April 24, 1998
INVESTORS GUILTY OF 'BLIND TRUST'
SOLID CITIZENS HAVE BEEN DUPED OUT OF MILLIONS OF DOLLARS IN CLASSIC RIPOFF TALES
SECOND IN A THREE-PART SERIES
By Howard Burns -- Free Press Business Reporter
In them, we trust.
Sometimes, too much.
That's amplified in tragic proportions in the stories of Woodstock investors who sunk life savings and carefully nurtured
retirement nesteggs into something known simply as the Cayman fund, started by financier Albert Walker.
There, as in a spate of other spectacular London area cases, betrayal followed what one veteran investigator calls "blind
trust."
It's a classic ripoff tale -- one that contains elements and pitches often found in big-time swindles.
There are lessons here, too, police point out, for all investors concerned about fraud.
The London region has witnessed a succession of brazen con jobs, some of them executed by people regarded as pillars of
the community.
The bottom line is solid citizens have been duped out of millions.
Former London lawyer Julius Melnitzer even caught the high-powered banks napping. His free-wheeling, posh lifestyle
came crashing down after he defrauded four Canadian banks of $61.1 million and friends and associates of $14.7 million.
Self-styled businessperson Wayne Leard was sentenced in May 1995 to 10 years in prison and ordered to repay $19.5
million to investors caught up in the tangled, purported export of items as ordinary as light bulbs.
In another high-profile case, David B. Holden was charged following the collapse of Holden Financial Corp., once the
largest privately owned real estate and commercial finance operation in Ontario. About 300 investors lost $7 million to $10
million.
A recent Ontario Securities Commission survey showed 59 per cent of respondents were concerned about getting ripped off.
Ray Porter, a forensic specialist with Coopers & Lybrand in London and the former Mountie who helped jail Melnitzer,
cites "blind trust" and greed as among the factors that leave people open to fraud artists.
The first step a con artist takes is to instil confidence in investors, said Porter.
That leaves them vulnerable because their guard is down, he said.
"It's a breeding ground for potential fraud."
Few are immune.
"I think just about anybody can get hooked, from the person who makes very little for an income up to a major financial
institution," Porter said.
Always "check things out the best you can," he added.
In the Woodstock case, investors were promised tax savings and solid returns in an offshore haven.
The Cayman fund was marketed softly to mostly older citizens of Woodstock as a safe tax shelter investment by Walker.
DIFFICULT TO RESIST
The trail of victims shows it proved hard to resist. The exotic name conjured up visions of holidays, white sand beaches
and, best of all, financial security.
But the fund turned into a nightmare investment for those who handed over money to Walker, charged with defrauding
investors out of millions of dollars.
Some trusted him because he projected a family persona. He befriended others by asking about their family members.
Walker could be a master of small-talk and smooth as silk at the same time, investors recall.
On top of that, his purchase of an existing bookkeeping service gave him a built-in and loyal client base to tap.
Many of the victims had been previous tax preparation and bookkeeping clients of a company Walker bought.
The comfort factor was high.
There was an brilliant air of success about the guy, a smart dresser and church-goer who appeared to have many irons in the
fire.
As a result, Walker turned heads in the small Southwestern Ontario city, known for its 19th-century homes and quiet,
tree-lined streets.
That facade of respectability is a common element in con jobs, police warn.
"He really impressed me. He started opening offices all over the place and I thought 'Holy mackerel, look at him go,' '' an
acquaintance once said.
One investor, now 80, stated the obvious: "We trusted him too much."
RCMP investigators have heard it all before.
The group of Woodstock investors is not the first to be stung by people who set themselves up as self-described advisers or
financiers.
And, police regret, they certainly won't be the last.
"The amount of funds that people can invest and then just take somebody's word for it, is just unbelievable," said RCMP
Cpl. Ralph King, who has been investigating the Walker case.
Pitches often include promises of marvelous returns, police say.
