Civil or Criminal Actions against companies or regulators

[admin]

Wall Street Journal
AUGUST 3, 2009
U.K. Probes Structured-Finance Products
Concern Is That Some Bankers Knowingly Sold Complex Assets Based on Flawed Valuations


BY DOMINIC ELLIOTT AND MATT TURNER

LONDON -- The U.K.'s Serious Fraud Office is investigating sales of structured products such as credit-default swaps and collateralized debt obligations, amid concern some bankers may have knowingly sold complex assets based on flawed valuations before the global financial crisis struck two years ago.

"Some of them are incredibly complicated and they are sold by very, very clever people," Richard Alderman, the director of the Serious Fraud Office, said. "The question is not just were they mis-sold, because that gives rise to a number of regulatory issues, but was there actually fraud. Or in other words, did those selling them ...

[admin]

PENSIONS SUE MANULIFE
Class actions allege inadequate risk strategy

Jim Middlemiss, Financial Post

Friday, July 31, 2009

Manulife Financial Corp. and four of its current and former executives have been hit with two class-action lawsuits by pension funds in Quebec and Ontario involving representations made about the risk-management strategies surrounding its guaranteed financial products.

The Ontario suit alleges the company "consistently misrepresented, either explicitly or implicitly, that MFC's risk management processes were adequate" and claimed that in early 2004, the company "decided to minimize its risk management in order to increase its short-term profitability."

"Without adequate risk management, MFC effectively made an undisclosed wager that the markets would continue to rise."

The suit further alleges that "MFC failed to utilize effective and appropriate risk management and failed to disclose that failure." That led to an "inflated" stock price, which "declined severely" when "the truth began to emerge."

The cases come three weeks after the Toronto-based financial giant was sued in a shareholder class-action suit in the United States that alleged it made false and misleading statements over its failure to hedge exposure to stock markets. The cases follow the announcement six weeks ago that Manulife is under investigation by the Ontario Securities Commission over its disclosure practices related to those products.

David Paterson, Manulife's spokesman, declined to comment on the lawsuits, but said, "We believe that our disclosures satisfy all applicable requirements and we are cooperating with the OSC."

The Ironworkers Ontario Pension Fund, which extracted a multi-million-dollar settlement in a class-action lawsuit against Research In Motion Ltd. and its two top executives over option backdating, has filled a $500-million lawsuit in Ontario.

Comite syndical national de retraite Batirente inc. has filed suit in Quebec.

It manages more than $700-million on behalf of its 25,000 members and has filed suit in Quebec Superior Court seeking a minimum of $10,000 in damages, although that number will soar as the litigation proceeds and more documents are filed, legal experts say.

Also named in the lawsuits are: former CEO Dominic D'Alessandro; Gail Cook-Bennett, chairwoman of Manulife's board; Arthur Sawchuk, former chairman of the board; and Peter Rubenovitch, who was chief financial officer from 1998 to June of this year.

The lawsuits claim that between Jan. 26, 2004, and March 26, 2009, Manulife made negligent misrepresentations about its risk-management practices involving its segregated funds and variable annuities.

Those products guarantee a minimum payment or return to investors and are usually backed by hedging strategies. However, last year's market turmoil resulted in substantial losses to the portfolio of investments supporting Manulife's guaranteed investment products, and the company had to raise billions of dollars to boost its capital levels. Its stock price plummeted, fueling the class-action suits.

The Ontario suit alleges that "MFC decided to substantially reduce or eliminate its risk management with regard to some or all of its guaranteed products," but failed to properly disclose that to investors.

The lawsuits claim Manulife "misrepresented that it had prudent and appropriate risk management practices and procedures" and "failed to make full and timely disclosure of [its] failure to properly hedge its exposure to market fluctuations in certain of its products."

The lawsuits also take issue with Manulife's disclosure in its corporate documents during that five-year period, arguing that investment-return risk was not properly mitigated by using reinsurance as claimed.

The pension funds disagree with Manulife's claims in its disclosure documents filed with regulators that the products were "diversified," arguing they had the opposite effect and were actually "highly correlated" once the markets tanked.

On June 19, Manulife disclosed that the OSC had issued a preliminary enforcement notice against it, which concluded the company failed to meet its continuous disclosure obligations. Manulife is now responding to the OSC's accusations.

The lawsuits were filed by Siskinds and Cavalluzzo Hayes in Ontario and by Siskinds Desmeules in Quebec. The action must still be certified as a class lawsuit, which will take months, and the courts must decide which jurisdiction should take control of the case.

jmiddlemiss@nationalpost.com

MANULIFE FINANCIAL

Ticker MFC/TSX
Close $26.29, up 82¢
Volume 6,817,308
Avg. 6-month vol. 9,796,390
Rank in FP500 3

[admin]

Fund fees face legal scrutiny
<http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090426/REG/30426
9987/1003>

