Financial Abuse by "Trusted Professionals"

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Postby admin » Thu Sep 22, 2005 9:45 pm

New York Times


September 22, 2005
Hospitals See Possible Conflict for Doctors on Medical Devices
As an assistant professor at the Louisiana State University Health Sciences Center in Shreveport, Dr. William Overdyke oversaw operations to replace worn-down knees. From 2000 through the middle of 2001, whenever a patient needed an artificial knee, he or the residents he supervised implanted one made by Sulzer Medical, state documents show.

Dr. Overdyke has said that he used the Sulzer implant because it was the best available. But Louisiana state officials say he had another incentive as well: the $175,000 a year that he stood to make from contracts with the company. The contracts called for him to consult on product design and "promote and educate other surgeons" on the virtues of Sulzer products.

Before signing with Sulzer, Dr. Overdyke said, he had never used the company's artificial knee. Earlier he had a contract with another company, Wright Medical. And during that time, he and his residents largely used Wright's artificial knees.

Dr. Overdyke paid $10,000 in fines after investigators determined that his consulting arrangements with Sulzer were an improper conflict of interest under the state ethics code. Hospital officials said they had been unaware of his relationship with the company.

Yet in a variety of ways, many doctors have unusually close, if largely unseen, ties to device makers. And those relationships are a central issue on an emerging battleground in the health care wars: the upward cost spiral of implantable medical devices.

Countless patients have been helped by these new technologies - artificial knees that allow aging weekend athletes to play on, stents that help keep once-clogged arteries clear, defibrillators that correct potentially fatal heart arrhythmias.

But the rising cost of the devices and the relationships between doctors and manufacturers are causing profound concern among hospital executives, health care economists and other experts, mirroring recent reactions to the way pharmaceuticals are marketed. In the last two years, Medicare payments to hospitals for implant surgery have risen about 40 percent, from $10 billion to $14 billion, according to an analysis of Medicare records. And federal prosecutors have begun to investigate some device makers' deals with doctors, trying to determine if they amount to payoffs for using a product.

Among the loudest objectors have been hospitals, which buy the devices and most immediately feel the pain. But health care economists stress that consumers and insurers are also hurt by the rising cost of medical technology, including implantable devices.

"We're paying for it, but no one can see it," said Paul Ginsburg, president of the Center for Studying Health System Change, a research group in Washington.

The device companies occupy a privileged corner of the medical economy, where many of the checks and balances that have come to govern health care costs simply do not apply. Hospital officials and health care experts say the companies have used their relationships with doctors and a climate of secrecy to ensure that their products remain unusually profitable.

Central to this equation are the surgeons, who typically decide which devices are used yet bear no financial burden for their costs. Hospitals, which do bear that burden, have been reluctant to challenge doctors about their choices and are mostly in the dark about the inner workings of the marketplace. One large device company, Guidant, has even sued two hospital consultants because they divulged pricing information to competing hospitals.

Prices paid by hospitals vary widely, yet information is so scarce that hospitals say they are often unaware if they are overpaying, and impotent to negotiate a better price. Many hospital executives say some orthopedic and cardiovascular operations, once a major profit center, have become a marginal, even money-losing, endeavor.

Nor do the hospitals generally know which of their doctors have relationships with the device companies and if so, the details of those arrangements. In addition to six-figure consulting agreements that also pay doctors to promote a given device, companies pay royalties on new devices, send doctors to educational conferences, sponsor fellowships and provide unrestricted grants.

The device companies' trade association, AdvaMed, says the industry is highly competitive and spends heavily on innovation. As for the consulting contracts and other benefits, the companies and doctors say they are intended not to buy loyalty but to pay for research and training and for the help doctors provide in designing these sophisticated devices.

A Potential Conflict

Two years ago, AdvaMed approved a voluntary code of ethics that recommends limiting the value of company gifts to under $100 and hiring consulting doctors for their expertise, rather than their abilities to generate the most business.

"If there have been inappropriate payments made, I think companies regret that, and that's why they have been aggressive in implementing this code of ethics," said Blair Childs, an AdvaMed executive vice president.

The president of the American Academy of Orthopedic Surgeons, Dr. Stuart L. Weinstein, says that since doctors are responsible for most of the innovations in medical devices, "There have to be these close relationships between surgeons and industry." What is important, he adds, is that these relationships are aboveboard and disclosed to the patient, and that the doctor chooses the best device for that patient.

In March, the United States attorney in Newark issued subpoenas to five orthopedic implant companies, asking them about their consulting agreements and other arrangements with doctors. "A number of investigations are under way," said Lewis Morris, chief counsel to the inspector general for the Department of Health and Human Services.

The question for investigators, he said, is whether the companies and the doctors have crossed a line from legitimate compensation for valuable services rendered in the development of the devices to unethical payoffs for securing competitive advantage in a crowded marketplace.

"The potential for inappropriately steering medical decisions is always at play, and there is always the risk that doctors will prescribe a particular device because of their own financial interest and not the interest of the patient," Mr. Morris said.

In the modern health care marketplace, prices and fees are increasingly determined by negotiation. Yet when it comes to implantable devices, that dynamic often barely exists. Even though the Lee Memorial Health System in Florida is one of the nation's busiest joint replacement centers, James R. Nathan, the system's chief executive, says he has little leverage negotiating discounts. The marketplace, he says, "doesn't work."

Part of the blame lies with the hospitals, which often seem to lack the financial sophistication needed to negotiate lower prices for these devices. While hospitals have been successful at cutting costs for standard supplies like light bulbs and bandages, many hospitals' accounting systems are so inadequate that they have little idea what they actually pay for more complex devices, said Dr. John Cherf, a knee surgeon with a business degree who consults with hospitals and health care businesses.

With manufacturers guarding pricing information closely, the price of a given device can vary by thousands of dollars from one hospital to the next. One hospital in the New York area, for example, paid $8,000 more for a DePuy hip than a competitor, according to a recent survey by the Greater New York Hospital Association.

"It's almost been a black box around it, what people pay," said Timothy Glennon, an executive with the association, which is now examining prices for cardiac implants.

Prices are soaring. A defibrillator now runs as much as $35,000; the price of the latest artificial knee approaches $10,000. A single screw used in spinal surgery can cost as much as $1,600. In all, in the last two years alone, spending on implant surgeries by Medicare, the federal insurer for the elderly, increased twice as fast as the program's spending over all, according to the Medicare analysis by Orthopedic Network News, an industry newsletter.

Rising prices have made device companies unusually profitable: according to an analysis by Medicare, they enjoyed net profit margins of nearly 20 percent at the end of 2003, more than twice the average for the Standard & Poor's index of 500 companies.

The hospitals, though, say they are finding themselves squeezed, as rising costs outstrip any increases in reimbursement. While the average price paid for a hip or knee implant has climbed by about two thirds since 1995, according to estimates by Orthopedic Network News, reimbursement from Medicare, which pays for the bulk of these operations, has not increased.

