For years, disgraced financier Earl Jones kept his alleged scam operating on little but the force of his reputation. He knew nearly all of his clients personally, rarely missing a birthday or a funeral, and was pleasant and reassuring even as he allegedly bilked them out of their life savings. Many of his former clients are still discovering the extent of the damage. “It’s absolutely incredible that he didn’t get caught,” says Susan Brown, a six-year Jones investor who lost $300,000. His clients included his brother and godson, among many others, as well as his son-in-law, from whom Jones coaxed $150,000 earlier this year—and, as Maclean’s recently learned, legendary hockey writer Red Fisher, who often wove tales of Jones’s prowess into his columns. Jones, he wrote, was a “matchless money manager” and a “superstar investment guru” who “always has been blessed with a talent of knowing a sure-thing investment when he sees one.” (Fisher won’t discuss the matter, but records show he lost a sizable amount of money.)
Jones’s personal and business assets, seized by bankruptcy trustees in August, won’t come close to covering the losses of his alleged victims, thought to be upward of $86 million. So his former clients are parsing the mountains of what they allege are forged cheques, falsified documents and fudged powers-of-attorney, and have found another target: the banks with whom Jones did business over the years. By not paying heed to numerous irregularities in Jones’s financial activities, say lawyers for the former clients, the banks essentially allowed the fraud to continue. “His bankers seemed to trust him as his clients trusted him,” says Ginny Nelles, one of the more outspoken former clients.
Jones, his former clients’ lawyers and bankruptcy trustees claim, made thousands of withdrawals often totalling over $1 million a year from his Royal Bank in-trust account. Trust accounts are normally used to hold client funds that are to be invested or divested. Jones allegedly used his as a personal piggy bank to pay for cars, condos, trips and school tuition for his daughters. None of the banks he had most of his dealings with, lawyers say, appeared to notice when Jones’s office (poorly) forged their signatures on dozens of cheques, and several powers of attorney, over the years.
It all served to perpetuate the myth of Earl Jones: in his clients’ minds, he was a superstar whose keen investment eye was matched by his wide smile. “With Jones, you always knew everything was okay,” says Christiane Jackson, a long-time investor recently forced to sell her home because of her losses.
Some clients are fighting back: as Maclean’s has learned, 16 former investors, Jackson included, are individually going after the banks for cashing cheques allegedly falsely endorsed by Jones. As well, Stein and Stein, the law firm representing Jones’s creditors, hasn’t ruled out a class-action lawsuit. Certainly Gilles Robillard, the bankruptcy trustee charged with overseeing the liquidation of Jones’s remaining assets, believes the banks could have done more to prevent Jones’s excesses. “Earl Jones has been stealing money since the early ’80s, and there were tons of red flags,” says Robillard. “Someone should have noticed something was wrong.”
For at least 23 years, Earl Jones conducted the majority of his business transactions through an in-trust account held at the Royal Bank branch in Beaconsfield, a Montreal suburb. In the spring of 2008, Royal Bank employees noticed Jones had also used the account to pay personal expenses. According to bankruptcy documents, these included nearly $200,000 to buy the Jones family condo in Boca Raton in 1993; $212,000 to pay for his daughter’s condo in Hyannis Port, Mass., in 1997; and a $170,000 bank draft Jones wrote to himself in April 2008. This was a long-standing practice, says Robillard: in 1987, for example, Jones’s personal expenses paid through the RBC trust account totalled roughly $775,000. He would typically take significant sums, sometimes upward of $200,000 a year, out of the account with his ATM card. Withdrawing money “sometimes seemed like it was a full-time job” for Jones, says Robillard.
“Normally, there should be a mechanism in a bank so that when this kind of thing happens, a red light goes on,” said National Revenue Minister Jean-Pierre Blackburn last month. Royal Bank apparently didn’t investigate the irregularities, however. When, in the fall of 2008, the bank noticed what a spokesperson called a “few transactions [that] did not comply with the rules,” officials merely advised Jones to switch from an in-trust account to a commercial account, which he did. On Aug. 27, shortly after the change, Louise Voyer, then an employee of Jones’s, sent out a letter to Jones’s clients. “Our Royal Bank has offered additional benefits relating to our accounts,” it reads, directing clients to replace their existing interest cheques with ones drawn from the commercial account. For their part, Royal Bank officials say they didn’t suspect trouble because “the transaction activity was consistent with the information we received about the nature of Mr. Jones’s business,” said spokesperson Stephanie Lu, noting the matter “was still under investigation.”
Soon after, Jones opened another account at the Bank of Montreal branch in Pointe Claire, near Jones’s office. Despite it being a commercial account, Jones had “Earl Jones In Trust” printed on his cheques. The ruse apparently worked: every former client contacted by Maclean’s was under the impression that the BMO account was in trust. Even Neil Stein, the lawyer representing Jones’s creditors, thought the BMO account was in trust until Maclean’s told him otherwise. The distinction is important, as in-trust accounts are far more difficult to establish, and usually (though not always) audited. “If the bank is cashing cheques knowing they’re marked ‘in trust’ it could have a problem,” said Stein, when informed of the discrepancy.
BMO doesn’t think so, however. Spokesperson Ronald Monet said the bank isn’t responsible for what its clients have printed on their cheques. “We are of the opinion that we are not liable in this matter,” he said.
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