April 26, 2009
Two legal cases that will be decided by courts this year may
significantly affect the mutual fund and investment advisory industries.
Financial planners and advisers should be aware of the cases and consider
the likely impact on the industry if the plaintiffs win.
Both cases involve the level of fees charged to mutual funds
by their advisory firms. The U.S. Supreme Court has agreed to hear one case,
that of Jerry Jones et al. v. Harris Associates LP. In the other, Gallus et
al. v. Ameriprise Financial Inc., the 8th U.S. Circuit Court of Appeals
overturned a district court decision in favor of Minneapolis-based
Ameriprise and sent the case back to the district court "for further
proceedings not inconsistent with the views set forth in this opinion."
In the Jones v. Harris case, the plaintiffs argued that the
adviser's fees were too high and thus violated the fiduciary standards of
the Investment Company Act of 1940.
A district court rejected this argument, ruling in favor of
Chicago's Harris Associates based on a precedent set in a 1982 case stating
that the test should be whether the fees are within the range of what would
have been negotiated at arm's length and that the fees are not so
disproportionately large as to be unreasonable in light of the services
provided.
The plaintiffs appealed, arguing that precedent should not
be followed, because it relies a lot on market prices as the benchmark of
what are reasonable fees. The benchmark is not valid, they argued, because
fees are set incestuously. They further argued that if any market fees are
used, they should be the fees for unaffiliated institutional clients.
The 7th U.S. Circuit Court of Appeals again rejected the
plaintiffs' arguments, ruling:
"A fiduciary must make full disclosure and
play no tricks but is not subject to a cap on compensation. The trustees,
rather than a judge or jury, must determine how much advisory services are
worth."
The decision of the Supreme Court to hear the appeal
suggests that at least some of the justices are ready to revisit the issue.
In the Gallus case, the 8th U.S. Circuit Court of Appeals
ruled that while the 1982 decision provides a useful framework for looking
at advisory fees, in deciding if the Ameriprise's mutual fund fees were
reasonable, the lower court should have compared them with the firm's
institutional fees.
These two cases suggest that the courts are beginning to
recognize that the mutual fund industry has changed greatly since the 1982
decision and that some of the assumptions underlying it may not be valid.
They may be ready to require mutual fund boards, who are
fiduciaries, and the fund companies, also fiduciaries, to negotiate at arm's
length and to negotiate more reasonable fund advisory fees.
If they do so, revenue and profit margins in the mutual fund
industry almost certainly will come under pressure. That could mean more
fund company mergers as firms attempt to offset the lower revenue with
economies of scale.
That in turn may lead to fewer fund choices.
It could also mean fewer client services, separate fees for
some of those services and possibly lower commissions for commission-based
advisers.
Overall, these cases bear watching because their outcomes
could have a substantial impact on the mutual fund industry and its clients.

[admin]

From: JIM MACDONALD
Sent: Wednesday, April 22, 2009 5:00 PM

Subject: 2nd OPINION: Can you sue your advisor? (Part Two)

I do not understand the continually reinforced mythology
about suing an advisor. In virtually all cases,

* the legal contract is between a customer and a company where the
salesperson is employed.
* There is no contract between the customer and the salesperson.
* The company does not allow the salesperson to use that title which
is in the legislation;
o instead the company provided business cards refer to the securities
regulator licensed "salesperson" as an "advisor" or a "VP".

If things went wrong with your car, would you sue the
salesperson or the dealership or the manufacturer of your car?

Is this strategy not a deceptive attempt on the part of the
industry to deflect responsibility totally to the salesperson rather than to
accept responsibility for the creation, manufacturing and marketing of
allegedly fraudulent, toxic products.

When I was in the industry,

* I was repeatedly told to stop asking questions about the practices
of the companies I worked for and the industry and its regulatory structure.

* I was told to stop making suggestions to provide greater
transparency to customers such as with the misleading statements that are
routinely produced by the industry.
* I was told to stop asking detailed questions which exposed the flaws
of the various structured products, income trusts or hedge funds.
* I was told that I was wasting the time of these fine people who were
briefing us on this great sales opportunity and that we all wanted to make
more money - did we not.

When the new issues, for example, imploded predictably
within months, the firms did not stand behind the products;

o instead they shifted responsibility to the salesperson and the
customer.

There is no warranty in this industry like
the car industry.

The moment the toxic products get created
and sold, the industry and all those legal and accounting firms working with
the industry, all get paid their fees and bonuses-even when predictably, the
toxic products implode within months.

Yes you can sue your advisor, but the industry has that
stacked up against you.

The industry and its regulators have created a massive wall
to protect themselves meaning that you really only have a chance to get
justice if you have at least $1 million for legal fees and ten years of your
life to dedicate to taking this all the way up through the legal appeal
process.
That is why I took the measures I did to get the Markarian
v. CIBC World Markets Inc.
<http://investorvoice.ca/Cases/Investor/Markarian/Markarian_index.htm>
decision translated into English
<http://investorvoice.ca/Cases/Investor/Markarian/Markarian_v_CIBCWorldMarke
tsInc.htm> 01 August 2007 so that English Canada would see one of the few
cases where the victim was so injured and angry that he was not going to
give up even if he had to go to the Supreme Court.

This is the most abusive industry I have ever experienced.
And too many professionals just smile and enjoy protecting their fat
paychecks.

That is why I got out.

James MacDonald MBA

[admin]

Securities class actions rising, report says

125% jump in 2008 over 2007, NERA says


http://www.Nera.Com Andrew Barr, National Post

Securities Class Actions In Canada
Jim Middlemiss, Financial Post

Wednesday, January 28, 2009

Canadian investors are getting more litigious and using securities class-action lawsuits as a means to keep companies in check, according to a new study from NERA Economic Consulting.