Not all are scams but sage advice from the RCMP includes a tip to avoid "get-rich-quick" schemes completely, especially if
they have that "too good to be true" ring to them.
Question and be sure to understand all aspects of any tax-saving component of an touted investment.
Get a second opinion.
In short, check everything out before you hand over any cash, no matter how reliable the person appears to be, said King,
who works in a commercial crime unit.
Afterward, be vigilant by keeping a handle on the investment and the adviser you're working with, he advised.
Legitimate businesses will have no problem with clients calling for updates and information or requesting written
verification of a fund's performance. Any irregularities should sound alarm bells.
Dramatic changes in lifestyle or demeanor could also indicate something may be wrong, said King.
Walker acted differently after family friends gave him $9 million to look after in 1989, RCMP contend. For example,
Walker turned into a jet-setter and bought a Jaguar.
Another tipoff might be a feeling by a client that the person handling the investment is suddenly off-limits, by phone or in
person.
"At the beginning, it's usually 'I'll do anything for you.' Later on, it's kind of 'Don't bother me.' ''
In the Cayman fund, investors were lured, by and large, by the stated tax advantages, said King, adding that such a line can
be used as a pitch to hook unwary investors.
"The main denominator between them all was the offshore tax haven. Obviously, they were looking at a good return, too."
The North American Securities Administrators Association (NASAA) says the importance of protecting the investing public
from fraud can't be overstated.
Suggestions from NASAA and the RCMP include:
* Don't expect to get rich quick.
* Beware of deals that seem too good to be true.
* Be suspicious of so-called inside information.
* Be wary of high-pressure tactics such as "tomorrow will be too late."
* Investigate before you invest.
Woodstock investors in the Cayman fund were among the first to go to police, sparking a two-year investigation that started
in 1991.
The probe ended with Walker, who had fled Canada in 1990, being charged with theft, fraud and laundering the proceeds of
crime. He's currently in jail in Britain charged with the murder of businessperson Ronald Platt, whose identity he had
assumed.
In an affidavit sworn last November, the commercial crime section of the RCMP alleges that $3.2 million was stolen from
financial services clients, related, in large part, to the Cayman scheme.
"Mr. Walker concentrated most of his efforts in this regard on clientele such as family friends, neighbors, associates and
generally the older members of the Woodstock, Ont., community and the surrounding area," the RCMP affidavit says.
One Woodstock investor who sunk $25,000 into the Cayman fund was initially delighted with its reported performance.
"I almost doubled the investment," said the woman, who asked not to be identified.
She received a handwritten note from Walker in the summer of 1987 saying that the $25,000 had almost doubled. The
money, needed for retirement and all of it lost, was reinvested for an additional five years.
Another investor says being victimized has changed her outlook.
"I know we learned from our mistakes."
On Monday, a London judge will be asked to order overseas bank accounts, gold bars and other property belonging to
Woodstock financier Albert Walker be surrendered for the benefit of his creditors.
Walker's property has its origin in funds misappropriated from investors, most of them in the Woodstock area, court
documents prepared by KPMG, the trustee in bankruptcy, show.
Meanwhile an RCMP investigation is ongoing into a series of limited partnerships to raise low-fat cattle. At least 138 area
investors sunk nearly $3 million into the limited partnerships sold by former mutual fund salesperson Dino Perry DeLellis
and London lawyer Bill Kennedy.
DeLellis and Kennedy have already been banned from ever selling securities in Ontario by the provincial securities
commission.
"Buyer beware" was the message from former Ontario Securities Commission chairperson Jack Geller, who heard the
DeLellis case.
The commission, he said, has the power to punish offenders, but can't get investors' money back.
Here, in a three-part series, is a look at how little we know about managing money, how vulnerable we are to promises of
tax savings and big returns and how we can get help without getting hoodwinked.
Next Story: TRIGEN EAGER FOR SECOND LONDON PLANT DESPITE LOSSES
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