Hospital officials also argue that the constant introduction of new, and more expensive, models can have less to do with innovation than with the appearance of innovation. While some higher prices are a result of clear improvements, like a drug-coated stent that helps reduce scarring that can block an artery, hospitals say many new models offer no significant upgrades and sometimes are too sophisticated for patients who get them.

Dr. Calvin Weisberger, a cardiologist for the California health plan Kaiser Permanente, says an enhanced single chamber defibrillator costs $5,000 to $8,000 more than a basic model. "The average patient does not need all of the bells and whistles," said Dr. Weisberger, who helps the plan's doctors and hospitals evaluate new devices.

Asked about the range of prices, the companies say it reflects a variety of business considerations, including volume. And Mr. Childs, the executive with the device-makers' trade group AdvaMed, argues that the hospitals' overall costs have not gone up significantly, because improvements in these devices let doctors operate faster and patients go home sooner. Medicare payments largely reflect the hospitals' overall costs, he said.

Doctors, Mr. Childs says, do consider price when choosing implants. "Physicians are a very discriminating customer," he said. "It's not like you're selling to a bunch of stooges."

For the device companies, the most important relationship is with the doctors, and they spend considerable money and energy nurturing it. "The vendors work hard at these relationships," said Ed Epperson, chief executive of Carson-Tahoe Hospital in Nevada. The extent and precise nature of the relationships remain largely hidden. The companies and doctors are unwilling to discuss specific arrangements. Hospitals are often unaware of them, because the doctors using their operating rooms and admitting patients are usually not employees. Even academic medical centers may require the disclosure of financial ties only if a doctor is conducting a clinical trial.

Financial Ties

Even so, a range of relationships begins to emerge from a review of published research, court papers and other government documents. And perhaps the clearest available view comes from the case of Dr. Overdyke in Louisiana.

Dr. Overdyke had been a consultant for Wright Medical, which paid him $150,000 to $200,000 annually, according to his deposition. His arrangement ended in 1998, and he soon became involved with Sulzer; at about the same time, a distributor to the hospital, MD Medical, also changed its representation to Sulzer. A founder of MD Medical later became Dr. Overdyke's wife.

The contract with Sulzer paid Dr. Overdyke $75,000 a year to consult on the design of two products, including a refinement on one of its Apollo knee systems, and to "promote and educate other surgeons on the benefits" of these devices. He also signed two royalty agreements in 2001, each providing advances of $50,000 a year on products not yet being marketed.

Over two years, the state university spent nearly $200,000 on Sulzer orthopedic products. Dr. Overdyke said he never told the residents which brand to use. Asked why the residents chose Sulzer, he replied, "You'll have to ask them."

Dr. Overdyke was never accused of directly profiting from using Sulzer implants. But the hospital says his ties to Sulzer represented a clear conflict of interest under Louisiana ethics laws, which forbid state employees from doing business with companies with which they have financial ties. He left the hospital in 2001; the hospital says it did not renew his contract for reasons unrelated to his relationship with Sulzer.

Dr. Overdyke and his wife declined to discuss the case, their lawyer said; Zimmer, which has since bought Sulzer's business, also declined to comment. But the counsel for the state ethics board, R. Gray Sexton, said the case "involved conditions routinely tolerated" in private hospitals across the nation.

Mr. Epperson, the Nevada hospital executive, says he sees some parallels to the practices employed by pharmaceutical companies, which have been criticized by consumer groups and regulators for trying to influence doctors with a variety of benefits.

In addition to consulting and royalty agreements, the device companies send doctors to educational conferences about their latest models. They provide financing to medical associations. DePuy, a unit of Johnson & Johnson, paid for a one-year foot and ankle fellowship at the University of Virginia Health System and financed a Web site for an orthopedic surgeon in Tulsa, Okla.

A DePuy spokeswoman said these payments helped educate surgeons and patients. Indeed, the device companies say their relationships with doctors differ from the drug makers' because the surgeons are intimately involved in perfecting new devices and techniques. The companies finance much of the clinical research in the field. And while a general practitioner may not need to go to Europe for a meeting on the latest painkiller, a surgeon using an artificial spinal disk for the first time may need training in how to implant it.

Still, hospitals say that the closeness of these relationships makes it almost impossible to enlist the physicians in the battle for better prices. Dr. Cherf, the knee surgeon, says the device industry has "done a brilliant job" exploiting the erosion of the traditional alliance between hospital and doctor. At the same time, hospital administrators and consultants say hospitals often hesitate to question surgeons' decisions, since the doctors are a main source of patients and revenue.

One hospital that did protest was Grant Medical Center in Columbus, Ohio, which in 2003 sued Biomet and one of its distributors, saying the distributor had tried to take advantage of an important orthopedic surgeon's insistence on using Biomet's implants.

The surgeon, Dr. Adolph V. Lombardi Jr., performed about 1,200 joint replacements a year at the hospital, according to the lawsuit. Grant Medical said the distributor had offered an ultimatum: pay 35 percent more or purchase a service agreement worth several hundred thousand dollars.

While the lawsuit noted that Dr. Lombardi was conducting a clinical trial for Biomet, he also has financial ties to the company. He was a consultant and received royalties from Biomet, according to a 2004 disclosure statement. The foundation for a new hospital that he helped start owned $318,000 in Biomet stock, the foundation's 2003 public filing showed.

The case was settled; Dr. Lombardi, the hospital, company and distributor all declined to comment.

There is another central figure helping cement the company-doctor relationship: the sales representative. Because hospitals cannot afford to purchase the devices ahead of time, the representatives are often present during operations, sometimes helping the surgeon decide which implant to use.

Many hospital executives see that operating-room role as a potential conflict of interest, since the representative has every incentive to push the most sophisticated, and expensive, device. The representatives work on commission - as much as 10 to 20 percent - and can make as much, if not more, from an operation than the surgeon, industry consultants say. Representatives frequently make several hundred thousand dollars a year.

One former salesman said that to encourage a surgeon's loyalty, he used to pay the doctor's assistant $200 a case. "It was a bonus they didn't have to pay with their money," said the representative, who insisted on not being identified because he still works in the industry and fears retribution.

A Rebellion Develops

The Justice Department's investigation is seeking to determine if some of the companies' agreements violate federal laws barring doctors from being paid directly by device makers for using a certain implant. People in the industry said they believed that prosecutors were assessing whether doctors who were paid most under these arrangements were also the heaviest users of a company's implants.

Federal authorities had already been looking into sales practices at Medtronic's Sofamor Danek unit, which sells spinal implants. Now the inquiry has broadened to much of the orthopedic-implant industry, with the subpoenas to Stryker, Johnson & Johnson's DePuy unit, Zimmer, Biomet and Smith & Nephew. The companies say they are cooperating.

A rebellion has begun on several fronts.

Some hospitals are trying to align their interests more closely with those of their doctors. Some have begun meeting with doctors to decide which devices to buy. Others are discussing sharing savings from more efficient purchasing; HCA, the nation's largest for-profit hospital chain, is seeking federal approval for a plan to give its orthopedic surgeons 10 percent to 20 percent of such savings.