A securities class-action suit is where an investor sues a company on behalf of shareholders for inappropriate conduct that often leads to a decline in share price or regulatory action.

The number of securities class-action lawsuits filed in Canada rose 125% last year over 2007, hitting its highest peak ever. Last year was also notable in that there was $890-million in total payments made to settle such suits, the report says.

The nine suits filed last year was double the number of four filed in each of 2005 to 2007 and almost double the high of 2004, when five suits were filed.

"It's the highest we've seen," said Mark Berenblut, senior vice-president at NERA and co-author of the study, believed to be the first to examine such suits in Canada. The report cites cases dating back to 1997 and the filing of the infamous case against Bre-X Minerals Ltd., Canada's first securities class-action suit.

So why the spike in 2008? Mr. Berenblut speculates it's because of changes to securities laws here in Canada that have "opened the door to securities class actions." Four provinces have created civil liability for continuous disclosure, allowing investors to sue for misrepresentations in such things as press releases or quarterly financial statements or when companies fail to make timely disclosure of key information.

Ontario was first to allow such actions, in 2005. In the past two years, Alberta, British Columbia and Quebec have instituted similar measures.

Mr. Berenblut said "there's a rising consciousness. You've seen several [law] firms emerging that are specializing in this area," which is driving securities litigation.

There's likely room to grow, as securities filings are less common in Canada than the United States. Last year, there were 255 securities class actions filed in the United States. The filings here amount to less than 4% of the U. S. total, yet when adjusted for market size, the report found the filing rate here is "growing faster."

NERA, which works with law firms litigating class actions, examined the 42 cases filed since 1997.

The report found the bulk of allegations within the cases focused on improper accounting, misleading earnings guidance, insider trading and product/operational defects, and customer-vendor issues.

The cases involved 13 different economic sectors, with companies in finance (23.8%), non-energy minerals (14.3%), consumer services (9.5%) and telecommunications (9.5%) accounting for 57% of the cases.

The study also found that the vast majority of suits are settled and only a small fraction in Canada or the United States make it to trial. So far in Canada, only one case--involving Danier Leather Inc. -- has resulted in a court verdict and it absolved the company of misrepresentation, which was upheld by the Supreme Court of Canada.

Of the 42 cases examined, 20 have settled, for a total of $3.6-billion.

Such lawsuits have a cross-border nature. The report notes that nine of the settlements involved actions filed in both countries.

For cross-border suits, the total paid out was $2.9-billion, compared with the $17.7-billion claimed -- about 16.3% of the amount sought.

The average cross-border settlement was $322-million versus the $3.5-billion claimed, a 12.6% payout. However, the cross-border suits are largely skewed by two cases against Nortel Networks Corp. , which settled for $1.3-and $1.2-billion. Other large settlements included Biovail Corp. at $141-million, YBM Magnex International Inc. at $110-million and Hollinger International Inc. at $46-million.

For domestic suits, the total settlements amounted to $731-million, compared with $6.51-billion claimed, a payout of 11.2%. The average settlement was $73-million, compared with $651-million claimed, an 18% payout.

The biggest involved Portus Alternative Asset Management, a $611-million settlement, about 38% of the $1.6-billion claimed. Next was Atlas Cold Storage Holdings Inc., at $40-million, followed by Atlas American RSP Fund, which settled for $20-million, close to the $22-million claimed.

Currently, there are about $3-billion in claims outstanding involving 21 actions. The report found one area that Canada lags the United States is in option backdating class actions. There have only been two such suits, both filed in 2008. The first U. S. options backdating class action was filed in 2005 and peaked with 24 in 2006, dropping to nine such suits in 2007 and five in 2008.

"The paucity of Canadian options backdating cases to date may reflect the fact that Canadian regulators have not conducted the kind of large-scale investigations of options granting practices that were undertaken by the United States Securities and Exchange Commission," the report says.

jmiddlemiss@nationalpost.com

(advocate ps, .......and the lawyers have not even clued in to the fact that provincial securities commissions have granted thousands of "exemptions" to securities laws, negatively affecting hundreds of thousands of consumers, without public notice to them. It is like a tainted meat scandal, where the health inspectors helped to get the tainted product sold to the public, while knowing it was bad..............)

[admin]

Lawsuits against insurers certified
Great-West, London Life facing class action over withdrawn millions

December 04, 2008
James Daw
Business Columnist
TORONTO STAR

Ontario courts have certified two class-action lawsuits alleging London Life Insurance Co. and Great-West Life Assurance Co. unlawfully removed $220 million from accounts reserved for 1.8 million participating policyholders.

A trial is scheduled to begin in September 2009 in London, if no settlement is negotiated first.

The legal dispute erupted after Great-West Life bought London Life's parent company in 1997.

Participating policyholders are disputing Great-West's legal right to withdraw money from accounts reserved for them, after they had paid to participate in their insurer's profits through dividends, bonus additions or other benefits.

The insurers have argued the policyholders would benefit from savings and efficiency gains.

Formal legal notices of the action have been published in 32 newspapers across Canada. In September, the insurers failed to persuade judges of an Ontario appeal court to overturn a certification ruling granted last February.

