Too big to prosecute, our bankers

[admin]

February 5, 2010
RBC knew of Jones account oddity, memo shows
By CBC News
The Royal Bank of Canada knew disgraced Montreal financial adviser Earl Jones was using his personal account for business and passing it off as an in-trust account, The Fifth Estate has learned.

The Royal Bank of Canada knew disgraced Montreal financial adviser Earl Jones was using his personal account for business and passing it off as an in-trust account, The Fifth Estate has learned.

But the bank denies there were any indications that Jones was using his account inappropriately.

According to a confidential internal memo obtained by The Fifth Estate, Jones was warned "he could get himself in trouble because this is just a personal account in his name alone, the in trust does not mean anything ?"

The memo was dated Nov. 7, 2001. But the matter was dropped and Canada's largest bank allowed Jones to keep doing business as usual.

Jones had a personal account with the Royal Bank but told his clients it was an "in-trust" account. The only problem the bank had was that Jones was operating his business through the account, and it asked him to open a commercial account in 2008.

Wayne Bossert, executive vice-president of RBC, said Earl Jones did what many entrepreneurs do ? start small, using personal accounts to operate their business.

Asked whether it was wrong for the bank to let his clients believe Jones was putting their money into a trust account, Bossert said: "Jones illegally used our letterhead, our logo, in other ways of applying legitimacy to his fraud."

"We had no knowledge of that. What we understood of Mr. Jones is he was an administrator of trusts and estates. A very legitimate business and a legitimate business for him to be in."

Bossert denied that any alarm bells went off before 2008.

"We saw no signals that there was any abuse, any suspicious transactions through the account. There was nothing to signal that this person was anything other than a legitimate successful businessman."

Last month, Jones pleaded guilty to two counts of fraud totalling roughly $50 million. The charges covered his 27-year career as a financial adviser on Montreal's West Island. Authorities have confirmed that Jones bilked 158 clients out of $50.3 million.

Neil Stein, a lawyer representing most of the victims, said Jones would commingle everything into one bank account, called "Earl Jones in trust" that he would use "as his own piggy bank."

"When you're opening up an account in trust for somebody, it's clear, or it should be clear to the bank and everybody, that that account is not being opened for your personal benefit, but rather for and on behalf of some other person or entity."

Stein said he wants to know why the Royal Bank never questioned how Jones was using his account.

"More than red flags should have gone off, from what I've seen," he said.

"There are obvious instances when you see cash being withdrawn from a trust account, when you see credit card bills being paid from a trust account, when you see a debit card being issued on a trust account. That shouldn't happen. "

[admin]

IndependentInvestor Newsletter 082C of 31 01 2010

Today's quote: In Canada, there is what I call brutal bank dominance of the market. What the 1987 Big Bang did...So today, if you have an account that is under $350,000, and you want to talk to the bank, you talk to a machine. That was a fundamental mistake in Canada. Peter Brown, founder, Cannacord Financial

http://independentinvestor.info

[admin]

"This works out to something like 0.5 cents on the dollar. This is a pittance. It's nothing "- Michael Miles, 60, the Victoria, B.C.-based chairman of the Retail ABCP Owners Committee commenting on the modest $138.8 million in fines negotiated with 7 firms involved with the $32 billion non-bank ABCP scandal


Small penalties paid for $32 Billion non-bank ABCP fiasco
Seven financial services firms have agreed to pay a modest $138.8 million in penalties and costs in connection with the investigations into the non-bank asset-backed commercial paper (ABCP) market. Settlements were reached behind closed doors between the Autorité des marchés financiers (AMF), the Ontario Securities Commission (OSC) and the Investment Industry Regulatory Organization of Canada (IIROC) and seven institutions involved in the Canadian third party ABCP market. The Canadian $32 billion ABCP market ground to a halt in August 2007 amid fears that the assets behind the notes included U.S. subprime mortgages and other high-risk loans. Thousands of Canadians suffered, some brutally, from the aftershock. National Bank Financial Inc.’s settlement totals $75 million, including an administrative penalty of $70 million, $4 million to fund an investor education campaign, and $1 million in investigation costs. The OSC reached 2 settlements: one with CIBC and CIBC World Markets Inc. and the other with HSBC Bank Canada. IIROC reached 3 settlements, with Scotia Capital Inc., Canaccord Financial Ltd. and Credential Securities Inc. The AMF reached two settlements, one with National Bank Financial, and the other with Laurentian Bank Securities Inc. The administrative penalties and investigation costs ( not identified) to be paid by the firms is as follows:
• National Bank Financial Inc. (TSX:NA), $75 million
• Scotia Capital Inc. (TSX:BNS), $29.27 million [ includes $320K costs]
• CIBC and CIBC World Markets Inc. (TSX:CM), $22 million
• HSBC Bank Canada, $6 million
• Laurentian Bank Securities Inc. (TSX:LB), $3.2 million
• Canaccord Financial Ltd. (TSX:CCI), $3.1 million
• Credential Securities Inc., $0.2 million
“With regard to financial penalties imposed, a fair and appropriate use for the sanction monies will be determined in accordance with applicable laws, court orders and in the public interest,” the regulators said in a joint release. The settlements work out to just $430 per million dollars of grief unleashed on investors . The penalties amount to less than the fees advisors, lawyers and accountants took home* to restructure the toxic ABCP into long-term notes, most of which still aren't tradable. None of the regulators assisted retail investors in their 2-year successful battle for recovery of assets with the huge institutions. * According to documents filed in connection with the proposed $32-billion restructuring, lawyers for the investors committee, their financial advisors JP Morgan and others had been paid or submitted invoices for $199.1-million as of Dec. 8, 2008.The lion's share of that money - $87-million – went to JPMorgan, the New York financial advisor contracted by the investor committee to figure out how to convert the $32-billion of frozen paper into long- term notes.


