Ex-Canucks goalie told to pay back $384,000 gain from Ponzi scheme
‘House of cards’ imploded when fraud discovered in 2012, judge says
VANCOUVER — Former Vancouver Canucks goalie Kay Whitmore has been ordered by a judge to pay back $384,000 he received after investing in a multimillion-dollar Ponzi scheme run by a Vancouver notary.
In December 2005, Whitmore invested $600,000 in the scheme being run by notary Rashida Samji after she had assisted him about three years before in the closing of his purchase of some real estate in the Vancouver area.
Whitmore, who since 2005 has been employed as a senior director of hockey operations for the NHL, testified that his understanding of the investment was that he was lending money through Samji to an “alcohol company” for a term of six months and that he would receive 7.5 per cent as interest within three weeks.
He said he was told that at the end of the six-month term, he had the option of receiving the principal of his loan or renewing the loan for a further six-month term, again with interest payable at 7.5 per cent within three weeks of the renewal.
By January 2012, by which time he had withdrawn his principal from the scheme, Whitmore had received a total of $384,000 in gains from the investment.
In his ruling on the case, B.C. Supreme Court Justice Gordon Weatherill noted that Whitmore was not a party to nor had any knowledge that it was a Ponzi scheme he had invested in. Unbeknownst to him, Samji had sourced her gains from the funds placed by other investors with her.
The judge noted that the “house of cards imploded” in February 2012 when Samji’s fraud was discovered and she was suspended as a notary public, with a police investigation resulting in her being convicted of fraud.
Samji had run the scheme from 2002 to about January 2012 and attracted 220 investors, including Whitmore.
In December 2012, the Samji Group made a voluntary assignment into bankruptcy and in September 2014, the trustee in bankruptcy of the Samji matter was authorized to conduct a process to determine the claims of the creditors of the Samji estate.
According to the ruling, the trustee determined that the total loss from the scheme was about $41 million, involving accepted claims from 150 investors who had lost money.
At trial, the trustee argued that the profits that the people who made money from the scheme, such as Whitmore, should have to be repaid.
The Whitmore lawsuit is the first of several actions commenced against people who earned money from the scheme, according to the ruling.
Whitmore, who said he used the money he earned for living expenses, conceded that he received an overpayment of $30,000 from the Samji Group with cumulative payments of fees on that amount totalling $56,000, that he should pay back.
But he said the remainder of the “excess” money he got constituted no more than a reasonable return on his loan agreement which he received in good faith.
“The defendant urges upon the court that his investment with Samji was a straightforward and legitimate “lending agreement” and that the excess was simply the payment to him of the agreed “interest” thereunder,” said the judge.
“In my view, that is an artificial construct that does not reflect the reality of what occurred.”
Weatherill said Whitmore’s arguments were not supported by any documentary evidence and nowhere was the word “loan” used.
“The defendant’s attempts during cross-examination to explain that his purported understanding that he had ‘lent’ his money to Samji in return at a set interest rate were convoluted, tortuous, rambling and defied credulity and common sense.”
The judge found that the moneys received by Whitmore were “void as a fraudulent conveyance” and ordered him to pay back the funds.
He said Whitmore was innocent of any wrongdoing, other than maybe a failure to perform “even a modicum of due diligence,” but noted that he took no steps to determine the legitimacy of the scheme.
Whitmore, the backup goalie in the Canucks’ run to the 1994 Stanley Cup Final, made a number of other arguments in opposition to having to return the money, but the judge rejected them.