Oh snap. Bad news for RBC. And I wouldn’t want to have been an employee from Beaconsfield in the last 25 years. One memo from Jones on RBC letterhead c.c.ing some poor banking fool and it’s game over for The Royal:
MONTREAL — Former clients of Earl Jones are seeking the right to sue the Royal Bank of Canada for allegedly allowing the disgraced Montreal financial adviser to blow through their savings.
A statement of claim was filed in Quebec Superior Court late Friday against the financial institution alleging a Montreal-area branch was aware of the irregularities in Jones’ accounts, but did nothing.
Jones pleaded guilty last month to orchestrating a massive Ponzi scheme spanning more than 20 years.
The victims are seeking the authorization of a Quebec judge for the class action suit, which claims millions of dollars invested by former clients went through an “in-trust” account that in fact was a personal bank account belonging to Jones.
“The petitioner submits that Earl Jones could not and would not have been able to carry out a Ponzi scheme to the detriment of the members of the Class were it not for the negligence and wilful blindness of the Royal Bank,” the claim reads.
None of the claims against the Royal Bank have been proven in court.
The legal documents allege that Jones enjoyed a privileged status at the bank because of his standing in the community and as such the transactions weren’t properly vetted.
It also alleges that the bank knew as early as 2001 that the account was being used for business purposes and that the “in-trust” status had no meaning.
The civil claim asserts that nothing was done until 2008 when a bank manager again noted certain irregularities in Jones’ account.
“Notes on the account indicate there was prior knowledge in 2001 that the client was operating business through the personal account,” the claim reads, citing an RBC email.
A copy of the email from the bank manager raising questions about Jones’ account is part of the evidence filed Friday.
A judge must still authorize the request for the suit.
The suit seeks the full amount that was deposited in the in-trust account between 1981 and 2008. A spokesman for the Earl Jones Victims Organizing Committee says the amount determined by lawyers is about $40 million.
“They did not act in a prudent, vigilant or reasonable manner in the operation of this in-trust account,” said committee spokesman Joey Davis, in reference to the bank.
“The nature of the operation of this account was for business purposes and could lead to trouble, according to the evidence, and they did nothing about it.”
The claim alleges if the Royal Bank had kept closer tabs, Jones would not have been successful in perpetrating his almost 30-year scheme.
RBC has not filed a statement of defence, but the bank said in a statement that it, too, was a victim of Jones.
“We were deceived by Mr. Jones, just as his clients were,” the bank said in a statement.
“Until 2009, there was nothing to signal that Mr. Jones was anything other than a legitimate and successful businessman. Mr. Jones used his long-standing reputation in the community to take advantage of both clients and companies.”
RBC said in a statement that by using its logos and letterhead, Jones lent legitimacy to his Ponzi scheme, even though no such accounts existed.
“We did not know that Mr. Jones was misrepresenting RBC’s role in his business until Mr. Jones was arrested,” the institution said.
RBC acknowledged that Jones’ in-trust account, opened some 25 years ago, was operated as a personal account. It added in the statement that in-trust accounts don’t have any special status or restrictions.
“Banks do not monitor the transaction activity of an in-trust account differently from any other type of personal or business account,” RBC said.
The bank added: “We are appalled at damage Mr. Jones has inflicted on so many people and are actively assisting the trustee and authorities involved in this matter.”
Until recently, Jones owned homes in luxury locales and lived a lavish life on the backs of his client’s small fortunes over a 27-year period.
Since then, both Jones and his financial-services company have been declared bankrupt and many of his possessions have been auctioned off.
Jones, 67, is to be sentenced on Feb. 15 and is in jail since pleading guilty to two counts of fraud totalling $50 million last month.
His criminal proceedings heard that he never invested a penny of the money and none of it has been recovered.