http://www.financialpost.com/story-prin ... id=2371360

[admin]

"Canadian Banks the World's Strongest Because they are Allowed To Financially Abuse Canadians" (advocate)



ABCP investors blast settlement, regulators
Mark Noble / December 22, 2009
Advisor.ca


While the majority of retail asset backed commercial paper investors got 100% of their principal investment back, many believe the firms that sold ABCP have received little more than a slap on the wrist in their settlement with securities regulators.

Members of the ABCP Retail Owners Committee argue the $138.8 million in penalties were far too small in comparison to the scope of the ABCP market, which was estimated at $32 billion.

"The first thing that hit me is that they only have to pay $138 million out of 32 billion dollars, which as a settlement represents roughly .04 cents on the dollar," says Layne Arthur, an Alberta-based investor who had the proceeds from the sale of his family farm locked up in what he thought was a safe investment. "Everybody involved in this settlement got immunity. They do not lose their right to practice at any of the banks or in the investment community at large."

Arthur fought for 18 months to get his money back.

"Everybody is walking around with smiles pretending this is all behind them. I think this is still a case of fraud. I would like to see a criminal investigation as to who knew what," Arthur says. "Luckily, I was one of the guys with less than a million dollars invested, so I got paid out. I just got my last cheque a month ago. I've wasted a whole year on this thing, and it was so frustrating. The lingering problem is this is going to happen again. People will be able to put together some fraudulent garbage and pass it off as a savings program."

The ABCP Retail Owners Committee says it has been unable to get criminal action taken against firms.

"Our representative's appeals for assistance from the RCMP's Integrated Market Enforcement Team were referred to the self regulatory bodies. 'Small folks' like ourselves were simply left to 'duke it out' with some of the largest financial organizations in the country," a release from the committee says.

Arthur expressed frustration at being passed around by enforcement agencies when the committee lodged its complaint.

"The system is broken. You cannot have the fox guarding the hen house. You need a totally independent police force that we can go to. I think there are 32 different arms of investigators at different levels, and all of them just referred us to the next outfit," he says.

Independent financial analyst and well-known investor advocate, Diane Urquhart, worked closely with the group in getting their money back. She says this last chapter in the ABCP proceedings highlights serious deficiencies in Canada's capital markets and banking structure.

"I am pleased to see that the securities regulators have finally brought seven securities dealers into settlement agreements as penalty for their sale of toxic ABCP into the public markets," she says. "The public announcement of these securities regulatory settlements demonstrates to the world that the Canadian banks were significant players in the international structured credit crisis, albeit indirectly through their wholly owned investment banks."

Urquhart believes the restructuring process allowed banks to skirt their responsibilities since they were not required to buy the ABCP back from investors.

"No Canadian banks required a government bailout because they had sold the toxic asset backed commercial paper from their inventories to their customers and because they were not forced to buy this bad paper back like the other banks of the world were required to do," she says. "Also, unlike in other countries, the Canadian bankruptcy courts gave full immunity from lawsuits by the ABCP owners against the Canadian banks and investment bank distributors of this toxic product. So, it was not the Canadian banks that took massive writedowns, but the customers of the Canadian banks and investment banks."

Urquhart believes the penalties that were handed out do little to deter or reform the type of sales practices amongst Canada's investment dealers that led to the ABCP crisis.

"With banks making billions of dollars in profit each year, miniscule monetary penalties such as this one, will not have any deterrence on the sale of toxic investments like ABCP in the future," she says. "Deterrence only comes when the well-paid managers and experts in the banks lose their jobs, lose their right to move to another investment firm or receive jail sentences in the cases of intent to defraud the investing public."

Sent By:

Diane A. Urquhart
Independent Financial Analyst
Mississauga, Ontario

[admin]

Bankers' group wants to continue to protect you

By James Daw
Personal Finance Columnist

Share
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Article
Canada's bankers have woken up. Hearing the cries for a supplement to the Canada Pension Plan or other larger-scale plan, they decided to use some gang-style protection tactics to guard and expand their turf.

Don't let the government suck money into a single, quasi-public, one-size-fits-all plan, their Canadian Bankers Association warns in a report released Friday. Let us continue to protect you.

"Requiring younger people to belong to a new contributory public retirement plan could have the effect of diverting income they need for other purposes such as near-term savings objectives and also may not result in actual increases in overall savings rates."