The device companies oppose this kind of arrangement, saying it could present an improper financial incentive to choose a certain device. "I want to know my doctor is my advocate," said Mr. Childs, the trade association executive.

The hospital industry says that one essential factor for ending the cost spiral is the free exchange of information about prices. Some hospitals are relying on consultants like Amerinet and MedAssets, which provide information about what other hospitals are paying.

"These are life-saving devices; America needs them," said John A. Bardis, MedAssets' chief executive. "But we don't need the business practices, which prevent transparency and true price competition."

These efforts at transparency are drawing fierce resistance. A major device maker, Guidant, has sued two consultants, including a unit of MedAssets, accusing them of sharing confidential price information. MedAssets countersued, saying Guidant has tried to buy doctors' loyalty through consulting agreements and other inducements.

Each has denied the other's charges. The suit against the second consultant, Byrne Healthcare, has been settled.

With the Justice Department's inquiry looming, some people in the industry say change is inevitable. "It's a broken system," said DeNene Cofield, the administrator who oversees surgical services for Medical Center East in Birmingham, Ala. "And at some point, it will fall apart."

Walt Bogdanich contributed reporting for this article.
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Ernie Wotton tells Senate Committee how it really is

Postby admin » Tue Aug 16, 2005 11:48 am


The Chair: I would call on Ernest Wotton to come forward, please. Good afternoon. You have 10 minutes for your presentation. You may allow time within that 10 minutes for questions, if you wish. I would ask you to state your name for our recording Hansard.

Mr Ernest Wotton: Thank you, Mr Chairman. My name is Ernest Wotton. I know nothing about finance. I am by trade a lighting designer. I'm a fellow of four professional organizations. I have practised in Canada, in the United States and in the UK. I have taught my trade at leading schools of architecture across North America. I am 83.

In July 1999, I wrote to the Honourable Dalton McGuinty, then the Leader of the Opposition, saying:

"Not so long ago when you retired you received your `50 year' pin and a pension. Today you receive neither. Nobody expects to spend a working life with the same employer. Instead, one changes frequently.

"These frequent changes mean that you have to make your own arrangement for a pension. If, like most people, you know little about financial matters, you put the money you have set aside for a pension in the hands of a financial adviser.

"Suppose that your financial adviser does not invest in line with your instruction and you lose money. You may spend months in fruitless discussion with the adviser in an effort to obtain reimbursement."

My letter to Mr McGuinty, written over five years ago, did not end there. I will return to it in a moment. It begins when, in February 1995, my wife and I took a bundle of very solid securities and cash to a financial adviser employed by a leading investment firm. We asked him to manage an account for us.

As I said, I know nothing about managing money, but I can read a graph. The mid-1990s were a boom time for investment, yet a downward slope appeared in the graph of our portfolio. Every monthly statement from the investment firm directed its clients to make contact with their financial adviser if they had any questions. Accordingly, I wrote to our financial adviser and said that the downward trend in the value of our portfolio was a cause for concern. He stated that our portfolio was healthy. He also confirmed specifically that a particular security I named was healthy.

Then three things happened. Our adviser left the firm, the particular security became junk and the investment firm wrote that as we had written to our financial adviser, in line, you will have noticed, with the instructions on the monthly account, it "had no responsibility for" our financial adviser's statement "that the portfolio was healthy."


I will not even try to outline my effort to obtain compensation. My correspondence occupies two binders, each three and a half inches thick. Some of the replies from the investment firm were marked "sub judice." I got no reply when I asked what this implied.

I drew to the attention of the president that his firm's newsletter referred to "the superb returns enjoyed over the past few years," and asked why I had not taken part in that bounty. The president wrote, "We remain committed to serving you with the best possible advice [and to] building strong relationships with our clients," but he omitted to send a cheque.

Meanwhile, I scouted for other ways to obtain restitution. I mentioned my letter to Mr McGuinty. He referred me to the Ontario Securities Commission, as did the Ministry of Finance. The OSC referred me to the Investment Dealers Association. From the time I wrote to the OSC, in line with the advice from Queen's Park, until the IDA hearing into what it referred to as "the matter," three years and seven months had passed. I learned that a number of other investors had also complained against our financial adviser. I was surprised, therefore, when IDA concluded that he had been correctly supervised.

At this point in my story my wife and I had been unable to get compensation for the enormous loss in our investment, and we were unable to take part in the arbitration process set up by IDA since our complaint fell outside its terms of reference. But the Ontario Ombudsman told me of the Ombudsman for Banking Services and Investments. Richard Bright of OBSI interviewed me and my wife and subsequently submitted his report to an arbitrator. We were awarded about 60% of our loss. Mr Bright's report identified a number of examples of investments obviously made without due diligence, yet they had eluded the investment firm.

May I summarize my conclusions arising from this sad recital of facts:

(1) An investment firm will not conduct a rigorous investigation into a complaint against its staff.

(2) An investment firm will use its enormous clout, including the use of legal terms in everyday correspondence, to wear down an investor, particularly the vulnerable.

(3) The provincial government has delegated to OSC its authority to protect investors from unfair or improper practices without ensuring that this authority is being exercised.

(4) OSC has delegated to IDA its authority to investigate complaints against financial advisers without ensuring that those investigations are swiftly and competently carried out.

(5) Neither OSC nor IDA has assumed the responsibility for ensuring that investors are compensated for their losses from investments carried out without due diligence. Instead, both OSC and IDA recommend that the investor take legal advice. OSC has stated that the average fee for legal advice is $37,500. This is far beyond anything many investors, particularly elderly investors, can afford.

(6) The March 21, 2003, review of the Securities Act of Ontario does not address the above issues.

(7) No investor, particularly the vulnerable, should have to go through the trouble and worry I had to go through, and that extended over eight years, in order to obtain relief.

In April 2002, the OSC mounted an investor education conference. About 100 delegates took part, representing 40 user groups. They broke into spontaneous applause only once: when a journalist member of a discussion panel stated, "The system is very wrong when one has to go to court for restitution. There must be another way. Companies must hold their employees accountable. Clients come first."

I was there. I noted this remark. I ask, Mr Chair, that you give it your urgent consideration. Thank you for your time.

The Chair: Thank you for your submission today. Regrettably, there is no time left for questions.
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Postby admin » Tue Aug 16, 2005 11:45 am

One man's quest for redress ends happily


Thursday, May 27, 2004

Justice for people who were burned by their investment advisers is such a rare commodity that it's worth celebrating even a single victory.

So, let's take a look at the story of Ernest Wotton and the cheque for $52,353 that his onetime brokerage firm wrote him not too long ago.

Mr. Wotton was the subject of a November, 2001, column about the need for a national ombudsman to help people wronged by the financial services industry get restitution. In 2002, just such an organization evolved -- the Ombudsman for Banking Services and Investments, or OBSI.

OBSI has been criticized in this space for siding against investors too often in its investigations, but there's no question the agency represented Mr. Wotton's interests in a way that no one else did.