The representative plaintiffs appointed by the courts are actuaries James Jeffery and D'Alton (Bill) Rudd and businessman John Douglas McKittrick, all of London. But anyone who has held a participating policy in the period since November 1997 stands to benefit, unless they mail a form to opt out.

Legal fees may be no more than a third of any court award or settlement. Other information about the lawsuits is available by telephone at 888-282-7217 or on the Internet at www.parpolicyclassaction.com.

[admin]

FP LEGAL POST

Financial Post

Preventative measures for class action defendants


by Julius Melnitzer

November 10, 2008
Potential class action defendants are demonstrating a growing awareness of preventative medicine. They've grown alert, it seems, to the idea that defeating certification can be achieved not only with offence but with defence. In other words, they've discovered that their chances of winning a certification motion on the grounds that a class action is not the most efficient way to go is considerably enhanced if they have an internal claims resolution process in place.

Take, for example, the Ombudsman for Banking Services and Investment (OBSI), a voluntary complaint processing system that the industry set up in 1996 when the feds were bouncing around the idea of a federal banking ombudsman. OBSI handled 468 complaints in 2007, an all-time high. It recommended compensation in 25% of banking cases and 61% of investment cases. The slow pace of resolution, however, has incurred the wrath of consumer advocates.

RBC, however, pulled its banking complaints out of OBSI this month, while leaving its investment complaints there. It moved its banking complaints to ADR Chambers, which will adjudicate appeals from RBC's internal ombudsman.

One of the reasons for RBC's withdrawal from OBSI is said to be the OBSI board's new terms of reference, which allow it to identify systemic problems and recommend compensation for all customers who are affected, rather than just the complainant. Sort of sounds like the type of claims resolution process a judge might note favourably when considering the most efficient way to deal with class action type complaints, doesn't it?

Plaintiffs counsel, take note.

Julius Melnitzer

[admin]

Anyone who lost money on the ABCP tainted investment crisis and did not recover all of it could and possibly should be investigating class action against your provincial securities commission.

Why?

Because thirteen provincial and territorial securites commissions granted permission to investment firms to knowingly break our securities laws and knowingly sell a tainted investment product to consumers.

Only by holding such persons accountable do we stop the constant abuse and predatory financial practices.

see press release below:

“The person who gave financial firms permission to break our securities laws and sell substandard financial investments to the public.”


“Is now employed at a self-regulatory agency and is pointing the finger at firms who sold these products.”


“She is the same person who signed the very documents granting legal exemption to these security laws.”


My name is Larry Elford. I am not making this up. Read on.
This release contains one Globe and Mail article, plus one comment at the end, and you will have the story.


http://www.theglobeandmail.com/servlet/ ... iness/home


Regulator says brokers failed on ABCP, sets new guidelines
JANET MCFARLAND
Globe and Mail Update
October 17, 2008 at 7:21 PM EDT
Canadian brokerage firms did little to review asset-backed commercial paper products before selling them to retail investors, according to a report by Canada's brokerage industry regulator.
The Investment Industry Regulatory Organization of Canada (IIROC) reported yesterday on a year-long compliance sweep of firms involved in selling non-bank ABCP to Canadian investors, laying out new guidelines to change the way investment firms review products before selling them to clients.
"There was very little understanding, generally speaking, of what this product really was all about," IIROC chief executive officer Susan Wolburgh Jenah said yesterday. She said brokerage firms reported they saw non-bank ABCP as little different from traditional commercial paper, even though IIROC concluded there were major risk differences.
The review concluded 76 per cent of the assets underlying non-bank ABCP were complex financial derivatives like synthetic collateralized debt obligations, whereas bank-sponsored ABCP had only three per cent of those types of derivatives and had 97 per cent traditional commercial paper assets like credit-card receivables. "The name asset-backed commercial paper was a misnomer. They were liability-backed," Ms. Wolburgh Jenah said.
The non-bank ABCP market collapsed in August, 2007, leaving investors holding about $35-billion of frozen notes, including 2,542 individuals with investments totalling $317-million. Many individuals were seniors or other risk-averse investors who reported they were assured ABCP was as safe as a bank GIC or other guaranteed product.
The report said none of the 21 Canadian brokerage firms that sold third-party ABCP to clients had reviewed the product through their internal due diligence process. Under such a process, committees assess whether new products are suitable for a firm to sell to corporate or retail clients.
IIROC said most firms reported they did not do due diligence reviews because they relied on the high credit rating the ABCP notes received from DBRS. Industry participants also reported they felt ABCP was a typical money market instrument that did not require risk assessment.
Bank-owned brokerage firms relied on reviews by their parent banks, the report added, but most of the reviews were done to establish credit and trading limits as part of financial risk control. Only one unidentified bank reviewed the product from a client suitability perspective and decided not to sell it. Toronto-Dominion Bank has previously disclosed it did not sell ABCP to clients.
IIROC said member firms that did not sell ABCP to clients reported they did not believe their clients would understand the product, or that there were simpler alternative products, or that there was little profit on the transactions. Indeed, the report said all dealer members who sold ABCP to retail investors reported the product was viewed as a "loss-leader" service to clients and not a profitable product.
No firms or brokers have been sanctioned by IIROC for selling ABCP to clients for whom it was not a suitable investment under the industry's know-your-client rules. Ms. Wolburgh Jenah said IIROC has not completed its reviews of complaints from clients.