The report has several ideas for improving private-sector offerings – described in words familiar to careful readers of a 2008 paper by Toronto pension lawyer James Pierlot, A Pension in Every Pot: Better Pensions for More Canadians.

Governments should offer relief from taxes and rules, the banks argue.

Yet they make no mention of the drain on retirement income caused once banks and insurers receive our meagre savings.

Canada has the highest investment fund fees in the world, enough on average to bleed 40 per cent of future retirement income from the most diligent savers.

Most of these funds lag market and pension returns. There's also the occasional bad advice and outright larceny by employees of banks and associated securities dealers.

Yet the banks' solution for stretching dollars in retirement is to keep more of our money. They ask to be able to sell life annuities from their branches.

Jean-Pierre Laporte, another Toronto pension lawyer, called as early as 2006 for an idea the banks dismiss: letting employees and employers take advantage of the efficiencies and lower cost of the CPP.

So, naturally, he dismisses the bankers' suggestion that Canada's retirement savings system is working – and would work better if only the tax incentives were more attractive.

"For anyone to argue our system works is ridiculous," Laporte said after reading the report.

"It only works for employees of government and large enterprises. They don't really tell us why (allowing Canadians to contribute to a large-scale pension like the CPP) would be a bad thing. They are saying the current system works – for us – so don't fix it."

Pierlot agrees with the bankers that Canadians should have more choice of ways to save, including private-sector pensions that could serve multiple workplaces, the self-employed, members of associations and individuals. He proposed this a year ago.

Yet he asks: "If choice is a good thing, why not have the reforms the paper proposes as well as new government options?"

The bankers have put their weight behind other proposals included in Pierlot's paper for the C.D. Howe Institute, which is a good thing.

We should let everyone have as much tax-deferred retirement savings room as government employees, plus top-up room after breaks in employment or fluctuations in income. We should harmonize pension legislation across the country.

But Pierlot chides the bankers for treating statistics on retirement savings as though members of public- and private-sector pension plans are all the same. "The difference between the two sectors matters because one has a problem, the other doesn't," he says.

The bankers suggest things would be so much better for workers who rarely have a pension or save much before age 35 if they had more tax-assisted savings room later in life.

More saving room later in life would help, but it's hard to catch up even if you have the room. So starting early and having investment returns compound over many years is better, if you can do it.

jdaw@thestar.ca

[admin]

to truly see corruption at its very best, look no further than Markarian V CIBC World Markets.

It is a landmark case because it has been tried and completed in full public view, without a settlement and a confidentiality agreement to hide the fraud of the CIBC.

It is found under "cases" at www.investorvoice.ca

reading that should make anyone question the honesty, ethics and codes of conduct of our Canadian banks.

[admin]

Mike Macdonald
Monday, April 27, 2009

The Truth About Canada's Banks & Their Success



A lot has been made about the relative strengths of the Canadian banking system. The newspapers are filled with stories about how the focus on "retail" has lead to lower risk profile for the Canadian banks. You have also been reading recently about the superior risk management focus of the Canadian banks and the superior compliance regime of both the banks and the Canadian regulators.


That's pretty neat stuff for us Canadians; hey we're number one! It was all pretty reasonable to the average bloke who has not worked inside the machinery of a big Canadian financial institution.....but I have and I can assure you it is all CRAP!


The reason Canadian Banks are so successful is quite simple. They have an oligopoly structure that lends itself to high margins through low competition strategies. In short, they make tons of profit by over-charging for virtually all domestic services! Need convincing? The evidence has been sitting staring at us for years so let’s point out a couple of obvious situations to get us started!


High Interest Savings Accounts: For years the Canadian Banks have made a fortune by offering little or no interest on your savings account. In fact the situation got so ridiculous that a foreign bank figured out that they could pay for their whole expansion into Canada by exploiting the fat margins that existed on savings accounts. Thus that annoying ING guy made his appearance and told Canadians the ugly truth! Your banks are not paying you interest you dummies! Of course the banks were not about to fight back over one measly foreign bank offering fair interest rates.


Think about it.....if Royal has ten billion in savings accounts earning 0.25%, they are not about to start paying 2.25% and give up $200 million in profits. They (and all the other banks) just sacrificed a few hundred million in deposits each, that would drift to ING, counting on Canadian apathy to keep most of the money in their accounts! The Canadian banks did not react at all until the credit unions followed ING's lead; at which time they created a high interest saving option that was not as high as ING and the credit unions, but was enough to stem the flow of apathetic money from the big banks!


Credit Cards: Foreign credit card companies also noticed that Canadian rates were very high, even though losses were quite low. In the hyper-competitive card market south of the border, aggressive credit granting and extreme marketing competition pushed card companies into high risk credit granting, expensive rewards programs, and aggressive direct marketing campaigns. No wonder the card interest rates were 19% to cover the losses and expenses. In Canada that was not quite the case. Rates were 19%, but marketing was through the branches to existing customers. Credit standards were still very reasonable and losses were consistently below the U.S. experience.

