Contrary to expectations, Great-West Life Assurance Co. of Winnipeg will not appeal a Manitoba court ruling that found it liable for the fraudulent actions of a former rogue broker. That decision not to appeal clears the way for more than a dozen pending cases arising from the actions of the same broker to move forward.
“We’re lined up with my clients. We’re going to pull the trigger, too, unless [Great-West] wants to settle,” says Richard Beamish, a lawyer at Winnipeg-based Tapper Cuddy LLP who represents about 10 former clients of Gary Palmer.
Great-West Life was found responsible in December for the actions of Palmer, who was earlier convicted of defrauding 23 people, including the theft of $1.5 million, during a nearly decade-long spree. He used the ill-gotten gains – in some cases, his clients’ entire retirement savings – to fund his insurance business and his high-end lifestyle. He is now serving an eight-year jail term. (See Investment Executive, Great-West responsible for ex advisor’s fraud: judge, December 19, 2013.)
Great-West argued that Palmer was an independent contractor and that it was not responsible for his actions. The trial judge disagreed, saying the company “cloaked [Palmer] with the attributions of apparent authority.”
The judge sided with Michel and Lorraine Mignault, awarding the Winnipeg couple $528,834.
Their lawyer, Dave Hill, didn’t receive an official notice that Great-West wasn’t going to appeal. The company’s intentions, however, became clear when it sent him a six-figure cheque for the Mignaults. He says he was glad Great-West didn’t appeal.
“It would have continued the plight of the Mignaults and others to wait to see if they were ever going to get paid. [The decision not to appeal] saves the costs of an appeal, which would have been extensive, and also a great deal of time to wait for the appeal to be heard and the outcome. It’s hopefully good news for the [remaining] investors,” says Hill, who represents another one of those investors.
Now that the court has established that Palmer was an agent of Great-West, Hill says that — unless the cases of the other plaintiffs were “entirely” different — they shouldn’t have to go to court to prove that point.”
Hopefully, this gives them a chance to negotiate a settlement with Great-West,” Hill says.
Next: A rare and unfortunate situation
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A rare and unfortunate situation
A spokeswoman for Great-West says the Palmer case is a “rare and unfortunate situation where a single independent advisor was found to have committed fraud.”
She added: “Great-West Life has been in business for more than 115 years and values its reputation in the community. This is an isolated incident involving an independent advisor and his clients and their investments through him.”
The spokeswoman noted that the company’s code of business conduct and ethics sets out its commitment to integrity and ethical behaviour. Advisors who contract with Great-West are required to sign a statement agreeing to comply with this code of business conduct.
She declined to comment on what Great-West might do with the other clients who were bilked by Palmer because the matters are before the courts.
Beamish isn’t sitting back waiting to see what will happen. He says he is setting his clients up for pre-trials and then plans to get them trial dates. “We’re going to push them hard. We were hoping [the Mignault decision] would break the dam,” he says. Beamish says he is also sending a letter to Great-West’s lawyers to test the waters regarding negotiating settlements.
Beamish admits he was surprised that Great-West decided not to appeal. “I suspect [Great-West] may feel this was a bit of a public black eye and if they keep defending it, it could become a bigger black eye,” he says. “[The Mignault decision] can’t be anything but positive for us.”
Starting in 1998, Palmer convinced the Mignaults to withdraw money from their annuity accounts and deposit the same amount in J.D. Raleigh & Co. Ltd., a company he owned. The Mignaults testified that they believed they were merely moving money from one Great-West account to another.
It was widely expected that Great-West would appeal the December judgment in the Mignault case because it had been sued successfully twice in the last five years and subsequently had the decisions overturned by the Manitoba Court of Appeal. In one case, a $37-million judgment on a pension fund was overturned and in the second, the aggravated damages awarded against it in a disability claim by a lower court were thrown out.