PAIR GETS 12 YEARS FOR PONZI SCHEME
Hundreds of millions gone in historic fraud
Six years after police were called in, victims in one of Canada’s most massive frauds finally saw justice done.
Tuesday, a judge in Calgary jailed Gary Sorenson, 71, and Milowe Brost, 61, for 12 years for a long-running Ponzi scheme in which between $120 million and $200 million of investors’ money disappeared.
Among the more than 2,000 people from Western Canada bilked in the fraud, centred in Calgary, were several players in the Canadian Football League, including Don Narcisse, a former star wide receiver with the Saskatchewan Roughriders.
They were told their money was being put in “low-risk” investments, that $99,000 would balloon to more than $1 million in eight years and everything was backed by gold.
Investors were wined and dined in the Bahamas and taken to a gold-refining plant, Merendon Mining Corp. Ltd., operated in Honduras.
But things were not as they seemed. Instead, the money went to raising horses in Peru, a palatial home in the Honduran capital Tegucigalpa, and a luxury bass-fishing lodge.
By 2009, when the Royal Canadian Mounted Police stepped in to probe what police called Canada’s largest Ponzi scheme, investors had lost between $120 million and $200 million.
What followed was one of Canada’s longest criminal trials, a five-month marathon in Courtroom 1503 of the towering Calgary Courts Centre.
In February, a jury of 11 found Sorenson and Brost guilty of two counts each of theft and fraud, and one count of money-laundering.
Fearing flight, the judge ordered the pair jailed to await sentencing.
Finally, on Tuesday, came a moment for which many investors had waited years: Justice Robert Hall of the Court of Queen’s Bench jailed the two men for 12 years. Brost also got five years, to be served concurrently, for money-laundering.
For Canada, where sprawling corporate frauds such as Bre-X Minerals (worth at one time $6 billion) and Nortel Networks (whose value rose to $400 billion) yielded no prison term for anyone, it is a rare moment for white-collar criminals to do serious time behind bars.
The Calgary sentence pales in comparison with the 150 years in prison celebrated New York fraudster Bernie Madoff received in 2009; still, Maldoff’s fraud was much bigger, at about US$16 billion.
Alberta prosecutors had sought 14 years for Brost and Milowe. But they said they were happy Tuesday.
“It was important for us that the judge found it was pure greed with no legitimate business purpose from Day 1,” prosecutor Brian Holtby said outside court.
“This dishonesty and greed hurt hundreds of people.”
Describing the victims Tuesday, the judge said, “Some were homeless. Many suffered shame and embarrassment. It eroded once-happy marriages. Some considered suicide.
“Neither of the accused has expressed any remorse.”
One investor, Edna Coulic of Kelowna, B.C., killed herself in October 2008.
Her family blames her death on the loss of $300,000 she invested in three companies: Strategic Metals, Syndicated Gold Depositories and Base Metals LLC, which proposed gold mines in Honduras, Venezuela, Ecuador, Peru, Canada and the United States.
“She was a beautiful young lady. She had so much potential, a full life ahead of her,” Coulic’s older sister Gloria Lozinski told the Calgary Herald.
“She wanted to do a lot of good with what she thought was going to be her return. Once she found out she wasn’t able to do it, it crushed her.”
Nearly 600 victims filed impact statements. But only one spoke up in court: Carole Knopp of Enderby, B.C., who lost $130,000.
“It is really nice to have it over,” she said Tuesday.
“I’ ll get over it, given my strength, yes. But financially, no. Seeing (Sorenson and Brost) in court, they look like hollow, empty people. They are sociopaths or psychopaths to not have any response.”
Ponzi schemes derive their name from Charles Ponzi of Boston, who raked in US$8 million (about $100 million today) in 1920 when he promised huge profits by buying discounted postal reply coupons in other countries and redeeming them at face value in the U.S. In fact, Ponzi paid early investors using the cash of later investors. “We all crave easy money,” Ponzi himself once noted.
Prosecutors in Calgary say Sorenson and Brost did the same thing: solicited new investors and used their money to pay existing ones.
Sorenson, who wore sweatshirts and running shoes to court, represented himself at the trial. In a final appeal to the jury, he said, “I’m trusting you.”
The Alberta Securities Commission fined the pair $54 million in 2012, and the U.S. Securities & Exchange Commission ordered them to pay $210 million to investors and $100 million in penalties.
It is unclear any investor will see restitution: during the proceedings, both men claimed poverty.