Even better, the banks owned the card processing firms and could screw both the customers (think 19% rates) and the merchants who had to pay outrageous fees for the privilege of accepting the cards! Again, the Canadian banks took it to the extreme and again foreign banks eventually stepped in. Check your mail box and see how often a U.S. monoline firm (sells only one product) has sent you a pre-approved card at a low teaser rate. Again, the banks are not about to match low rates and sacrifice the profits from tens of billions in outstanding card balances at 19%, or 24%, or 27%. Let Capital One or some other company steal the crumbs from the table, but never give in to the temptation to be competitive!


Need further proof? Canadian banks are paying huge class action fines for illegal foreign exchange fees on the credit cards! Canadian banks are the leading broker and mutual fund firms in Canada.....and Canadians pay the highest mutual fund fees in the world! Ask the small business guy about the cost of banking services in Canada!


So how does that make our banks the best in the world? How do you explain the lower risk profiles and the lack of idiotic leveraging? Simple actually; Canadian banks just were not willing to pull their capital out of Canada and forego the huge domestic profits to chase U.S. sub-prime assets, or expand aggressively into the U.S. capital markets. While foreign banks greedily schemed and took risks to gain any slight advantage in terms of profit, it was a totally foreign concept to the Big Five! Compete for profits? Surely you jest! Stay home; stay fat and happy!


So now you know! The success of the Canadian Banking System rests with us! If we were not suckers who overpay for all our banking services, then the big banks could not have been nearly so clever! Let’s give ourselves a hand! Of course don't forget to thank the government, who through the weakest banking regulations in the free world, continue to let the oligopolies thrive!


Keeping with this fine Canadian tradition; you can apply the same logic to some of the world’s wealthiest civil servants, dairy farmers, and financial planners! Low competition, poor regulations and consumer apathy!

I am Canadian!

sois mike


TheUnbiasedPortfolio.blogspot.com/

[admin]

http://www.investmentexecutive.com/image/En/logo.gif
January 2009
Insight

Consumer complaint process fragmented: Letters to the editor

Advocates say the decision of Royal Bank to leave OBSI does not serve the public interest

Re: “OBSI releases its revised, consumer-friendly mandate,” by James Langton (IE, December 2008).

Complaint handling in financial services has been a mess in Canada for years and is well documented. In Britain and Australia, for example, the office of ombudsman is established in law.

Canadian retail clients depend on the industry-sponsored Ombudsman for Banking Services and Investments. [But] retail clients have found the systems difficult to navigate, complex, slow and biased.

After a number of reports, and at the urging of regulators, a number of initiatives were undertaken. Over the years, OBSI’s processes and services have gradually improved.

In 2007 the Framework for Co-operation was released. This lays out the dispute resolution system in financial services, and was agreed to by the federal Department of Finance, the Joint Forum, OBSI, Canadian Life and Health Insurance OmbudService and General Insurance OmbudService.

It describes the architecture of dispute resolution and says that the ombudservices are an important part of consumer protection working in the public interest.

The framework lays out standards for the ombudservices, including independence, external review, accessibility, etc.

Among the expectations of the regulators are: systemic issues, tolling agreements, consumer assistance, “generous” interpretation of mandate — in short, a strong ombudsman service that is an integral part of the consumer protection framework in financial services.

Also in the framework are accountability provisions between OBSI and the regulators. Independent reviews are required every three years (OBSI had an independent, external review in 2007). A number of the changes OBSI has recently introduced are a direct result of that constructively critical review.

We should note that there is no formal requirement in legislation for a bank to be a member of an independent dispute resolution service.

The law as written provides an absolute bare minimum approach — banks must have a complaints procedure, but there are no rules about what those procedures need to be; and communications requirements are also minimal.

The federal government never required the banks to join the ombudsman service because there was a deal made in 1996 for banking, and again in 2002, for investments.

In exchange for not setting up a government service, the banks would be members of the external ombudsman service.

There was never a question of [banks] not being part of OBSI, at least not until the Royal Bank of Canada decided that it didn’t want to be subject to the revised OBSI Terms of Reference and the new rules on complaint-handling and systemic issues.

Royal Bank withdrawal [from OBSI] is bad for financial consumers for the following reasons:
> they could be subject to biased decisions and short-changed on restitution due to lack of independence;

> Royal Bank has turned its back on the agreement between the banking industry and government on independent dispute resolution;

> financial consumers face a two-tier system, in which some get the benefit of a truly independent, industry-wide service subject to the regulator’s framework, while Royal Bank customers have to use a private, for-profit firm hired by the bank.

The Royal Bank system is not in the public interest and will cause many difficulties, especially for seniors, unsophisticated clients, retirees and pensioners.

