An Ontario court has certified a class action against Bank of Montreal (TSX:BMO) concerning its alleged role in a $77 million investment fraud.
In a decision handed down August 15, the Ontario Superior Court of Justice certified the class action in a case in which thousands of investors from the Ismaili community in Ontario were defrauded by Salim Damji.
Damji sold investors shares in STS Inc., a company that he claimed had developed a new teeth whitening product, and which he said was about to be sold to Colgate-Palmolive. However, it was all a lie, and Damji defrauded investors of approximately $77 million.
On April 26, 2002, Damji was arrested and charged. He pleaded guilty and was sentenced to seven and a half years in jail. A court appointed receiver has not been able to recover the money. And so, the victims in the case are trying to sue BMO, claiming that, as Damji deposited their money into various accounts at the bank, that it knowingly assisted his breach of trust, knowingly received the fraudulent funds, and/or was negligent in its receipt of these funds. The allegations have not been proven.
Back in April, the court declined to certify the proposed class action, ruling that the proposed litigation plan was deficient. The court also had concerns about the health of the representative plaintiff, Alnassir Pardhan. However, the court found that the case met all the other conditions for certification. So, it adjourned the certification motion and provided both sides with an opportunity to file further evidence.
Now, having considered that additional evidence the court has decided to certify the proceeding as a class action on behalf of all investors who gave money to Damji for the STS scheme, and whose money was deposited at a couple of BMO branches between Jan. 1, 2000, and March 31, 2002. Pardhan has also been appointed the representative plaintiff for the class.