Montreal lawyer alleges another Ponzi scheme

An investigation is underway in Montreal into what's been described in two new lawsuits as another Ponzi scheme.

The probe comes the same week that Montreal financial adviser Earl Jones was arraigned on fraud and theft charges in connection with an alleged Ponzi scheme.

In the latest case, lawyer Jacob Rothman is seeking nearly $350,000 on behalf of two clients implicated in the alleged scam. He plans to file a third lawsuit next week.

The suits allege the parties invested in a Bahamas company called Progressive Management Ltd.

"The fraud can be succinctly described as a Ponzi scheme in that PML, as it developed, was little more than a corporate shell, soliciting funds from innocent victims and utilizing these funds for the personal benefit of a variety of individuals," documents filed in court state.

A Ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by other investors rather than from any actual profit earned from investments.

According to the suits, the funds were also used to "generate volume in certain offshore gambling institutions."

Rothman said when his clients showed him documents from PML, it took him 90 seconds to decide he was looking at a scam.

He said in 2005, the high rates of interest his clients had been receiving slowed to a trickle. Then in February 2006, a letter was sent to all investors saying PML was undergoing restructuring and they shouldn't expect any money for 24 months.

When the two-year deadline passed, PML was unreachable.

The lawsuits implicate several financial advisers who are alleged to have solicited investment funds knowing the company was not a financial institution that invested in generally recognized valuable securities.

Quebec securities regulator investigating

Quebec provincial police wouldn't say whether a criminal investigation is underway, but Quebec's securities regulator has confirmed its involvement in the case.

"What we can confirm is we are in fact investigating this file," Autorit des marchs financiers spokeswoman Cathy Beausjour said. "It is a complex file as it is an offshore company."

She wouldn't say how long the regulator has been involved or elaborate further,because the regulator is named as an interested party in the lawsuit.

Beausjour said investors should be careful to verify what products an individual is authorized to sell.

"It's extremely important before investing with a representative to ensure the person is registered with the authority and that they are licensed to sell the product they are selling," she said.

Beausjour said defendant Lance Townend was registered as a mutual-fund representative and group savings plan broker.Gennaro Natale, a second defendant, was registered in group insurance and group annuity plans and as a certified financial security adviser and financial planner.

Neither man answered phone calls, but a lawyer for Natale said his client has never heard of PML or the investors he is alleged to havedealt with.

Beausjour had no information on the other defendants named in the suits.

No statements of defence have been filed and the allegations have not been proven in court.