Ken Kivenko

Chairman, Advisory committee

Small Investor Protection Association

[admin]

RBC in hot water over Olympus United Funds collapse
The case is Balanced Return Fund v. Royal Bank, 09-cv-695, U.S. District Court,
Southern District of New York (Manhattan
Royal Bank of Canada was sued by investors in Olympus United Funds who claim they
lost more than US$90-million in the funds' collapse. According to a complaint filed Jan.
23 in U.S. District Court in Manhattan Royal Bank, "secretly managed" the funds, The
funds' parent company Norshield Financial Group filed for receivership in June 2005
amid probes by securities regulators. In its dealings and relationships with Norshield,
Royal Bank of Canada assumed control of investments, exercised discretion in key areas
and thus became liable for my clients' losses," Lee Squitieri, a lawyer for the investors,
said in an interview. Royal Bank officials allegedly overstated the funds' assets, breached
their fiduciary duties to investors, committed fraud and misrepresented material facts, the
investors said in the complaint. They seek unspecified damages.” Royal Bank of Canada
believes the lawsuit is without merit and will vigorously defend against the claims,"
Jackie Braden, a spokeswoman for the bank, said in a Jan. 26 statement. Among the
investors suing are Balanced Return Fund Ltd., Mendota Capital and Commax Investors
Services Ltd. Source: C.Cotts, RBC sued over failed hedge funds, National Post, Jan. 27,
2009 pg FP5

[admin]

Tony Fell tears strip off banks
Barry Critchley, Financial Post

Wednesday, January 28, 2009

For a person who hasn't drawn a paycheque for more than a year, Tony Fell, former chief executive at RBC Capital Markets, sure works hard. At Monday's annual dinner of the Toronto Board of Trade, Fell gave his views on the global credit crisis. And he didn't hold back.

After castigating economists at central banks and at the IMF as well as those in the financial business for their failure to "pick up on this credit bubble," Fell weighed in on the lack-of-leadership roles played by all other market participants as well as the need to find a new order given that "the grand experiment of deregulation of financial markets and financial institutions which started with President Ronald Reagan's appointment of Alan Greenspan in 1987, is over."

He argued the "crisis clearly highlights a massive failure of corporate governance," specifically the failure of boards to oversee management and the failure of management to oversee the business. In short, where were the directors and why do so few of them "resign over matters of principle," he wondered. "Hard-hitting directors [must be] prepared to stand up and be counted."

The too-big-to-fail argument shouldn't apply, he argued, because "capitalism is the freedom to do outstandingly well and ... also the freedom to go bankrupt and that has to be demonstrated from time to time. There has to be at least some discipline in the marketplace."

He believes banks have become too big, too international and too complex. The result: Banks have become "too big to manage".

Now the big global banks should be broken up into smaller, more focused and more manageable institutions." Citigroup has started down that path.

The argument that Canadian banks should be globally competitive doesn't hold much sway with Fell. "It's all egos run amok," he said, noting Citigroup, Deutsche and UBS aren't role models. "What's wrong with being the 25th-or 50th-largest bank in the world and growing your business organically by offering good service? Canadian banks are plenty big enough to compete where they want to compete."

And he is no great fan of financial engineering and innovation -- a "disastrous" problem area. "The financial industry should get out of complex structured products," he declared, adding if a "security has more than two bells and one whistle, just say no." He railed against credit rating agencies -- whose model is "broken" --and said central banks should "target, and rein in, overheated and speculative industry and market bubbles even if it causes a slowdown or a recession."

Fell believes a "back-to-basics" model for the financial business is required:

running a more conservative business,
reining in growth expectations,
reducing leverage with much less financial innovation and engineering,
more focus on client business,
more organic growth and fewer grandstanding acquisitions.
In short, the world's biggest financial institutions should downsize and scrap their plans to rule the world.
While that approach leads to lower profitability "at least, over time, you will be in business."

But he is not optimistic even if he hopes the lessons of the past 18 months are "indelibly ingrained" on central banks, regulators, boards and corporate management so that the financial business will again become "an industry of choice" for investors.

If not, then "twenty years from now, this crisis will be ancient history and long forgotten, and the young people running the businesses at that time will set out to do the same thing all over again."

bcritchley@nationalpost.com

(advocate comments........good words, well said. I still maintain that Tony and his style of ruling the financial world was "the" model that he now criticizes. He was the top dog at the top firm for as long (longer) as I have followed the shenanigans of this industry. If he was as professional and ethical back then, as he claims to be now, we would have far less damage than we do today. Get rich anyway you can, and then get ethics?)

[admin]

Royal Bank of Canada Sued Over Failed Hedge Funds (Update1)

An earlier suit was withdrawn to seek a private settlement,
but was refiled when a deal could not be reached, a lawyer said.
By Cynthia Cotts

Jan. 26 (Bloomberg) -- Royal Bank of Canada, the country’s biggest bank by assets, was sued by investors in Olympus United Funds who claim they lost more than $90 million in the funds’ collapse.

Royal Bank, based in Toronto, “secretly managed” the funds, according to a complaint filed Jan. 23 in U.S. District Court in Manhattan. The funds’ parent company Norshield Financial Group filed for receivership in June 2005 amid probes by securities regulators.

“In its dealings and relationships with Norshield, Royal Bank of Canada assumed control of investments, exercised discretion in key areas and thus became liable for my clients’ losses,” Lee Squitieri, a lawyer for the investors, said in an interview.

