Collecting from cheats is a long, complex process: specialist

Law firm investigates properties, how funds are used to pay for them

Collecting fines from fraudsters takes patience and a willingness to dig deeply, according to debt collections specialist Speigel Nichols Fox LLP.

The Mississauga, Ont.-law firm with 29 years of experience collecting for financial institutions and other creditors was hired last spring by the Ontario Securities Commission in a two-year pilot program to help boost the province’s collections of penalties from fraudsters.

The OSC — as well as the B.C. Securities Commission — can use the help.

From fiscal 2007-08 to 2016-17, the B.C. Securities Commission has collected less than two per cent of $510 million in fines and orders to pay back the proceeds of fraudulent activities, according to the findings of a Postmedia investigation published last month.

In response, the B.C. government has called on the BCSC to improve its collection record, asking for proposals and looking for solutions that may require new legislation, Finance Minister Carole James has said.

The Ontario Securities Commission collection rate is better than B.C.’s, at about 18 per cent in the past decade, but there are still $370 million in uncollected fines, according to Postmedia’s analysis.

Alberta and Quebec have similar collection rates to Ontario.

“The old saying, patience is virtuous, it’s even more so in this field,” said Irving Fox, a partner at Speigel Nichols Fox.

He noted that one file the firm handled took 200 hours of investigation time. “We take nothing at face value,” said Fox.

The firm’s collections department — headed by chief law clerk Tiziana Moretti — typically builds a profile of a debtor, including tracking assets through spouses, children, other family members and business partners. That can include a history of property ownership and tracing how funds have been used to pay for properties and from where they originated.

The Postmedia investigation showed fraudsters often placed property in the names of spouses or property was held jointly.

Fox said those assets can be attacked if they can be shown to be transferred to escape penalties or debts, or if in essence, the fraudster was a beneficial owner.

Even if a property was put in a spouse’s name well before the fraudulent activity, Moretti said that would not deter her from going after the asset.

“I would look at somebody basically from when they were born, who their family members were, when they bought their first house. There’s a pattern with these people. You’ll see that. They start getting more entrepreneurial — that’s when they will put the house into their spouse’s name,” noted Moretti.

Sometimes the team will sketch out relationships and transactions on a whiteboard, much in the way a criminal investigation might, she said. The firm also uses expertise in internet intelligence to track down debtors. They found one debtor through a photo of a child in karate class, for example.

Ultimately, there is a series of collection tools that can be used including garnishment, seizures, and so-called Norwich orders requiring third parties including financial institutions to disclose information on debtors, explained Fox.

Fox noted one spinoff benefit of more aggressively trying to collect penalties from fraudsters is it may be a deterrent in itself.

“Once they know you are going to pursue them — and you are not going to let them rest easy — that in itself will have some deterrence,” he said.

Once they know you are going to pursue them — and you are not going to let them rest easy — that in itself will have some deterrence.