Trust But Verify
A nine-month suspension has been imposed by the Ontario Law Society Tribunal Hearing Division
Nancy Myers Elliott, the respondent, participated in 13 development projects financed by syndicated mortgage funds. The projects failed and the lenders to the syndicated mortgage funds lost their investments. Ms. Elliott admits she failed to be on guard against participating in fraudulent or improper loan transactions, used Law Society forms in which the prescribed wording was altered, and acted in syndicated mortgage transactions using legal documents containing contradictory statements as to whether she was retained by the syndicated lenders.
Respondent is a “well-regarded senior member of the bar” who had relied on another attorney
The respondent had a longstanding professional relationship with Gregory Harris, a corporate/commercial lawyer. She viewed him as a very capable, knowledgeable and skilled corporate, commercial and securities lawyer. They frequently referred clients to each other and worked together many times. She also considered him to be a friend.
Losses
None of the 13 projects was successful. All the development companies became insolvent and there was insufficient equity in the syndicated mortgages for the syndicated lenders to recover most of their investments.
Knowledge
The parties agree Ms. Elliot did not know the projects were fraudulent. Specifically, she did not know that:
• Singh had a financial interest in the borrower development companies beyond what had been disclosed in the loan documents. Through profit-sharing agreements or intermediary corporations, Singh had a financial interest in all of the development companies.
• In five of the projects, Singh signed a consulting services agreement with the development company that entitled him to a share of the development company’s proceeds, as if he were an equity shareholder.
• Singh was also a part-owner of the development companies in the other projects, either directly or through intermediary corporations.
• In one project Singh signed the loan agreement on behalf of both the trustee corporation/lender and the development company/borrower.
Personal circumstances
Ms. Elliott spoke movingly about the circumstances which led to her misconduct and its impact on her and her family. She trusted Harris, with whom she had worked for years and whom she believed to be a friend. She was impressed that Singh had created this business model. Although devasted by the proposed penalty, she acknowledged it was a necessary consequence of her actions.
Sanction
This penalty reflects the seriousness of the misconduct and its impact on the syndicated lenders. In assessing the appropriateness of the proposed penalty, we note Ms. Elliott has no prior discipline. Her obvious and profound remorse and acceptance of responsibility are also significant factors in our assessment. Further, the respondent co-operated fully with the Law Society in its investigation. Absent the ASF and her admissions, this application would have required a multi-week, document-intense hearing. Co-operation with the Law Society serves the public interest since such co-operation can promote settlement and ensures the efficient resolution of disputes.
(Mike Frisch)