Stockbroker pleads guilty to $7.8 million fraud Victims included family, friends and neighbours
Were told investments safer than a bank
BETSY POWELL
STAFF REPORTER
Nelson Allen liked to tell his clients: "I look after you just like I look after my parents."
The former Newmarket stockbroker pleaded guilty in the Superior Court of Justice yesterday to defrauding investors, including family, friends and neighbours, of $7.8 million through his companies Nelbar Financial Corp. and Essex Capital Management Inc., between 1994 and 1999. The money has not been recovered. He'll be sentenced by Mr. Justice Harry LaForme March 31.
Allen and co-accused Robin Moriarty, 34, a longtime employee and confidante, were charged in 2000 with 31 counts of fraud over $5,000. Yesterday the crown withdrew all charges against Moriarty, which didn't sit well with some investors.
Crown Attorney Frank Moskoff detailed, in an agreed statement of facts, how 32 victims, including small business owners, retirees, a real estate agent, pipefitter, investment adviser, quadriplegic, and Globe and Mail columnist Michael Valpy, lost investments ranging from $10,000 to $1 million in what police and the Investment Dealers Association have described as a pyramid, or Ponzi, scheme.
Allen already has been fined $525,000 and banned from the brokerage industry for life by the Investment Dealers Association, the industry's self-regulating body. He was also ordered to pay $40,000 toward the cost of the association's investigation in 2001. Moriarty was fined $160,000, plus $12,000 in costs, and banned from the industry for seven years.
According to the association, investors were sold what they were told were short-term, interest-bearing deposits, called Corporate Investment Certificates (CICs). Redemptions of the CICs were funded by subsequent investments.
Allen and Moriarty were found guilty by the association of failing to observe high standards of ethics and conduct, engaging in conduct unbecoming to the public interest and not being of good character or business repute. Both refused to co-operate.
Outside court, Moriarty's lawyer, Sharon Lavine, said her client is "relieved and delighted" all the charges were dropped.
The investors launched a class action in 1999 to try to get their money back. Ninety-year-old Percy Levy, who invested $40,000 with Nelbar, is the representative plaintiff. Also included in the class action is Ayman Said, who invested $600,000, nearly the entire insurance settlement he received as a result of a car crash. "The accused stated to the victim that his money was safer with his company than it was with Scotiabank," Moskoff told court yesterday.
Allen's brother-in-law, Curtis Somerville, invested with Allen after he "represented at all material times that the monies invested would be fully guaranteed," Moskoff said. Valpy, introduced to Allen by a friend, lost the $80,000 he had "earmarked for his three daughters' education."
Ron and Gloria Hutton knew Allen for 18 years. They lost almost $900,000. "They were friends and neighbours," Moskoff said as Allen, sitting next to his lawyer, John Norris, stared straight ahead. "The money represented their life's work and savings and was to be used exclusively to fund a retirement income."
Some of the victims first crossed paths with Allen when he was selling mutual funds out of an independent storefront operation in Sherway Gardens. Allen, who became a stockbroker in 1989, also hosted a popular financial forum in the mall's central square.
It's around that time that Jon-Albert van der Hart met Allen. Van der Hart was dating Moriarty's sister.
"He was a very charismatic man, (he had) this sense of confidence," said van der Hart. "He didn't talk too much, so when he said things, they'd be more thought through and you tended to listen."
By 1995, Allen had moved his operations into plush new offices at 36 Toronto St. where he employed 30 traders. In 1997, Nelbar Mutual Group was renamed Essex Capital Management. "He would always have the camel hair jackets and he'd wear a fedora. He bought his 2000 Jaguar XJR, $120,000 car, super-charged sedan," recalled van der Hart. In 1993, Allen paid $360,000 for a sprawling 100-year-old house in a tree-lined neighbourhood in Newmarket, which is where he lives today with his wife Barbara and two young sons. A competitive swimmer at university, Allen purchased an adjacent lot where he built a kidney-shaped pool.
Allen transferred the property to his wife Barbara for $2 on March 23, 1999, nine days after the Financial Services Commission of Ontario froze his companies' assets and ordered that they cease any further commercial or financial business. The class lawsuit alleges the transfer was "fraudulent, unenforceable and void" and that it was done "for the purpose of hindering, delaying or defrauding creditors." The allegation has not been proved in court.
Many of Allen's former clients still live close by. "I pass his house two or three times a day," said Ann Campbell, classified manager at Metroland's York Region Newspaper Group, owned by the Star. She lost $135,000, including money invested on behalf of her elderly sick mother, who has since died. It's unbearable, she says, listening to "them frolicking and splashing in their pool.... They drive newer cars than we drive." Campbell, whose two sons also lost their investments, released a statement on behalf of her family after court.
"Nelson Allen has finally acknowledged his guilt in criminal court," it read. "He has destroyed the lives of honest, hardworking citizens who placed their absolute faith in him. Instead of securing their futures, he has besieged the pockets and purses of clients, friends and neighbours alike, to corruptly achieve and maintain an opulent lifestyle fuelled by materialistic self-indulgence." |