Royal Bank officials allegedly overstated the funds’ assets, breached their fiduciary duties to investors, committed fraud and misrepresented material facts, the investors said in the complaint. They seek unspecified damages.

“Royal Bank of Canada believes the lawsuit is without merit and will vigorously defend against the claims,” Jackie Braden, a spokeswoman for the bank, said in a statement today.

Among the investors suing are Balanced Return Fund Ltd., Mendota Capital and Commax Investors Services Ltd.

Squitieri filed an identical lawsuit last May, he said. The parties agreed to resolve the matter privately, after which he withdrew the suit with the option to refile it later, he said.

“We did not reach a satisfactory resolution,” Squitieri said.

The complaint doesn’t identify individuals responsible for the funds because investors can obtain complete relief without doing so, according to the lawyer.

The case is Balanced Return Fund v. Royal Bank, 09-cv-695, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Cynthia Cotts in New York at ccotts@bloomberg.net.

[admin]

RBC pays US$10.98 million to settle US mortgage fraud probe
By Jonathan Stempel

Wed Nov 26, 2008 3:01am EST

NEW YORK (Reuters) - A Royal Bank of Canada (RY.TO: Quote, Profile, Research, Stock Buzz) mortgage unit will pay $10.98 million to settle charges it gave the U.S. government false information about borrowers who took out 219 home loans that ended up in foreclosure.

RBC Mortgage Co agreed to the payment to avoid litigation but denied wrongdoing, according to Patrick Fitzgerald, the U.S. attorney in Chicago, who announced the settlement.

Investigators accused RBC of knowing that 219 loans made in the Rockford and Freeport, Illinois, areas between February 2001 and April 2004 were based on false or fraudulent statements about the borrowers' credit, employment or sources of equity.

They said the lender also submitted false information about the loans to the U.S. Department of Housing and Urban Development.

"Mortgage lenders should know that they must maintain the integrity of the lending process so that federally insured mortgages will be available to worthy borrowers and not based on fraud and deceit," Fitzgerald said in a statement.

RBC spokesman Kevin Foster said the lender has cooperated fully, and takes any allegation of employee misconduct very seriously. He also said RBC sold the unit where the alleged misconduct took place in 2005.

The civil case is related to a separate federal criminal probe that resulted in the convictions of 25 defendants, including three RBC Mortgage officers, Fitzgerald said.

Tuesday's settlement includes payments of about $10.7 million to cover the charges, and $264,000 for other claims stemming from a HUD audit of loans that RBC was accused of improperly certifying as current.

(Reporting by Jonathan Stempel, editing by Matthew Lewis, Richard Chang)

[admin]

Canada’s largest bank gives OBSI the kissoff and spits on clients

The Royal Bank of Canada (RBC) has announced the introduction of a new independent dispute resolution process, effective November 1, 2008. RBC has retained the services of Toronto-based ADR Chambers, an alternate dispute resolution firm, replacing OBSI. RBC had taken strong objection to a number of positive proposed OBSI mandate changes in a Feb. 1, 2008 Comment letter (available on the OBSI website). RBC asserts that it expects the new appeal process will result in quicker response to RBC banking clients' concerns that remain unresolved after review by the RBC Ombudsman. ADR members are all independent contractors who contract individually with the clients through ADR Chambers Inc., a for-profit corporation which provides administrative services to the members and the clients to assist in the delivery of the dispute resolution services. ADR fees will be paid directly by RBC which potentially could give rise to a conflict-of interest ( a la bond rating agencies). The time line goal on a best efforts is 180 days or less but no clear automatic review if this time is exceeded. Their connection to FCAC, law enforcement and OSFI is not yet clear to us. Investment complaints will continue to be serviced by OBSI. HYPERLINK "http://www.adrchambers.com/bankingombuds.htm" http://www.adrchambers.com/bankingombuds.htm Terms of reference at HYPERLINK "http://www.adrchambers.com/terms_of_reference.pdf" http://www.adrchambers.com/terms_of_reference.pdf

Many of the terms of reference are similar to OBSI and the dollar limit is identical-$350,000. But there are some huge disadvantages to using ADR’s services compared to OBSI:
ADR is not committed to following ISO guidelines for external dispute resolution entities
The 2 year Ontario limitations clock is not stopped as is the case with OBSI
ADR will not take on a case until after RBC has self-declared they have completed the process, regardless of any level of reasonableness [OBSI standard is now 90  days]
There is no News Release issued should RBC not accept a recommendation as is the case with OBSI
Unlike OBSI , ADR will not formally deal with systemic cases of financial assault but they may raise the issue with RBC
There is no automatic independent review/assessment of ADR operations
Governance is more opaque even than OBSI
According to OBSI’s 2007 Annual Report just 25 % of banking disputes recommended compensation compared to 61 % of investment cases. Only 7 RBC banking cases were referred to OBSI in 2007. Similar to the current framework with OBSI, the ADR Terms of Reference provide that where a complaint involves an area that falls within their mandate and that of another Ombuds service, ADR will, we are told, cooperate with that service to respond to the complaint. It is our understanding that the all-important process that will be used to engage clients [ referred to as complainants] will be client –friendly as is the case with OBSI and not legalistic as is the case with their work on IIROC arbitrations. Overall, a giant step backward for banking financial consumers. If other banks also go their own way, OBSI could implode and a Government legislated Ombuds service put in place.


