Nearly 10 years after Quebec’s financial watchdog launched penal proceedings against an investment consultant, a Court of Quebec judge fined Denis Patry $2.1 million after being found guilty of 89 counts of securities violations.
Patry was charged for aiding, by act or omission, Les conseillers en valeurs Planiges inc., with making misrepresentations in securities transactions on 81 occasions and failing to fulfill an undertaking with the financial regulator, the Autorité des marchés financiers, on six occasions.
Patry was president and director of Planiges, a firm founded in 1982 that offered investment consultant services. Between 1991 and 1995, the value of the portfolios managed by the firm declined substantially. In February 1996, Patry persuaded the vast majority of his clients to transfer their money, until that time held by Desjardins Trust, which was acting as a securities custodian, into an account held by Planiges at Royal Bank of Canada. Some $10,000,000 was transferred as a result.
Over the following months, some clients asked to be repaid, and were given some $7,000,000, leaving about $3,000,000 in the account. At some point during the 2000’s, the quarterly statements of account sent to clients and prepared by Planiges according to the Patry’s instructions contained falsified values. Patry was trying to use this scheme to hide the fact that, because of his use of the funds to perform futures or options transactions as well as to finance the operations of Planiges, the cash had evaporated. In reality, nothing was left in June 2005, whereas the quarterly statements showed substantial amounts.
The case took so long to resolve because the courts had to grapple with the admissibility of the defence of mental disorder for a strict liability offence, its limits, and the nature of evidence required. On February 2011, Judge Claude Millette of the Court of Quebec concluded that it had been proven beyond a reasonable doubt that Patry had aided with making misrepresentations to investors and had failed to fulfill an undertaking with the AMF, but because he was afflicted with a serious illness – bipolar disease — he had been found not responsible by reason of mental disorders, a ruling upheld by Quebec Superior Court.
The Quebec Court of Appeal however overturned the lower court decision.
“In my view, the Court of Quebec judge erred in law by confusing the physical consequences of an act with the objective sought,” said appeal court Justice François Doyon in Autorité des marchés financiers v. Patry, 2015 QCCA 1933. “He also erred in law by considering the mental disorder defence when it does not meet the minimum air of reality test, or by giving it effect when the evidence was clearly insufficient to rebut the presumption. The evidence did not support the defence.”
The Quebec appeal court convicted Patry of 89 counts of securities violations and returned the dossier to the Court of Quebec case for sentencing.
Court of Quebec Judge Claude Leblond said in Autorité des marchés financiers c. Patry, 2018 QCCQ 1144 that were it not for extenuating circumstances, in other words his mental illness, he would have sentenced him to a 30-36 month prison sentence in addition to the fines.