Notary fraud victims may get compensation

Earlier this year, a B.C. Securities Commission (BCSC) hearing panel ruled that former notary, Rashida Samji, ran a Ponzi scheme that took in over $100 million from at least 200 investors. The panel found that she perpetrated a fraud with the scheme, but it has yet to hand down penalties in the case, pending a hearing on sanctions. (See BCSC panel finds former notary public committed $100M fraud, investmentexecutive.com, July 22, 2014.)

Now, in a class action suit against Samji, her personal corporation, Rashida Samji Notary Corp., Samji & Assoc. Holdings Inc., a company she owned and controlled, and the Society of Notaries Public of B.C (Society) before the Supreme Court of B.C., the only disputed issue was whether or not the funds invested in the scheme were received by Samji in her capacity as a notary public. The Society maintains a compensation fund, under the legislation governing notaries, in order to assist people that may suffer losses due to the actions of notaries.

The plaintiffs in the class action sued in connection with the investment scheme Samji promoted, known as the “Mark Anthony Investment”, which the BCSC found to be a Ponzi scheme. And, the court reports that Samji “agreed she operated the fraudulent investment scheme using the ‘Mark Anthony Group’ name between 2003 and 2012, and that the plaintiffs were investors in the scheme.” The only issue for trial was whether the funds she took in were received in her capacity as a notary.

The class action plaintiffs argued that “Samji told investors that the funds provided to her would be safe because they would be held by her in her notary trust account, which was subject to review and audit by the Society.” And, they noted that she reinforced that impression by using her notary seal on the letters of direction received from investors. They maintain that Samji received the funds in her capacity as a notary public, arguing that it does not matter that she received the funds as part of an alleged investment opportunity, and not for the provision of notarial services.

Samji had practiced as a notary public for approximately 20 years until the Ponzi scheme was discovered in February 2012, and she was suspended by the Society, the court’s decision notes. She resigned from the Society in March of that year.

The court said that the Society argued that Samji was not acting in her capacity as a notary public when she was promoting the fraudulent investment scheme and receiving funds from investors, and that none of the activities she engaged in as part of promoting the fraudulent scheme fell within the scope of a notary public’s authorized rights and powers. The Society admitted that while Samji likely used her status a notary public to lend herself credibility, “the fact she happened to be a notary public at the time does not, in any way, change the fact that she performed no notarial services for the plaintiffs in connection with the investment the plaintiffs believed they were purchasing.”

The judge in the case, Justice Laura Gerow, sided with the investors, ruling, “I agree with the plaintiffs that if the ‘Mark Anthony Investment’ had been a real investment opportunity, the drawing of the letters of direction and the holding of the funds in Ms. Samji’s trust account pursuant to the letter of direction would have been within her rights and powers as a notary… As a result, I conclude that the investors’ funds were received by and entrusted to Ms. Samji in her capacity as a notary public.”

The court also noted that Samji’s status as a notary public, and the representations that the investors’ funds would not be at risk because they would be held in her trust account, “were integral to the fraud carried out by her, in clear breach of her ethical obligations as a notary public”.

If the argument that Sajji did not receive the funds in her role as a notary was upheld, the court said, “it would create a gap between Ms. Samji’s ethical obligations as a notary and the remedy that the special fund is intended to provide as a last resort for the breach of those obligations… If that argument is accepted, then the public would be left unprotected and the purpose for which the special fund was established would be frustrated.”

The court also said that the purpose behind the compensation fund created under the Notaries Act “the question of whether the funds were entrusted to a member of the Society in the person’s capacity as a notary public must be answered from the perspective of the person providing the funds.”

“It is not a question of whether the notary was acting within the strict confines of [the legislation]. Rather, it is a question of whether the person was providing the funds to the notary public to be held in trust and the funds were received by the notary public on that basis. In this case, the evidence clearly establishes that the funds were advanced and received on that basis,” the court said.

According to the law firm representing the plaintiffs in the class action, Surrey, B.C.-based Hamilton Duncan Armstrong & Stewart, a hearing is set for September 10 in a separate bankruptcy proceeding involving Samji and her companies where the trustee in that case will seek to confirm the distribution method for the money it has collected.