from canadianfundwatch.com

[admin]

information that's in the public domain Re: Michael Wilson

1. Michael Wilson was our GOC Minister of Finance 1984-1991

2. Michael Wilson was Chairman of UBS Canada from 2001-2006

3. Michael Wilson was appointed by PM Stephen Harper as
our Canadian Ambassador to the United States of America
on March 13, 2006 — a position that Michael Wilson still holds !!



Swiss banking's $5.6-billion man
Accused by the United States of helping wealthy Americans hide their fortunes from the IRS, former UBS executive also led a covert team in Canada that funnelled mountains of cash offshore


Raoul Weil was indicted in a U.S. tax evasion crackdown this week.

GREG MCARTHUR

From Friday's Globe and Mail

November 14, 2008 at 2:00 AM EST

A senior Swiss banker who was charged two days ago by United States prosecutors with dispatching bankers to help rich Americans evade taxes also oversaw a covert team in Canada that funnelled as much as $5.6-billion offshore, The Globe and Mail has learned.

Raoul Weil, former head of wealth management for Swiss financial giant UBS, has been accused by the U.S. Department of Justice of equipping a team of bankers with encrypted computers and countersurveillance training in an effort to conceal $20-billion from the Internal Revenue Service.

Internal UBS records, as well as interviews with former UBS officials, show Mr. Weil was in charge of a similar operation in Canada. A team of a dozen or so bankers, known internally in UBS's Zurich and Geneva offices as the “Canada Desk,” made several trips a year to UBS-sponsored events, such as chamber orchestra concerts, and encouraged the country's wealthy elites to move their money to Switzerland.

UBS operates a legitimate, licensed Canadian subsidiary, which manages the multimillion-dollar portfolios of many well-to-do clients, but officials from the subsidiary say the members of the Canada Desk never set foot in its offices in Toronto, Montreal, Calgary and Vancouver.

There is so much secrecy surrounding the Canada Desk, which has been led by a Zurich-based banker named Edith Roellin, that many former directors said they had never heard of the group.

“It was not talked about. It was never mentioned. I didn't really even know they existed,” said Fred Ladly, a former director of the Canadian subsidiary's wealth-management division for about 10 years. “I think I could say this for all the other members. If I knew something like that was going on, I'd quit.”

Another former official of the licensed business said the subsidiary kept a “distance” from Ms. Roellin and her team.

“From a compliance and governance perspective, UBS Canada did not participate nor know of those assets,” said the former official, who declined to be named.

Although their dealings in Canada are discreet, Ms. Roellin and her team appear to do significantly better business than UBS's licensed operation. Internal bank balance sheets obtained through the investigations in the United States show that as of October, 2005, the Canada Desk managed $5.6-billion. The licensed business held less than half that – $2.6-billion.

The bank declined to make Ms. Roellin available for an interview, and she did not respond to an e-mail request for comment.

Despite the highly publicized indictment of Mr. Weil, which made the front page of The Wall Street Journal, as well as the arrest of several UBS bankers in countries such as Brazil, the Canadian operation has received little scrutiny from law-enforcement officials. The Canada Revenue Agency has refused to say whether it has launched an investigation.

Records released in the United States show that the bank itself was aware it was on shaky legal ground every time Ms. Roellin and her team touched down at a Canadian airport.

One UBS slideshow, which was released through a U.S. Senate hearing and dated 2003-2005, warns:

“It is not permissible for non-Canadians [sic] banks outside of Canada to seek out
banking relationships with Canadian residents while the residents are in Canada.”
That law is a provision of the Bank Act that Parliament passed more than two decades ago to clamp down on foreign bankers – so-called suitcase bankers – attempting to skirt domestic regulations. As the law stands, a banker who does not work for a licensed subsidiary or branch is not supposed to be in Canada doing business.

“That would be illegal” said Robert MacIntosh, a former president of the Canadian Bankers Association, when he was told about UBS's dual operations. “That's what happens over time. People bend around the rules and forget what the rules were in the first place.”

Some of the bank's defenders argue that Ms. Roellin and her team aren't in violation of the law because UBS has a licensed operation in Canada. However, each UBS Canada official interviewed by The Globe disavowed the conduct of Ms. Roellin and the Canada Desk.

UBS declined to explain why it issued an internal warning about that provision of the Bank Act, but continued to send Swiss bankers to Canada.

“I don't think it makes sense that we go into this thing,” UBS spokesman Serge Steiner said when asked about the contradiction between the bank's internal warning and Ms. Roellin's regular trips to Toronto. “We can't go now and discuss every and each detail on several documents.”

