Nearly five years after the collapse of a Ponzi scheme that bilked over 150 Canadians out of approximately $35 million, partial distribution checks are being mailed to victims following an out-of-court settlement with a financial institution accused of turning a blind eye to the fraud. The checks, which represent approximately 45% of victim losses, are the result of a class action lawsuit filed by victims against the Royal Bank of Canada based on alleged misconduct in handling accounts by convicted fraudster Earl Jones. Jones pleaded guilty to fraud charges in 2010, and is currently serving an 11-year prison sentence.
Jones founded Earl Jones Consultant and Administration Corp. (EJAC), a Montreal-based asset-management firm that operated for several decades. Beginning as far back as the 1970's, Jones solicited clients through financial courses at local community centers, many of them elderly, and often with the agreement that he would serve as the executor of their estate upon their death. Jones also promised steady 8% returns to clients. In total, Jones raised at least $50 million from victims.
However, victims began raising concerns in 2009 when interest checks were returned for non-sufficient funds. Jones was arrested in July 2009 and charged with orchestrating a massive Ponzi scheme. According to authorities, Jones used more than $13 million of investor funds to fund a lavish lifestyle for himself and his family. Jones later pleaded guilty to two counts of fraud dating back to 1982, and was sentenced to serve eleven years in prison.
After an investigation, a bankruptcy trustee declared Jones both personally and professionally bankrupt. However, the investigation uncovered internal RBC documents showing employees had raised questions over Jones' relationship with the bank as far back as 2001, and a consortium of Jones' victims soon instituted a class-action lawsuit. While the lawsuit sought over $40 million, the sides settled for $17 million in early 2012. After accounting for legal fees, $12.2 million was left to disburse to victims, who will receive a 44.1% recovery of their losses.
In addition to the settlement, RBC was also fined $500,000 for its role in Jones' fraud by the Investment Industry Regulatory Organization of Canada.