Below is the comment from www.investoradvocates.ca :


(larry elford, from lethbridge alberta, Canada) wrote: Fascinating to see Ms. Wolburgh Jenah point the finger at Canadian Investment firms........."Canadian brokerage firms did little to review asset-backed commercial paper products before selling them to retail investors, according to a report by Canada's brokerage industry regulator"


I have in my hands two "exemptive relief" documents, signed by Ms. Wolburgh Jenah when she was vice chair of the Ontario Securities Commission. These permissions allowed major banks in Canada to sell these products to consumers without meeting our securities laws.


Perhaps it would be time for her to come forward, and explain why she granted these firms permission to break our laws with these products.


(see permissions to break our laws signed by Susan Wolbergh Jenah at:
http://www.osc.gov.on.ca/Regulation/Ord ... tdbank.jsp
and
http://www.osc.gov.on.ca/Regulation/Ord ... ntreal.jsp
and this one to CIBC signed by Paul Moore and Harold Hands of the OSC
http://www.osc.gov.on.ca/Regulation/Ord ... 1_cibc.jsp

By checking the OSC web page under orders, rulings and decisions, one can find several thousand permissions to break our laws granted by her or her colleagues at the securities commissions. A commission of inquiry is requested by investment professionals at investoradvocates.ca who find our financial laws a cruel joke at best, and criminal breach of trust at worst.

[admin]

Livent Co-Founders Liable For US$36M
Appeal Court Rules

Shannon Kari, Financial Post

Tuesday, July 29, 2008

The Ontario Court of Appeal has ruled that a US$36-million class-action judgment in the United States is enforceable against Garth Drabinsky and Myron Gottlieb.

The ruling upheld a lower court decision in Ontario and rejected arguments by the Livent Inc. co-founders that they could not properly defend the lawsuit in the United States because they are facing criminal charges in both countries.

"It cannot be that individuals such as the appellants can avoid civil liability for their misdeeds simply because they also face criminal charges in both jurisdictions. Such a result would be contrary to the principles of order and fairness," wrote Justice Susan Lang on behalf of a unanimous three-judge panel.

The decision is the fourth time a court in Canada or the United States has ruled against Mr. Drabinsky and Mr. Gottlieb in relation to the class-action lawsuit. David Roe buck, a lawyer representing Mr. Drabinksy, said he has instructions to seek leave to appeal the ruling to the Supreme Court of Canada.

The Supreme Court grants leave in only a very small percentage of cases. If it declines to hear the appeal, "the next step is enforcement of the judgment," said Jasmine Akbarali, a Toronto-based lawyer for the plaintiffs in the class-action lawsuit.

A court in New York state originally imposed the US$36-million civil judgment in 2004, which was upheld on appeal.

The class-action proceeding alleged there were misrepresentations in a 1997 registration statement with the U. S Securities and Exchange Commission concerning the distribution of unsecured notes. The statement was signed by Mr. Drabinsky and Mr. Gottlieb.

A year later, after the two co-founders were ousted from Livent by new management, the theatre company released restated results, which reduced its net income by US$85-million. It filed for bankruptcy protection and the unsecured notes were worthless, the Court of Appeal noted in its ruling.

Mr. Drabinsky and Mr. Gottlieb were charged with fraud in the United States in 1999 but they could not be extradited once they were charged in 2002 by Canadian authorities based on the same alleged criminal conduct.

The defence in the U. S. civil suit was that the Livent executives had "reasonable grounds" to believe the financial statements were true.

Mr. Drabinsky and Mr. Gottlieb claimed protection under the U. S. Fifth Amendment and refused to answer questions for the civil suit.

They argued that they were effectively prevented from testifying in the U. S. civil suit, because the evidence would have been used against them in the ongoing Canadian criminal proceeding. This argument was rejected by the Ontario Court of Appeal, which found that any U. S. testimony would likely have been excluded in Canada.

The ongoing Ontario Superior Court trial of Mr. Drabinsky and Mr. Gottlieb, who are each charged with three fraud-related counts, resumes on Aug. 12.

skari@nationalpost.com

[admin]

I just discovered a class action against provincial regulators and "bureaucrats" within the government and regulatory system regarding the matter of BSE or mad cow disease.

I makes me wonder if class action firms will one day recognize or analyze the failures and the well documented "worst practices" that are standard within our current Canadian financial services industry as well as those who police themselves as self-regulators in this industry.

The damages continue to add up, are estimated at $30 to $60 billion per year from bad practices and unresolved conflicts of interest.

Thankfully it is well enough documented that the case is not going away soon. I just hope that someone takes a look.

If anyone needs a starting spot, begin with several thousand legal exemptions granted to financial firms without public notice or public input. You, yourself probably own an investment or two that has been negatively affected by obtaining an exemption to our laws.
Drop us a note and I will help you get pointed in the right direction.

[admin]

further to the class actions ongoing against at least one bank for foreign exchange gouging in RRSP accounts..........I direct you to this web site with a funny commercial to describe the way it feels to be hit with these bank costs.......and a solution that allows the customer to be treated fairly.

