THE BLOG

Four Years Later: How Uncle Earl Jones Swindled Investors

07/09/2013 12:36 EDT | Updated 09/08/2013 05:12 EDT
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July 9 marks the 4th anniversary of the discovery of a Montreal-based fraud that cost trusting investors millions of dollars and pushed two of the victims' children into an unwitting legal battle against venerable Canadian financial institutions and two levels of government. The fact that eight victims died and others are now in a compromised intellectual state before ever seeing retribution is just another ripple in the wake of Earl Jones' finely orchestrated and highly nocuous manipulations, one propped up by an approachable folksy façade.

The convicted fraudster is currently serving an 11-year sentence in Quebec's Ste. Anne des Plaines prison and recently waived his right to early parole, opting, perhaps wisely, to spend at least another two years behind bars.

Despite Jones' lavish lifestyle and fondness for the trappings of wealth, the charm and hands-on approach of "Uncle Earl", replete with his modest office in Montreal's family-friendly West Island, helped him gain the trust of a wide circle of investors simply by word-of-mouth recommendations.

It didn't seem to matter that Jones was never certified to work as a financial advisor. Part of Jones' pool of funds typically came from liquidated estates whose money was then placed into a 'trust' account, one on which Jones offered a higher rate of return than the banks, starting at around six per cent.

Other funds came from the so-called "money lenders" who provided capital for private loans to beneficiaries Jones falsely stated were waiting for their estates to be settled. As long as there was a supply of estates to liquidate, Jones could perpetuate the monetary pyramid.

The money lenders were a small portion of Jones' clients and included financial advisers and insurance brokers who, for all intents and purposes, should have known better, reportedly earning up to 14 per cent on their investment capital.

The group that suffered the biggest losses was the one whose members' greatest crime was that they simply didn't know any better -- the senior citizens who blindly took Jones' word that he would take care of them.

It's alleged that the damning trail of forensic accounting revealed that Jones' fraudulent activities could have been exposed years earlier had he not appeased investors with excessively large paybacks. Like most houses of cards, the larger it grew, the shakier the foundation became. In the end, the funds, like cards in the deck, simply ran out.

Though the legally defined list of victims fluctuated near 150, the collateral damage of Jones' actions metastasized much further including not only his own family members but extended families of the victims who were thrust into the public realm.

Tasked with assuming the roles of official legal plaintiff, claims administrator, media spokespersons, and victims' rights representatives, the victims and family members mobilized against corporate giants and the court of public opinion who often accused the group of being casualties of their own collective greed by trusting an investor who promised returns exceeding, in some cases, 14 per cent on their investment.

The settlement reached with Jones' bank, the Royal Bank of Canada, that provided approximately 50 per cent of the estimated loss, was significantly higher than most fraud recuperation amounts. Unfortunately, it also resulted in some infighting and complaints against the administrator, legal counsel and committee members that the settlement amount should have been higher. The official plaintiff Virginia Nelles (a Jones victim herself who volunteered to sign on to this role for legal purposes) widened the scope of the definition of 'class member' to allow more people a greater benefit from a share of the settlement and the 'all for one and one for all' mentality meant her own mother's final claim amount was ultimately reduced.

Through the four-year journey whose end is imminent any day now, Earl Jones' Victims Advocate Kevin Curran credits the genuine concern of a very few players in the convoluted playing field.

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"The mortgage bank was absolutely human," he says of one financial institution's efforts to resolve the Jones-crafted predatory mortgages (which saw the victims on the hook for both investment losses and their unknowingly remortgaged homes). "They provided an extremely fair deal and as a result a half dozen seniors have remained in their homes." That particular victory is tainted by the fact that an equal number who declined to participate in the mortgage settlement ultimately lost their respective homes.

For those victims who paid income tax on fake interest, they suddenly found themselves facing a government who took the initial position of claiming there was no recourse until the group sued under the guidance of bankruptcy lawyer Terrance McQuillan. Both levels of government eventually acquiesced and refunded several million dollars in income tax paid on fictitious interest.

There's a term in the legal and accounting industry 'turning the inventory' in reference to closing the case files, and though the group was determined to maintain the human face of their battle, the legal paper-trail was accumulating as the forensic web widened, forcing Curran to take possession of, and move, 350 boxes of accounting evidence to a storage facility until all court proceedings had been exhausted. "In turning the inventory," said Curran, "you get paper cuts."

By accepting a settlement from the Royal Bank, one which has been described by Nelles as a 'measured' decision, the group avoided a protracted legal process that likely would have focused on the dubious actions of those earning the highest payback from their golden goose.

The anniversary of the uncovering of Jones' decades-long deception coincides, almost to the day, with one of the last remaining legal procedures as Quebec Superior Court Justice Robert Mongeon prepares the final rulings which precede the disbursement of the settlement of funds from the Royal Bank.

And while the concept of greed remains inextricably tethered to any mention of Earl Jones and his clients, there are also pockets of good that kept the fight going for four years, a fight fueled by hope and perseverance. People put their lives on hold, accountants donated office space, and some lawyers worked pro bono to help unravel the mortgage morass and despite internal legal challenges within the victims' group, justice was rendered comparatively quickly.

The goal in bringing the ordeal to an end resulted in, as with any convoluted situation, compromise. And though the funds, like the trust, recouped would never equal what was squandered, enough was regained to bring a measure of peace to a vulnerable group.

For the vast majority of the swindled clients, Jones offered more than a healthy return on their investment - he offered senior citizens comfort by taking complete control of their finances.

"Life tells us that very few people are good with money," said Curran, "but they're very good with trust."

And therein lay the problem.