plaintiffs that Keybase was concerned that John Allen had misrepresented the plaintiffs' net worth to the loan companies," thereby qualifying them for larger loans than their financial status and asset base warranted.
"The plaintiffs were informed that they were not the only clients of John Allen's who were defrauded in this manner," says the lawsuit.
Keybase "was negligent, in that it . . . failed to adequately supervise or monitor the investment decisions and transactions made by John Allen," says the lawsuit.
Allen's last known address was in Kensington, P.E.I., says the suit. Allen, as well as his lawyer and a lawyer for Keybase, could not be reached Friday for comment.
"I guess their defence is that people did it out of their own free will kind of thing, but it's not going to hold up," said MacGillivray, the Andrews' lawyer.
Their suit alleges that "to achieve commission results John Allen and therefore Keybase, intentionally misrepresented the plaintiffs' financial information to B2B and AGF. John Allen and Keybase advised the plaintiffs in a negligent manner encouraging them to borrow and risk much more than they could afford."
The suit alleges Allen's "dishonest conduct, acting within the scope of his employment, has caused (Martin and Sheila Andrews) substantial economic loss, which is ongoing and worsening. This conduct, however, continues to benefit the defendants and the financing companies while at the same time the plaintiffs continue to suffer."
MacGillivray said he's in the process of getting his clients' mutual funds evaluated to determine what kind of damages he'll seek from Keybase and Allen.
"This happened in the summer of 2007 just before the market crashed," said the New Glasgow lawyer.
None of the allegations made Andrews' statement of claim have been proven by the court.
Credit: The Chronicle Herald
Topics: Long Term Disability, Auto Accident, Civil Suits