Enjoy

http://www.questrade.com/trading/regist ... cials.aspx

[admin]

September 30, 2007

Consumers fighting back
Class-action lawsuits on rise as buyers let companies beware
By LINDA LEATHERDALE, TORONTO SUN

September 30, 2007

Cellphone companies, automakers and toy manufacturers have all been the targets of recent class-action lawsuits launched by consumers tired of being kicked around.
There's a Viking saying: Don't get mad, get even. And one way for the downtrodden to get even are class-action lawsuits.

There was a time when you never heard of consumers banning together to hire a pit-bull lawyer and go after Goliath. But lately, the legal confetti has been flying.

Some say the one who let the legal hounds out was Erin Brockovich, portrayed by Julia Roberts in the popular 2000 movie.

Brockovich, with now deceased pugnacious lawyer Edward Masry, took on the mighty Pacific Gas & Electric Co. in a toxic pollution suit and won an amazing $333 million US for 648 residents in Hinkley, Calif.

Some will argue this is nothing but pure greed. Win a lawsuit and you've won the litigation lottery. In other words, it's all about the money and not justice.

But Regina lawyer Tony Merchant, whose firm, The Merchant Group, is involved in a host of class-action suits across the country, says that's not true. Most just want fairness and they're tired of being kicked around.

"People have become conscious that they don't have to be kicked in the face over and over again," said Merchant, a former Saskatchewan MPP.

Bruce Cran, president of the Consumers Association of Canada, says weak consumer protection laws in Canada are forcing consumers into the courts to fight for fairness.

Cran says he's miffed there is no longer a separate consumer ministry in Ottawa to advocate for consumer rights. Instead, consumers are lumped into Industry Canada, which Cran says shows industry is in the driver's seat, not consumers. That's despite the fact that consumers account for two-thirds of Canada's economic health and wealth.

"When the election rolls around, consumers should be asking the parties if they'll insist on consumer representation in cabinet," Cran said.

Other consumer advocates complain lax competition laws and a watchdog with no bark or bite allow powerful oligopolies to bully the little consumer. And heaven help them if they complain.

To me, this is bullying at its height. Sprint Nextel axed up to 1,200 of its customers for calling customer service too often, and told them to switch to another wireless carrier. In other words, Sprint fired its own customers. Whatever happened to the customer comes first? And that's in the U.S., where there's plenty of competition.

GAUGING CUSTOMERS

Here in Canada, my boss -- Pierre Karl Peladeau, CEO of Quebecor Inc. -- complains that three dominant players in the wireless market are forcing customers to overpay for service.

"The Big 3 wireless players (Bell, Rogers and Telus) have a stranglehold on competition and on your wallet," Peladeau said in a recent speech to the Empire Club in Toronto. He backed up his accusations with charts and graphs showing Canadians pay some of the highest cellphone fees in the world, while our access to new technologies lags.

Industry insiders accuse Peladeau of having a personal axe to grind because he wants entry into the market and is seeking a next-generation wireless network in Quebec.

Meanwhile, anger over high cellphone fees has led to a class-action lawsuit handled by Merchant's law firm. The lawsuit, certified in Saskatchewan court, claims Canadian cellphone companies are profiteering by charging customers system-access fees over and above their regular fees.

Most companies charge system access fees of $6.95 a month and the lawsuit, which tackles all players in Canada, including Rogers, Telus and Bell, claims "unjust enrichment" because providers make the fees look like they are being charged by federal regulators or going to maintain the system, when they are really going to the companies' bottom line, Merchant said.

When the industry was in its infancy, system access fees were originally paid by the consumer to Industry Canada, explained a spokesman with the Canadian Wireless Telecommunication Association. But by the mid-1980s, cellphone companies became responsible for collecting the fees, while Industry Canada upped the licensing fees charged to companies.

It's estimated the companies pay $150 million a year for use of the airwaves. But Merchant estimates the companies make more than $1.2 billion a year by charging Canada's 15 million cellphone users the system access fee.

The lawsuit is valued at more than $12 billion, plus interest. None of the lawsuit's allegations have been proven in court.

Another class-action suit made headlines as our loonie zoomed to hit parity with the U.S. Greenback, sparking howls of complaints from Canadians that they were overpaying for many goods, including magazines, computers, greeting cards and cars.

REVVING UP FOR LAWSUIT

Toronto class-action law firm Juroviesky and Ricci filed a $2-billon suit, on behalf of four Toronto residents, who claim the auto industry conspired to inflate the price of automobiles in Canada in an effort to discourage cross-border shopping.

Named in the lawsuit are the Canadian and U.S. Divisions of General Motors, Honda, Nissan and Chrysler. Also named are automobile dealer associations in Canada and the U.S.

The suit covers consumers who bought cars between August 2005 and August 2007, as the Canadian dollar was gaining strength, and claims the defendants attempted to control and limit cross-border shopping by:

- Forcing consumers to sign "no export clauses."

- Failing to honour warranties purchased on the other side of the border.

- Penalizing dealers who sold vehicles and threatening dealers who didn't comply.

Again, none of these allegations have been proven in court.

The latest class-action lawsuit, now making headlines, is another suit by Merchant Law Group, this time targeting toymakers Mattel Canada Inc., U.S.-based Mattel Inc., and its subsidiary Fisher-Price Inc.