Canada's banking regulator, the Office of the Superintendent of Financial Institutions, is responsible for enforcing the law, but in the past three years it hasn't handed out any formal notices of violation. A spokesman for the regulator said the normal practice is to issue an informal notice, which he said is usually sufficient to get offenders to stop. The agency declined to say how many informal notices it has issued.

No former management executives of UBS's Canadian subsidiary reached by The Globe would speak on the record, but several said there were legitimate reasons why a Canadian would prefer a Swiss UBS banker over someone from the Canadian branches. One former official highlighted the service culture and reputation of Swiss bankers. The former officials also pointed to the expansive pool of mutual funds available through the Swiss offices, which dwarf the securities products available in Canada.

Professor Reuven Avi-Yonah, an international tax expert at the University of Michigan and a member of the board of editors of the Canadian Tax Journal, dismissed those explanations. If enhanced service was the main reason for parking savings in Switzerland, UBS could implement similar service at its Canadian branches, Prof. Avi-Yonah said.

As for mutual-fund options, no one from the Canada Desk is registered with the country's securities commissions, which means it's illegal for them to market securities during their trips.

“By and large, the main reason is bank secrecy and to hide income from Revenue Canada,” Prof. Avi-Yonah said. “When UBS sends their own Swiss people into Canada to solicit the funds that's basically what they're promising.”

[admin]

To: David Andrew

Please confirm that the OBSI took a proactive decision to narrow its mandate to specifically exclude rbc customer complaints.

Please provide me the documentation of the decision of the OBSI to narrow its mandate or to allow its mandate to be narrowed such that it will no longer consider complaints from the Canadian public who are customers of RBC.

Given your much repeated public statements to the effect that you are independent and objective, please square that with this recent RBC decision for me. I do not understand how such a corporation could decide on its own to remove its customers from your purview? Is this unique to RBC or could other companies also arbitrarily decide to exclude their customers from access to the supposedly independent review services of the OBSI?

You are no doubt familiar with the recently announced role of ADR as per its site:

http://www.adrchambers.com/bankingombuds.htm




RBC opts to go solo on complaints
November 08, 2008
Ellen Roseman

C arolyne Parfitt, an RBC credit card customer since 1983, couldn't believe how she was treated when she missed a few monthly payments while travelling.
The bank said she would pay a 16.99 per cent rate on her low-rate Visa – up from 11.99 per cent – if she missed two more payments in a row or three in a year.
Parfitt spoke to a customer service supervisor, and was told she'd have to follow the cardholder rules.
So she asked to close her account.
"What other recourse did I have to show my disapproval? Whatever happened to customer retention?
"I'd never let my clients leave in such a fashion, so frustrated and brushed aside after 25 years."
It may be the spillover from the U.S. credit crunch, but Canadian banks are getting tougher with customers.
"We are contacting Ms. Parfitt to apologize for the mishandling of her situation," said Beja Rodeck, an RBC spokesperson I contacted.
Until recently, Parfitt could have appealed to the Ombudsman for Banking Services and Investments.
This is a voluntary complaint-handling system set up in 1996, when the industry wanted to discourage Ottawa from setting up a federal banking ombudsman. But late last week, RBC announced it was pulling out of OBSI on Nov. 1.
It has retained ADR Chambers, an independent dispute resolution firm, to provide an appeal process for clients who disagree with the findings of the RBC ombudsman.
Was RBC unhappy with OBSI? Why was it leaving so abruptly?
I asked for an interview with an RBC executive, but didn't get one.
Instead, I had to send my questions to media contact Jackie Braden, who sent back information that was in the news release.
Among the benefits of the new system, she said, was "ADR Chambers' commitment to address disputes on a timely and comprehensive basis."
Timeliness has been an issue for OBSI. It's criticized by consumer advocates for not handling enough complaints and not turning them around more quickly.
According to OBSI's annual report, it opened 468 case files in 2007 – the highest ever.
It recommended compensation to clients in only 25 per cent of the banking cases, compared with 61 per cent of the investment cases.
With 21, Scotiabank had the most banking cases opened, followed by TD Bank with 15, CIBC (10), National Bank (8) and RBC (7).
"In the context of our overall business activities, we have very few complaints," Braden said.
"While we have over 10 million clients, we have generally had less than 10 open cases with OBSI each year. To date, we have always accepted OBSI's recommendations.
"The key driver for this change (to ADR Chambers) was our clients and, in particular, improving timeliness of complaints handling. For example, we have a case that's been with OBSI since May 2006."
"The OBSI will still handle RBC investment complaints, but not RBC banking complaints."
RBC didn't respond to my question about OBSI's board adopting new terms of reference on Oct. 27 – four days before its pullout.
The new terms allow OBSI to identify systemic shortcomings and recommend compensation for all affected customers – not just for the person who complained.
RBC's move to another dispute resolution service, coming so soon after a major expansion of the independent ombudsman's powers, may indicate its displeasure.
To me, it shows that Canada's largest bank prefers to be held accountable only for problems that affect one customer at a time.
Ellen Roseman's column appears Wednesday, Saturday and Sunday.


I look forward to your response.

James MacDonald MBA