"Without OBSI, I would have got nothing, absolutely nothing," said Mr. Wotton, 83, a lighting consultant and designer who is working on the refurbishing of the Library of Parliament in Ottawa. "If things blow up, don't waste time asking politicians, the Investment Dealers Association or the provincial securities commission to resolve the issue for you. As far as I'm concerned, OBSI fills a gap."

His story begins in February, 1995, when he and his wife engaged an investment adviser he'd met socially to take over the running of a portfolio that included such blue- chip stocks as Bank of Montreal, MacMillan Bloedel, Molson, Rothmans and Gulf Canada, as well as a Province of Ontario bond yielding about 9 per cent.

Mr. Wotton recalls the adviser saying he would "rationalize" the portfolio, a term that turned out to mean selling some blue chips and buying speculative investments, which plunged in value. He also sold the Ontario bond and purchased a much lower-yielding Ontario Hydro issue.

How all this fit into Mr. Wotton's stated objective of investing "conservatively for steady growth over a longish period -- say five to 10 years" -- is a mystery. Mr. Wotton's adviser died in late 2002 and his employer never acknowledged that he did anything untoward.

Mr. Wotton's efforts to get someone to help him recover these losses was almost Sisyphean, except that Sisyphus got the rock up the mountain every once in a while. As Mr. Wotton recalls, several politicians he contacted directed him to the Ontario Securities Commission, while the OSC suggested he call a lawyer. He felt he couldn't afford a lawyer, so he continued his quest for justice.

He tried the Investment Dealers Association of Canada, which interviewed him about his adviser but then never followed up with anything definitive. Eventually, someone referred him to OBSI, which was set up to provide a court of last resort for people with disputes against banks, brokers and investment advisers.

At OBSI, his file landed in the hands of senior investigator Richard Bright, a former bank and credit union executive with experience as an investment adviser.

"I was very taken by Mr. Bright's professionalism," Mr. Wotton said. "I thought that he asked the rights questions, and that he put together a first-class report from the interview and information I put before him."

Mr. Bright's report dispassionately lists the senseless manoeuvring of the broker handling the portfolio. In one case, a Government of Canada and an Ontario bond, each paying about 9 per cent a year, were sold and a portion of the proceeds was invested in a convertible debenture issued by a speculative mining play called William Resources. The debenture was sold eventually for a capital loss of almost $25,000.

The final report prepared by Mr. Bright pegged Mr. Wotton's losses at $46,360, which grew to $52,353 after interest. OBSI recommended that his brokerage house write him a cheque for this amount -- and that's what happened.

He didn't get back all the money he lost. When setting up his account with his adviser, he indicated that he wanted 10 per cent of his portfolio in speculative investments. The OBSI report didn't recommend he be compensated for losses related to the speculative part of his portfolio.

"It's not 100 per cent, but it's better than what was coming our way before," Mr. Wotton said of his settlement.

What do you do if you're in Mr. Wotton's position of having an investment adviser cost you money through bad advice or service? Call the adviser's branch manager first, and then maybe the firm's compliance department. If you're dealing with a bank-owned firm, you can also take your complaint to the bank's own ombudsman.

Should you be told that your adviser did nothing wrong, and this is all but certain, your next steps are to look at options that include the arbitration plan offered by the IDA, hiring a lawyer or going to OBSI.

Mr. Wotton's advice after more than six years of phone calls and letter writing? "You have to be bloody-minded," he said. "Also, stay alive and learn to type."
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Ernie Wotton, 80 yrs old

Postby admin » Tue Aug 16, 2005 11:43 am

Financial services consumers need a court of last resort
Thursday, November 08, 2001
By Rob Carrick

For the sake of the Ernest Wottons of this world, we need a national ombudsman for consumers wronged by the financial services industry.
Mr. Wotton has been fighting an utterly hopeless battle to recover losses caused by a stockbroker who mismanaged his portfolio. Picture a highly conservative investor in his mid-70s having his blue-chip stocks dumped in favour of penny mining stocks and you get the idea.

The Wotton case is a perfect example of why we need a financial services ombudsman to handle complaints from all areas of the financial world -- brokerages, banks, credit unions, insurance and mutual fund sales.

Regulators from these sectors are trying to find a way to make a unified ombudsman's office fly. They've formed a study group, but nothing concrete has emerged yet.

There are lots of reasons for this initiative to fall by the wayside, but none of them are acceptable. Failure is a poke in the eye of consumers like Mr. Wotton.

Let me introduce you to Mr. Wotton. He's an 80-year-old Toronto man who, on the telephone, sounds something like Alfred Hitchcock. A lighting consultant and designer who is active in business, Mr. Wotton counts the Library of Parliament among his clients.

In 1995, Mr. Wotton and his wife set up an account with a broker they met socially. They added some cash to the new account, as well as some shares they'd accumulated in companies such as Bank of Montreal.

The broker got down to business by selling some of Mr. Wotton's existing holdings and buying stocks such as William Resources (now William Multi-Tech) and Durkin Hayes Publishing, an audio-cassette producer that is now called Imark Corp. Both stocks trade in the sub-$1 zone, an indication that they're laughably inappropriate for the portfolio of someone with Mr. Wotton's profile.

All told, Mr. Wotton's portfolio fell by about one-third between the end of 1996 and mid-2001, a time of huge gains for the stock market. "An accountant I spoke to told me you'd have to work hard to lose money during that period," he said.

Mr. Wotton says he has been informed that his broker is being investigated by the Investment Dealers Association of Canada, but never mind that. While the IDA can punish this individual, it has no mandate to get any of Mr. Wotton's money back.

This explains all the letters and phone calls made by Mr. Wotton to find someone who can help recover his losses. All he has to show for three years' worth of effort is a fat file containing copies of his correspondence.

"I put the file on the kitchen scales and there's so much bumf in there that it weighs 10 pounds," he says.

It should be noted that the IDA sponsors an arbitration plan through which small investors can have their case decided on by an independent arbitrator. One of the problems with this process is that it won't accept complaints that predate the arbitration's start date of June 30, 1998 (in Ontario; start dates differ in other provinces).

That rules out Mr. Wotton. His only other alternative: launch a legal action that quite likely would cost tens of thousands of dollars.

A properly run ombudsman's office would investigate Mr. Wotton's complaint (yes, it would look at incidents that happened before its inception) and then order redress if warranted. There's already a model for this -- the Canadian Banking Ombudsman, which quietly but effectively acts as a court of last resort for people with a complaint against their banks.

The federal government intends to revamp the banking ombudsman, but it's holding off until it sees whether there is a credible plan to create a one-stop complaint window for all financial services.

While financial regulators ponder this idea, Mr. Wotton wanders through a landscape of people who either aren't interested in helping him, or who want to do something but have no clout.

His odyssey started, as it should have, with his brokerage firm. "I got in touch with eight or nine people at the company and at no time did anybody sit down and say, now look, let's try and sort this out."

Next, he went to the Ontario Securities Commission, which punted his complaint over to the IDA after several months. In June, 1998, Mr. Wotton says the IDA notified him that it was on the job. To date, he has received no word from the IDA about a final resolution.

A national financial services ombudsman would provide a chance to do some real good for people like Mr. Wotton, who have been wronged and are powerless to do anything about it.