About 750 consumers have joined this legal battle and Merchant believes many more will join.

"We've been contacted by people from right across the country," he said.

The suit was sparked by the recall of more than 20 million made-in-China toys over the past two months, as exports from manufacturers came under scrutiny for high levels of lead and design defects.

In the statement of claim, the plaintiffs argue the toymakers "conducted themselves in a wilful, wonton and reckless manner," and accuses the defendants of unfair business practices in dealing with customers and the public.

No Mattel spokespeople were available for comment. And again, none of these allegations have been proven.

Merchant said these are only a few of the lawsuits swirling in Canada. Others deal with the GST, stocks and bonds, and even Agent Orange.

Go to www.merchantlaw.com or e-mail Merchant at tonymerchant@canada.com

"There is no risk to consumers to join in," Merchant said. "If we lose in the court, the law firm pays. But if we win, consumers stand to gain financially and be part of getting companies to do the right thing."

[admin]

With recent class actions announced against auto manufacturers or dealers for taking advantage of Canadian auto buyers for profit, it seems possible that similar action may be possible against Canadian financial service providers in the future.

Given strong evidence on issues like Canada's "world's highest" mutual funds fees, income trusts which some experts have called fraudulent "ponzi schemes", the made in Canada Asset Backed Commercial paper crisis which was designed to present huge risks to the buyers and huge returns to the sellers.............these plus a dozen other cases seem to suggest that the industry which promises Canadians a duty of care, and owes the client an obligation to place the client interests ahead of their own, may be on the hook for much larger amounts than the amount the CIBC paid out on ENRON. (that was $2.4 billion)

Some studies have placed the annual cost of financial abuse of Canadians by "trusted" financial firms and advisors, at between $30 billion and $60 billion per year.

[Stan Buell]

SIPA made a joint presentation with the united Senior Citizens of Ontario to the Ontario Standing Committee on Justice Policy at the Ontario Legislature. However it apparently had little impact on the committee as the legislation was passed without revision to the reduced limitation periods from six years to two years.

SIPA received an e-mail from a small investors that had been submitted to the Committee and a copy was forwarded by the clerk to all members. The message has been filed as a public document but has not been published in any reports. I wonder how many significant comments are buried in this fashion.

I was impressed by Fred's message and fell that concerned citizens need to know there are many who are trying to make a difference. The reason we created SIPA was to try to provide a vehicle for concerned citizens to get together to work co-operatively to make changes for the better.

Here then is Fred's letter:

From: Fred Scholl [mailto:fredscholl@sympatico.ca]
Sent: Monday, April 24, 2006 8:02 AM
To: Freedman, Lisa
Subject: Bill 14, Access to Justice Act, 2006

Dear Madam,

Thank you for giving me this opportunity to express my thoughts on the subject of reducing the limitation period to 2 years.

Strictly speaking based on my personal experiences with the Canadian investment industry, I have to state that a 2 years limitation period in my case would not have been sufficient. I never pursued matters with two major Canadian financial institutions that to my mind were totally disinterested in my financial wellbeing, but strictly focused on maximising their revenues to the detriment of my financial wellbeing (my retirement funds, that I had managed to accumulate over 40 years). Statements in their ‘sales pitch’ were blatently false and misleading.

My source of information were the institutions that I was dealing with. I had no knowledge that an OSC or IDA even existed.

The OSC was brought to my attention by the ‘investment advisor’ of the brokerage arm of the second Canadian bank that I was dealing with. He stated, that I needed to hire a lawyer to address complaints and deal with the OSC. No mention at all of an IDA. It took me more then 2 years to even find out that they existed. Nowadays probably the public is more aware of the IDA due to their lobbying the former minister of finance the day of the announcement on Income Trusts.

The process for an uninformed investor (I at the time) is complex.

To begin with, the second bank sent me prospectuses on the mutual funds I had purchased through them about 1 month after the fact (4 separate envelopes of prospectuses, all received the same date – 1 month after the fact). Only then did I become fully aware of what I had purchased and the fees involved (penalties for early redemption, etc.).

Of course I cannot be sure that this was done on purpose, in order to prevent the lodging of a timely complaint. However it appears strange, that the post office would delay delivery of 4 separate envelopes.

In the end, I decided to write the whole sorry mess off to very bad personal judgement (trusting the Canadian financial industry).

Recently I did read in a financial publication an analysis by a ‘financial advisor’ (true professional, working based on fees. Not one of those people calling themselves ‘financial advisors’, but peddling specific mutual funds). She had examined a family’s investment structure. I immediately recognized, that the institution that family was dealing with, was the same firm I had been dealing with (same funds, same sales pitch, etc. probably the firm had some special incentive arrangement with those funds). No mention of the name of this fine institution, a cornerstone of Canadian society.

The conclusion of the professional was that their ‘investments’ were totally wrong for this family’s circumstances. The fees were enormous to boot. With authority of her client, she contacted the financial institutions to be informed, that they had no further interest in that account, requesting that the account be closed immediately, refusing to provide further information.

What I did find even more interesting is a brief follow up article in their next publication. They were astonished as to how much correspondence they had received from people stating that the family the article had covered must have been them Like I, such people immediately had recognized the institution involved (still no mention of the name of the institution), with identical negative results of their ‘investments’ (except fees of course).

