The other financial scandal that struck Quebec, the one that did not receive nearly the same attention that the defunct mutual fund company headed by Vincent Norbourg did, is winding its way through the courts.
Three more individuals linked with the bankrupt Montreal financial group Mount Real Corp. were recently condemned to pay fines ranging $13,000 to $425,000 while a fourth pled guilty to 40 counts, making it 18 individuals who have so far pled guilty to 478 counts, with fines totalling $2.2 million.
Quebec’s financial watchdog, the Autorité des marchés financiers (AMF), launched penal proceedings three years ago before the Court of Québec, filing 682 charges against shareholders, directors and officers of bankrupt Montreal financial group Mount Real Corp. after a three-year investigation involving six investigators who had to sift through 375 boxes of evidence and 1.5 million e-mails and other electronic documents. The AMF is seeking imprisonment not exceeding five years less a day, and fines ranging from $500,000 to $5-million for each offence, for a total of $551.5 million.
“The investigation revealed that the officers of Mount Real had apparently set up an elaborate ploy involving, in particular, fictitious transactions, which resulted in significantly improving the appearance of the company’s financial position, thereby misleading the public,” said the AMF after it launched the penal proceedings.
Approximately 1,600 retail investors lost $130-million on unregistered investment notes issued by Mount-Real and its affiliated companies, and there is little chance that investors will recoup their monies. A government-appointed administrator who took control of Mount Real in November 2005 after the company was shut down by the AMF found that it was “an empty shell.”
“This is a dossier where investors risk losing the quasi-totality of their investment in spite of our efforts to recover the assets,” told me Jean Robillard, a partner at Raymond Chabot Grant.
Mount Real was a firm that provided management and accounting service and strategic advice to companies and individuals. Its principal business activity, though, was selling magazine subscriptions. In operation from 1997 to 2005, Mount Real’s structure was extremely complex, with up to 120 companies linked to it. A Toronto Stock Exchange listed company, the company boasted $5.7-million in revenues and $89.7-million in assets in fiscal 2004. In November 2005, the Quebec securities regulator shut down its offices after a probe.
The AMF alleges that Lino Matteo, Mount Real’s former chief executive, “orchestrated the ploy.” The accountant who was provisionally struck off the roll by the disciplinary committee of the Quebec Order of Certified Management accountants last year faces 308 charges under the Quebec Securities Act. The AMF is seeking a total of $204-million in fines plus jail time.
On March 2008, Matteo was found guilty of three counts of violating the professional corporation’s Code of Ethics relating to allegations he swindled millions of dollars from investors in the Mount Real case. Matteo handed a letter of resignation, and on November 2008 the disciplinary committee ordered Matteo to pay $18,000 in fines.
Also charged by the AMF was Paul D’Andrea, a CMA who too was provisionally struck off the roll last year. The former chief financial officer of Mount Real plead guilty on September 18, 2008 to 131 charges. He is cooperating with the AMF, and in exchange the regulatory body is not seeking a prison sentence against him.
D’Andrea too was found guilty of ethical breaches by the Quebec CMA disciplinary committee – on the same day that Matteo was. In essence, D’Andrea was found guilty of facilitating Matteo’s fraud, and on June 18, 2008 his license to practice was revoked for ten years, beginning April 2007.
“In spite of the serious nature of the reproaches, the evidence shows that the respondent was not the brains who conceived and put in place the sting against investors,” said the three-member disciplinary committee in a five-page ruling.
“At the time he was hired by Lino P. Matteo in 1997, the respondent had no practical experience, becoming a member of the Order in 1998. There is no doubt that for the Committee that the respondent was controlled and influenced by Lino P. Matteo, at the time an influential member of the Italian community which the community belonged to. The respondent did not profit from the frauds, and the salary that he was paid over the years was far from exhorbitant. The respondent also collaborated, and accepted to even testify against Lino P. Matteo.”
Another accountant facing charges is former Mount Real president and chief operating officer Joseph Pettinicchio, a CGA on the roll since 1983. The AMF filed 70 charges against Pettinicchio, and is seeking a prison sentence as well as fines totaling $63.5 million.