Note to everyone involved in this project: Don't blow it.
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Postby admin » Fri Aug 12, 2005 10:19 am

An example of how elderly people are mishandled and mistreated by some in the investment industry.

In Ontario court in 2001, Melville and Marion Hunt took their investment firm TD Evergreen Investment Services, to task for selling thier BCE shares without their authorization. The court ruled that the unauthorized sale constituted a breach of fiduciary duty to the clients and TD was found liable.

However in August, 2003, the court of appeal for Ontario reversed the earlier ruling, finding thta the advisor and the firm DID NOT owe a fiduciary duty to the clients. The court explained that the clients trust in the broker was not warranted due to the fact that they had a non-discretionary account. (an account where the advisor cannot make decisions and trades without permission)

This ruling appears to suggest that nearly every investment client in Canada (most accounts are non discretionary) should not place a level of trust in the broker, and perhaps if the broker violates or abuses the interests of the client, he or she may be allowed to since (technically) without signing over full discretion and full authority to your broker to trade your account you are appearing to retain some control and influence yourself. (so if your broker takes advantage of you, theoretically you had a hand in it)

If this makes no sense to you do not feel surprised. It makes no sense to anyone except pehaps to the investment firm that was trying to avoid responsibility for illegally selling the clients shares, and possibly the judge that allowed it to succeed.

It is, however, illustrative of the power and the imbalance of power towards the industry over the public. So much power in fact that any investment firm out there can almost get away with anything short of murder. The large firms are "above the law", at minimum, and the lawmakers choose to look the other way at the maximum. Further examples like this to illustrate will be posted from time to time.
Last edited by admin on Tue Aug 16, 2005 8:35 pm, edited 1 time in total.
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Postby admin » Wed Aug 03, 2005 6:03 pm


brokers in the US charged by the NASD with SECURITIES FRAUD for misleading clients into higher class mutual funds to earn higher commissions. Such self serving advice prohibited in US, while considered standard practice in Canada.
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High % of Securities Violations Not Investigated

Postby urquhart » Thu Jul 21, 2005 7:20 am

The reason I and hundreds of other Canadians have asked for enforcement audits of their provincial securities commissions is because the Canadian public is being misled about the prevalence of securities fraud and offences occurring in this country. I have reached the conclusion that these commissions are investigating only a very small percentage of the offences they are aware so that the investing public would not become alarmed by the amount of securiteies fraud and violations going on. My evidence for this conclusion is as follows:

(a) David Brown, former Chair of the OSC told the Canadian Prospectors and Developers Annual Conference attendees in the year 2002 that the OSC did not like to prosecute more than a couple of cases on each category of illegal conduct since more prosecutions would cause the investing public to become concerned about whether they should be investing in Canadian capital markets.

(b) David Brown told the Ontario Standing Committee on Finance and Economic Affairs in August 2004 that there were not enough enforcement cases in Ontario to occupy more than 39 days per commissioner per year in hearings. Hence, it was not economic for the Ontario Government to establish a separate adjudication tribunal with full-time administrative judges to hear securities cases. (fortunately, the Ontario Government rejected David Brown's arguments and is proceeding to restructure the OSC to separate adjudication from policing.)

(c) the provincial securities commissions have not been asking for increased enforcement budgets, and in fact Ontario just delivered $15 million of excess revenues to the Ontario Treasury despite its enforcement action rate being only 1 in 26 compalints it gets annually.

(d) The OSC enforcement budget increased dramatically in the late 90's but the enforcement output did not increase much, until it was the subject of intense complaint at the August 2004 Ontario Standing Committee hearing on the OSC. Now, somewhat coincidently the frequency of enforcement actions has stepped out, but there is still no accountability on who gets investigated and prosecuted and who is protected.

(e) At the ASC, 35 whistleblowing current and former employees included complaints of interference in which enforcment cases were undertaken, with high profile Alberta executives being spared any actions for misconduct.

(f) in the Bruce Asquith et al application before the OSC concerning illegal share sales by six prominent Ontario lawyers, chartered accountants and executives, who were members of the control group at Technovsion, the OSC has admitted that it has spent hundreds of hours and over $90,000 in its efforts not to be forced to take enforcement actions for the illegal issuer bids it had acknowledged these six people accepted. The OSC had said it did not undertake an enforcement action on the illegal issuer bids for the reason that there was inadequate public interest to use its limited enforcement resources on the Technovision case. The OSC refused to enforce the filing of insider trading reports by these six prominent insiders. Yet, it could spend over $90,000 of its limited enforcement resources to collaborate with the six prominent wrongdoers and the public company corporate counsel to prevent any enforcement action and to squash the director who brought forward the evidence on numerous securities vioaltions occurring at the company. These violations were continuous disclosure misrepresentation, stock trading manipulation, unauthorized management compenation, illegal issuer bids paid to control persons with insider information on several material negative developments, and lying to the commission investigators and commissioners on the price received per share and cash paid for other purposes that had no validity.

I urge the investing public to demand an enforcement audit of their provincial securities commissions, like the one being done in Alberta, with one very key statistic being made public. What percentage of the securities frauds and securities violations made known to the commission is the subject of an investigation and an enforcement action? Only when this statistic is known can the investing public begin to make an informed judgement about whther they can afford to invest in Canada's capital markets taking into account both business risk and corruption. Also, only when this statistic is known can the investing public judge their regulators' and self-regulators' sincerity about investor protection and adequate money being spent for enforcement to deter white collar crime.
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Postby Guest » Thu Jul 21, 2005 2:19 am

perhaps the following bureaucratic boilerplate response can best be used to describe (in my opinion and experience) why Canada is still a buyer beware investment climate:

"Due to the high volume of complaints received by (put any regulatory agency here), the Commissioner has established a system for the selection of cases that best meet the objectives of the legislation. In prioritizing enforcement activity, the Commissioner reviews matters in relation to the following criteria: economic impact, the Bureau's enforcement policies and priorities, and the financial and human resources required to pursue a specific matter. These criteria have been developed to ensure that the Commissioner's discretion over enforcement matters under the Act is exercised in an objective and consistent manner.

Please be assured that officers will proceed with investigative and/or enforcement action, if deemed appropriate, as a result of your complaint. Since the Act provides that inquiries are to be conducted in private, the Commissioner cannot generally provide complainants with progress reports during the investigation of a particular matter."

Feel free to remove the names and insert any regulatory agency that is incapable of enforcing the law. This is similar to the reasons they will use when push comes to shove. They are allowed to interpret the law, and enforce it selectively, and they can and do use manpower and budget shortages to justify this.

I feel they should be required to publicly disclose what approximate percentage of complaints are destined to be ignored due to reasons such as above. Without such disclosure they are misleading the public into thinking they are protected, and they are not. The OSC has used this or similar reasons to explain away lapses in enforcing the law, and again, only after being put on the spot, not willingly.

Postby admin » Tue Jun 28, 2005 10:17 pm

Wolves in Salespersons Clothing?
May 15, 2005
Who's Preying on Your Grandparents?