I have closed the chapter on this unpleasant episode of my life. While I do blame myself for having been so trusting and blinded by a perception of honesty/integrity of well recognized Canadian financial institutions, I now trust no one. Now I do fully comprehend how this industry operates and how highly protected this industry is by Government. Unfortunately it was the most expensive lesson of my life at a time when I could least afford it (in retirement), no longer having the ability to make up for such losses.

Kind regards,

Fred

PS – I do not hold any income trusts due to my inability to figure out from their financial statements where the ‘distributable cash’ comes from.

When I did see one income trust come to market, my reaction was ‘you must be kidding me’. I lived in that province for 5 years. This firm constantly was in the local news. Labour disputes (strikes), bankruptcy, Provincial Government subsidies to keep this thing going. Complete closure was considered by Government as a possible option. Eventually sold to a Dutch company by the Province for peanuts, hailed at the time as a major coup, the Province no longer having to pump large sums of taxpayers money into this to keep it going.

THAT company being sold as an income trust to Canadian seniors/retirees ‘steady, predictable flow of revenue???’

Much must have changed over the past years. Their share price does not appear to support that theory, dropping like a rock. According to my calculations, well over 100 Million already has been wiped out of investment moneys.

I know, I know, not the responsibility of regulators. Investors are expected to exercise ‘due diligence’. The change in company name might hinder such efforts somewhat. (Or is ‘due diligence’ the responsibility of the financial institution, who’s ‘investment advisors’ sold this firm to seniors/retirees for the purpose of steady/predictable cash flow?

Well, no worry, reducing the period for possible claims to 2 years has tidied up possible liability in that area very nicely for such institutions – thank you.). Likely you do not recognize the firm I am referring to, not being in the news very much and you not having lived in that Province.

Hopefully that will be the case in years to come. I sincerely wish my perceptions are wrong, in the interest of those seniors/retirees that have invested hundreds of millions of Dollars into this.

One last, however, important point. I am certain, that there are many honest/competent people employed in the Canadian investment industry.

I simply have not found one (nor am I looking). There is no way for me to be reasonably sure that I can find one, as present status of self regulation (read unregulated) permits for honest and dishonest people to equally flourish side by side.

It took me probably 5 years to figure out what my options are in dealing with disputes. To then speak with a lawyer to be represented, I would think that a 10 years limitation period would be more realistic.

Keep in mind that the ‘investment public’ is not a firm, supported by qualified accountants, lawyers to detect wrongdoings. It takes a while to even figure out that wrongdoings did take place. Like I, many investors probably end up blaming themselves, for having put so much trust in the Canadian financial industry.

The Corporate Culture has changed in the Canadian financial industry. It appears to be all about maximizing revenue, large legal staff in order to ‘squash’ complaints, limiting/containing possible liability, lobbying Government in order to promote self interest.

In my opinion, no longer a business model based on honesty/integrity.

Just takes a while for that fact to sink in.

[urquhart]

The details of this class action lawsuit are at:
www.rrspclassaction.com

This case is relevant since it alleges that a Canadian bank-owned dealer failed to act in the interests of its RRSP, RRIF and RESP investing clients. The bank is alleged to have completed unnecessary foreign currency conversions into and out of Canadian dollars. Hidden fees of 3% plus were charged on reinvestment of sale proceeds, dividends and interest into securities of the same foreign currency. Foreign to Canadian currency and Canadian to foreign currency conversions were being done even where there was immediate reinvestment into a foreign security into another foreign security of the same foreign currency. The RRSP, RRIF and RESP investing clients are alleged not to have been informed and did not give approval for these foreign currency transactions.

CASE SUMMARY

This proposed class action was commenced on August 2, 2006. It is brought by James R. MacDonald on behalf of a class of individuals against BMO Nesbitt Burns Inc., BMO Trust Company and BMO Bank of Montreal in respect of foreign exchange transactions in RRSP, RRIF and RESP accounts.

The proposed class includes all present and former clients of the defendants who held or hold RRSP(s), RRIF(s) or RESP(s) and who, since June 14, 2001, have incurred foreign currency conversion charges in these accounts.

The statement of claim alleges that the defendants have systematically converted foreign currency in these accounts to Canadian currency without instructions from the customers, and without there being any need to do so, based upon revisions to the Income Tax Act which came into effect on June 14, 2001. Also, in effecting all currency conversions, the defendants levy an undisclosed conversion fee in addition to the amount that they actually pay to buy or sell currency. The claim alleges that the defendants failed to change their operational practices after the June 14, 2001 change to the Income Tax Act which allows RRSPs, RRIFs and RESPs to hold foreign currency as an investment, and further alleges that the reason for the defendants’ failure to effect a change was so that they could continue to earn profits from the foreign exchange fees, at the expense of the class members.

The claim seeks damages for all the fees charged in association with the unauthorized conversion of foreign currency to Canadian funds during the claim period. It also seeks repayment of all the hidden foreign exchange fees levied by the defendants on transactions where the customer did authorize a conversion of funds from Canadian to a foreign currency; but had no notice and did not agree to payment of the hidden fee. Each time a foreign exchange fee is charged by the defendants it depletes the funds in the customer’s retirement or education fund.