A provincial regulator has ordered the perpetrators of an international Ponzi scheme to pay $42 million in penalties and restitutions -- the largest punishment in British Columbia history.
In August, the B.C. Securities Commission ruled that Hal (Mick) Allan McLeod, David John Vaughan, Kenneth Robert McMordie (also known as Byrun Fox), and Dianne Sharon Rosiek fraudulently distributed securities and made multiple misrepresentations through Manna Trading Corp. and several other companies.
The Commission found the scheme began in 2005 as an investment club, starting with a handful of investors and working its way up to hundreds. Investors deposited more than US$16 million before it collapsed in June 2007.
In a decision released Monday, the BCSC has ordered the four to pay $26 million in penalties and repay $16 million to investors.
Lang Evans of the B.C. Securities Commission says the punishment sends a clear message, but it's unlikely the group -- who are believed to have fled B.C. -- will pay restitution.
"I'm under no illusions we're going to get all the money," he told ctvbc.ca in a telephone interview.
"We're going to look for assets and try to get some money back for people."
Evans says the saddest part about the Ponzi scheme is that it could have been shut down much earlier than it did.
"There were a number of red flags here. If the investors paid heed they could have prevented all of this."
After the scheme became public in August, investor Greg Dixon spoke publicly about losing money. The 51-year-old software designer lost $6,000 in the scam.
"The reason I'm here is just so that other people perhaps don't make the same mistakes that I did, and just to be a bit wary," he said.
"I've been trying my best to forget about the whole thing."
Widespread and deliberate
In its judgment, the BCSC said McLeod, Vaughan, McMordie and Rosiek operated a "widespread and deliberate" operation, with investors contributing anywhere from a few hundred dollars to tens of thousands.
Evans said the fraud, which operated similar to a pyramid scheme, was hard to trace.
"It was very difficult because they told investors it was a good deal and to keep it confidential," he said. "I do believe it could have been cut off earlier but people were reluctant to come forward."
Misrepresentation
The commission ruled Hal Allan McLeod, David John Vaughan, Kenneth Robert McMordie and Dianne Sharon Rosiek violated B.C. securities laws when they traded without being registered.
Evans said the foursome misrepresented themselves to investors about how their money would be invested, and what returns they should expect.
"They promised five to seven per cent returns compounded every month, it was offshore and they made investors swear to secrecy," he said.
"The people at the very top were pulling the strings. The four at the top created the scheme, orchestrated it and they benefited the most financially."
The frauds were made through four registered companies, Manna Trading Corp Ltd., Manna Humanitarian Foundation, Legacy Capital Inc. and Legacy Trust Inc.
Investors were lured into loaning Manna money and told it would be "placed with experienced traders who had a long history of producing double-digit monthly returns through foreign currency trading."
The RCMP has said it's looking in to the matter. If it launches its own investigation, the four could face jail time. But under the Charter of Rights and Freedoms, evidence gathered from the commission's investigation would be set aside as self-incriminating.