Illustration by The New York Times

BACK in February, Jose and Gloria Aquino received a flier in the mail inviting them to a free seminar on one of their favorite topics: protecting their financial assets. As retirees, they were always on the lookout for safe investment strategies as well as tips on how to make sure they didn't outlive their savings. Besides, the flier promised a free lunch for anyone attending the workshop, so what did they have to lose?
Potentially plenty, they would soon discover.
On March 1, Mr. and Mrs. Aquino stepped into the Coral House restaurant, not far from their home in North Baldwin, N.Y., on Long Island. They found themselves surrounded by about 50 like-minded retirees, most in their 70's and 80's, they said.
Over lunch, the crowd listened to a presentation by two investment executives from Diversified Concepts Inc. of Manhattan. Using charts and graphs, the men gave advice on how to invest wisely during retirement. Then they passed out forms and asked the retirees to list all their assets and financial holdings.
The Aquinos filled out theirs and left. Two days later, they said, one of the executives came to their home and described an investment with the American Equity Investment Life Insurance Company that would provide 7 percent interest on their money - immediately.
"When somebody tells you he will give you a 7 percent upfront bonus on your money and that you'll get that 7 percent even if the market goes down, you get interested," said Mr. Aquino. He said he signed the necessary documents and the executive left, handing a brochure to the couple.
That evening, the Aquinos told their daughter, Caroline, about their investment. "She said, 'Oh, don't invest like that before searching farther,' " Mr. Aquino recalled. "Then she went on the Internet and found these lawsuits going on in California against the company and we realized that we were not making a good decision."
The investment the Aquinos had chosen was an annuity, an insurance product that not only tends to carry high fees but also requires that most of the money stay locked up for years, making it especially inappropriate for many older investors, regulators say. In fact, the one they bought carried a staggering 17.5 percent surrender charge if it was cashed in during the first year, their daughter explained. Exit charges were not scheduled to disappear until 17 years after the purchase.
This meant that Mr. Aquino, who is 65, and Mrs. Aquino, 63, could not cash in the annuity without paying a surrender fee until they were in their 80's. The executive had not told them about the lockup requirement, the Aquinos said, although the brochure he left with them described the fees in small print.
Thanks to their daughter, they were able to phone the company in time to cancel their purchase. Others, however, have wound up stuck in an investment that they cannot liquidate without severe penalties.
Meetings like the one attended by the Aquinos take place thousands of times a year in restaurants, American Legion halls and senior centers across the nation - and are a growing problem, securities regulators say. The seminars are usually described as a way for retirees to receive free advice on estate planning, asset protection and tax reduction. After a short presentation, the attendees are approached by a sales representative, who almost invariably encourages them to liquidate their stocks, bonds and 401(k)'s and to buy an annuity.
"We started getting all these complaints from children of seniors who found out that their stock portfolios or other investments had been transferred into these annuities," said Joseph A. Ragazzo, deputy attorney general of California. "We see this investment abuse as a real problem. These cases are metastasizing all over the country."
David J. Noble, chief executive of American Equity Investment Life Insurance, the company that wrote the Aquinos' policy, said: "I deeply differ with anyone saying we have serious problems. We have over 200,000 annuity policy holders, and the percentage of complaints we have is 0.002. We are extremely market-conduct aware."
Mr. Noble also said that annuities' guaranteed rates of return and protection of principal make them attractive to people worried about how they are going to pay their bills.
The president of Diversified Concepts did not return several phone calls.
WHILE prosecutors in New York and Washington investigate questionable accounting practices in the insurance industry, regulators elsewhere say they are fielding more and more complaints about aggressive sales practices by insurance companies that design annuity products and by the people who sell them. Under the guise of estate planning, regulators say, retirees are being pushed into annuities that carry commissions of up to 12 percent and that require their holders to keep them for as long as 15 years, or to pay big penalties.
It is easy to see why older people find such investments attractive. Annuities produce higher income than other investments and can provide payments for life. They are often sold as a way to allay retirees' fears of outliving their assets.
There are several kinds of annuities. Fixed annuities guarantee that a set amount of money will be paid regularly, regardless of how the underlying investments perform. Variable annuities, by contrast, are based on a portfolio of stocks that rise and fall, so their payments can fluctuate.
With interest rates near historical lows, the first-year rates of 7 percent to 9 percent on some annuities make them alluring to people on fixed incomes. And with the stock market going sideways, people are looking for investment alternatives, giving annuity sales representatives a ready audience.
But because of the fees associated with these products and the restrictions on cashing them in, they are hardly ideal for investors who may need the money quickly, or who die before the investment matures. In many cases, if the holder dies during the annuity period, the beneficiaries cannot redeem the annuity without paying a surrender charge.
Companies that sell annuities say that the higher rates they pay justify the surrender charges. Most investors, they add, are happy with their purchases.
But last February, Bill Lockyer, the attorney general of California, and John Garamendi, the state's insurance commissioner, filed a lawsuit against a group of companies and individuals that state officials said had tricked retirees into using their retirement investments to buy annuities. The suit said that the companies employed up to 300 sales agents and 80 telemarketers and sold annuities worth "hundreds of millions of dollars."
The defendants in the case included American Investors Life Insurance of Kansas, a unit of the AmerUs Group in Des Moines; and Family First Advanced Estate Planning and Family First Insurance Services, both of Woodland Hills, Calif. The complaint seeks $110 million in civil penalties, consumer restitution and damages.
AmerUs said that it does not comment on pending litigation; however, the company said that it was taking the accusations very seriously and that it has strong sales and compliance practices. The Family First companies could not be reached.
Increasingly aggressive marketing has made annuities one of the hottest investments around. Money invested in variable annuities totaled $994 billion at the end of 2003, up from $771 billion in 1998, according to the Insurance Information Institute. Although total annuity sales fell slightly in 2003, they have almost doubled since 1997.
The growing ranks of the nation's retirees are a main focus of annuity sales agents. Next week, the Senior Market Expo opens at the San Diego Convention Center. "Now in its fifth year, Senior Market Expo is the only place you'll find the powerful strategies and ideas you need to boost your sales of life insurance, annuities, long-term care insurance and more," its Web site says. "This sales-centric event focuses on giving you - the senior market adviser - sales and marketing skills to earn more money selling to seniors."
Annuity sales can be highly lucrative. Commissions can reach 12 percent of the money invested, far greater than fees typically generated on stocks and other investments. Mr. Ragazzo, the deputy attorney general of California, said his office had found that some companies selling annuities sponsored trips to Hawaii and Europe for top agents. "Some of these guys are former used-car salesmen bringing in $600,000 a year," he said.
Ads for asset-preservation seminars often use scare tactics. "Your family's assets are in danger!" reads one; "Trust me! You need a living trust!" goes another.
As sales of annuities have grown, so have investor complaints related to them. According to the N.A.S.D., annuities were at issue in about 600 arbitration cases in 2004, more than twice the number from three years earlier. Of the seven types of securities typically involved in arbitrations, annuities were the third most common last year, behind stocks and mutual funds.
Sellers of annuities are also the subjects of civil lawsuits. The American International Group, the insurance company whose accounting practices are under investigation by regulators and federal prosecutors, has been sued recently in California by elderly investors who bought annuities the company issued. The investors are also suing Estate Preservation Inc. of El Segundo, Calif., which sold the annuities.
One plaintiff is Beverly Buhs, 80, of Millbrae, Calif. In 1997, Ms. Buhs, then 73, and her husband Art, then 76, attended a seminar at an American Legion hall. Like the Aquinos, the Buhs filled out a form detailing their assets; it was supplied by the seminar leader, an agent from Estate Preservation.
Mr. Buhs had previously invested in mutual funds, but he and his wife had never bought an annuity. With the agent's help, the Buhs set up a living trust, which they believed would help them avoid probate costs, according to the lawsuit. Shortly after setting up the trust, according to the lawsuit, the agent came to their home and persuaded them to sell their investments and to put them into a fixed annuity issued by SunAmerica, a financial services company bought by A.I.G. in 1999.
In December 2002, Mr. Buhs died of complications from an aneurysm. Only then did Ms. Buhs learn that the living trust did not protect her from probate costs and that she could not cash in the annuity without significant penalties, she said.
Ms. Buhs said she had to hire an estate lawyer to restructure the trust and wound up losing $20,000 of a $90,000 death benefit. Now she is still dealing with tax problems associated with the trust. "I tried to talk to SunAmerica, but I get so stressed out," Ms. Buhs said. "I don't know how to talk the jargon and don't know where to go. It's sad to think the world is like this. How many other seniors are being taken and deceived?"
Ms. Buhs's lawyer, Ingrid M. Evans of Renne Sloan Holtzman & Sakai in San Francisco, said: "The majority of annuity policies are going to seniors because those are people who have the money and are scared of the stock market and most susceptible to fear. But over a certain age it's not acceptable to sell someone a deferred annuity because they are going to pass away before it annuitizes," or matures.
Ms. Evans said Ms. Buhs had sued A.I.G. because SunAmerica "implicitly or explicitly ratifies the sales agents' unlawful and unfair schemes."
Chris Winans, an A.I.G. spokesman, said that the company would not comment on the litigation but said that the claims in the suits were unfounded. Ms. Buhs' annuity provided good returns - almost 20 percent from 1997 to 2002, after surrender charges, he said.
Mr. Winans added that A.I.G. has suitability policies and procedures that it monitors and enforces and that it requires the same of the brokers who sell its products.
Estate Preservation did not return a phone call seeking comment.
A.I.G. is the nation's top seller of fixed annuities through banks and the fifth-largest seller of variable annuities, according to the Insurance Information Institute. The company sold $8.8 billion in fixed annuities in 2004 and sold $8 billion of new variable annuities in 2003, the most recent figures.
In the first nine months of 2004, A.I.G.'s life insurance and retirement services group, which includes its SunAmerica unit, accounted for 45 percent of the company's total revenue. Sales at the group rose 24 percent from the corresponding period a year earlier and its operating income rose 23 percent, the fastest growth registered by any of A.I.G.'s four business segments. Premiums from annuities sold domestically rose 20 percent in the first nine months of 2004.
TYPICALLY, the people pushing annuities are registered only as insurance agents and not with government securities regulators who have large staffs to root out dubious practices. As a result, many fall through the regulatory cracks.
Last July, the California Department of Corporations filed a "desist and refrain order" against the Gentry Group, a Dallas company that sells annuities. The company had induced an elderly woman in Oroville, Calif., to authorize the sale of $98,470 of securities without her knowledge and to buy two American Equity annuities with the money, according to the order. The Gentry Group, the American Equity Life Insurance Company and the saleswoman who sold the annuities were not authorized to conduct business as investment advisers in California, so the desist order was issued.
The Gentry Group did not return a phone call seeking comment. American Equity said that it was resisting the order in court.
Mary L. Schapiro, the vice chairwoman of N.A.S.D., said that her agency had proposed new rules related to the selling of annuities to the elderly; they await approval by the Securities and Exchange Commission.
"Some of the worst advertising we've seen has been in equity-linked annuities," she said, "very promotional, talking about growth without any risk, all the kinds of push-button expressions that really resonate with senior citizens." But, she said, she oversees only a small percentage of the firms and people selling these annuities.
Alas, not every retiree can rely, as the Aquinos did, on a daughter to help them steer clear of an investment they might later regret.
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Postby Guest » Mon Jun 27, 2005 6:17 pm

It's time clients knew the rest of the story
The link between mutual fund profits and investor performance

John De Goey
Financial Post

Monday, June 27, 2005

In the debate about fair disclosure surrounding actively managed products and strategies, there are a number of important truths that certain elements of the financial services industry neglect to mention.

In releasing its Fair Dealing Model discussion paper in 2004, the Ontario Securities Commission proposed that interested parties offer input on three possible ways of ensuring people got a fair deal:

- Move to a system where there was more and better disclosure.

- Let the product manufacturers be responsible for who recommends their products and under what circumstances.

- Remove all embedded compensation from all investment products altogether.

As expected, participants coalesced around the option of more and better disclosure. The question remained what shape and form "better disclosure" should take.

Rather than regulating products, the emphasis of the FDM was squarely on the issue of advice -- and the primary concerns revolving around transparency and disclosure.

A big problem is that, in the past, disclosure lacked context: It explained how much products cost without explaining the effect of that cost in terms the average investor could understand.

With another product -- cigarettes -- governments decided the industry needed to engage in "radical disclosure" by putting some of the more "sensitive" attributes of the product in bold lettering on all packaging.

Here's a sampling of the disclosures that might appear on the cover of a mutual fund prospectus:

- Most active managers lag their benchmark in the long run.

- The handful that outperform cannot be reliably identified before the fact.

- Cost is the most reliable determinant of long-term fund performance (as a negative indicator).

- Many advisors consistently fail to recommend products that offer no commissions or trailing commissions.

These disclosures may sound radical, but compared with cigarette warnings, they're tame. As it stands, a whole series of circumstances consistently benefit the manufacturers, distributors and owners of mutual fund companies ahead of mutual fund unitholders. Much of this is so because of "asymmetrical information" -- people don't know what they don't know because they don't know what they don't know.

Mutual fund companies are wildly profitable, but that profitability comes at the expense of investor performance.

That linkage is lost on many ordinary consumers, yet the cardinal rule of financial advice is "the client comes first." It's about time the industry walked the walk.

Postby Guest » Tue Jun 21, 2005 8:55 am

has anyone info or update on Polla Goldfuss V TD Waterhouse

she is a widowed Holucaust survivor, in Toronto area, being sued by TD Waterhouse.
My understanding is she was a GIC client at the bank, and was then introduced to the local investment guru at the related company, put into equity mutual funds, lost money, paid the highest commission charges possible to the bank owned investment dealer, got help to complain, got some $250,000 compensation from the bank owned dealer, then the bank owned dealer rightfully fired the advisor and sued him to get the money back. In his statement of defense, his comments about how informed the client were differed from her complaint to the bank so they sued her as well???

They claimed that although she had signed a release saying all her complaints with the bank were final to get her money back, "they", meaning the bank had not signed it, so they feel fine with pursuing her.

I spoke to her apprentice lawyer a while back to see if she needed any help with the case, and the lawyer was so fresh out of school, it was sad. If anyone has any info or news on the case it is one that has implications for how the large bank owned dealers use legal stalking horses to bully their way in any and all my opinion anyway.

"open letter to the investment industry"

Postby guest » Mon Jun 20, 2005 9:59 pm

We regret having to make this plea in public, but the practice of hiding financial irregularities behind confidentiality agreements, gag orders and industry codes of silence is far too prevalent and the undersigned have lobbied far too long with no result.

We are talking about examples where ordinary Canadians do not get treated with the professionalism they deserve, and rather than fix the problem, they are beaten down using legal methods and a seemingly inexhaustible imbalance of strength over the client. We wish to ask you to start to do the right thing, as all industry participants promise to do, but some fail to live up to.
Specific examples include

Please apologize to 92 year old Norah Cosgrove, an Ottawa resident who trusted her financial advisor, and was disappointed in this trust. Your firm terminated the advisor in question, but when Mrs Cosgrove took her claim for $10,000 to small claims court (case ???) your defense was that you felt you did not owe this elderly client a duty of care. Your entire industry promises a duty of care to a professional standard of conduct to it's clients, and to state less in a court filed legal document is simple wrong. Please allow this woman to understand why you would let her advisor go, supposedly with some cause, and yet deny, deny, deny any wrongdoing to her, the client. Please correct this.

Please cease your legal action against 80 yr old Pola Goldfluss of Toronto. She has already survived the loss of her husband, as well as her ordeal during the holocaust. She also has already been granted a settlement of some $250,000 from her investment dealer for investment advice that was supposedly not represented properly to her. To turn around, and then sue this client, for the same $250,000 on a legal technicality is simply harsh, unusual and unfair to the clients you serve. Why, pray tell did you agree to give her back her money in the first place if she did not have legitimate concerns, and now to say that the settlement agreement that she signed, was not signed by you, and need not stop you from pursuing her is simply irresponsible abuse of your level of power. Please cease and desist. (see TD Waterhouse vs Pola Goldfluss.

Please stop asking clients who have been abused by the industry to sign confidentiality agreements promising to never reveal details of the wrong they suffered, or the settlement they received. Asking them to do this is in violation of at least one firm's code of ethics which states, "each and every transaction we are involved in will stand the test of complete and open public scrutiny". All the other firms no doubt have similar promises of ethical behavior in the public interest. We simply ask that you now live up to them.

For example, when the 92 year old Kelowna, BC resident this last year was helped into an assisted living facility by his financial advisor, and told by his advisor that he would help him sell his condo, he was not aware that it would ultimately end up registered in the name of the advisor. Nor was he fully aware of much of the details of the transaction. The fact that it was done with no money going to the elderly client, no appraisal of value, at far below market comparable properties, and at a zero percent interest loan to the advisor was not only hidden from the client, but from his family, the public, and the regulatory authorities. It remained hidden for as long as possible, and was not properly revealed to regulatory authorities except by private industry advocates who expressed concern for this client. What were you thinking and where was your responsibility to act properly? This is not behavior appropriate to a business that claims, "the highest standards of trust and integrity".

Please stop using money to purchase silence and escape from prosecution over things that should be fully and openly investigated and properly prosecuted. Members of the public are not allowed to buy their way out of the situations they find themselves in, and nor should our most trustworthy financial institutions. For the gentleman in Kelowna to receive title to his own condominium back, he was required to sign an agreement that started out, "for value received". I consider giving the man his home back after removing it from his fraudulently, and calling it giving him something of value is adding insult to injury. Please immediately reconsider and remove all future bans on open and honest transparency in your company and your industry. It will assist in restoration of public trust in our financial firms.

Please remove internal rules that prevent industry employees from speaking out on issues in the public interest. This is holding back the move towards trust and integrity that this industry so loudly proclaims. How can we possibly expect complete trust and integrity when there still exist internal rules forbidding employees from revealing indiscretions without approval of management. This internal code of silence has acted in the past kind of like asking an abused child to take his complaints to his abuser. Until this policy of keeping everything "inside the firm", is updated to our times, violations of trust and integrity will be an ongoing problem.
If you will recall when mutual fund sellers used to be able to obtain free vacations if they sold enough dollars worth of one fund or the other.

When Bud Jorgensen of the Globe and Mail started to investigate this practice many years ago, I was told by my then manager, "anyone who talks to the press about this is fired immediately. I found that a rather unsettling and startling comment to come from someone in and industry of trust. I have since learned that this same manager was enjoying his annual trips to the Indy 500, courtesy of a mutual fund company. Please remove internal codes of quiet, codes of silence or gag orders on ethical irregularities. they belong with the Cosa Nostra, not one of our most important industries.

Please remove the internal policy, written or unwritten of not informing clients of the most economical methods of investing. The promise made to most clients is to place their interest ahead of those of the industry, and to do otherwise is a failure of this promise. How many clients have been told that mutual fund commissions were deregulated in 1987, and that clients now have choices as to whether or not to pay commissions when buying most mutual funds? If the industry is truly in the business of serving as trusted professional advisors serving the client interests, I am at a loss to understand why no full service investment dealer that I am aware of has advertised this fact to clients. Is it because they are stuck in the uncomfortable position of claiming the status of trusted professional advisor, while having to act out the role and earn a living as commission salespersons?

Do clients realize that fully 80% of the mutual funds sold in the last five years were sold utilizing the highest choice of remuneration available to the advisor? Is this service in the client interest or in the industry interest? For data source view the sales figures on mutual funds at the Mutual Fund Dealers Association of Canada website.

If you multiply the 5% commission earned on every DSC (deferred sales charge) mutual fund choice by the amount of sales, it will partially explain the ease with which some members of your industry are able to earn billions of dollars each year. Perhaps it is time to address the details of those many mutual fund choices available to your trusting clients before class action parties force you to do so.

Financial Abuse by "Trusted Professionals"

Postby admin » Mon May 16, 2005 8:40 pm

where to start?
too many to list?
but here is the topic, lets hear from you.

Norah Cosgrove told by RBC that they owe her "no duty of care"....see Norah Cosgrove V RBC DS, Ontario Superior Court of Justice, small claims court file no. 03-SC-083313 (norah was 90 something at the time)

Murdo Mcdonald losing his house to Kelowna RBC advisor. (silenced) Murdo was 92 at the time, 2004.

Retired single nurse in Alberta charged commissions, trailer fee's and then an annual "advisor" fee by RBC. (silenced) (Hey, it is in her interest to have the second and third fee, isn't it....?

Retired couple in Lethbridge Alberta charged a 1% "advisor" fee by RBC to hold 2.5% Canada Savings bonds and mutal funds that they already paid commissions on. (silenced)
Last edited by admin on Sat Oct 06, 2007 5:40 pm, edited 3 times in total.
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