Kelowna lawyer in hot water with law society, again

Douglas Welder has a lengthy disciplinary record; now he is fighting for his professional life

TIf I had a dollar for every promoter who accused me of having a personal vendetta, I’d be almost as rich as Levi, who has been well remunerated as the skipper of this foundering ship.

he Law Society of B. C. has once again cited Kelowna lawyer Douglas Welder, this time for his alleged involvement in a large and destructive Ponzi scheme.

In a citation issued this week, the law society alleged that in 2006 and 2007 Welder received into his trust accounts several million dollars from investors and disbursed the funds to U. S. bank accounts controlled by International Fiduciary Corp. SA, knowing the B. C. Securities Commission had issued a cease- trade order and notice of hearing alleging IFC was running a fraudulent investment scheme.

A BCSC hearing panel later found that the perpetrators — Daniel Eric Byer and Malcolm Cameron Boyd Stevenson of Abbotsford, and Preston Pinkett II of Virginia — had defrauded IFC investors. The panel permanently banned the three men from the B. C. securities market and ordered them to pay $ 16.7 million in financial penalties.

The citation is the latest in a long list of run- ins Welder has had with the law society:

• In July 1992, he was required to undergo a conduct review after he was found to be in a conflict of interest in a real estate transaction.

• In July 1994, he was cited for making unsubstantiated allegations against another lawyer and required to undergo another conduct review.

• In November 1998, he was subjected to yet another conduct review as a result of his delay and inactivity on an estate matter.

• In July 1999, he was cited for helping a client attempt to breach a trust agreement. He was suspended for 60 days.

• In March 2002, he was cited for failing to remit GST and PST collected from clients. He was fined $ 2,500 and issued a formal reprimand.

• In November 2005, he was once again cited for failing to remit GST and PST funds. He was suspended for one year, later reduced to three months.

• In November 2009, he was required to undergo another conduct review for failing to comply with an undertaking within a reasonable period, and failing to promptly reply to correspondence from another lawyer.

• In August 2009, he was cited for failing to respond to three requests from the law society regarding its investigation into IFC. He was suspended for 45 days.

• In March 2011, he was cited for professional misconduct after he failed to respond to law society queries about two debts the Canada Revenue Agency had registered against him in Federal Court. He was suspended for three months and ordered to pay $ 2,500 in costs. David Chiang, a lay member who sat on the panel, wrote a dissenting opinion saying the suspension was too short, given Welder’s lengthy disciplinary record and lack of contrition.

I agree. The law society’s handling of Welder’s numerous breaches strikes me as very similar to the society’s long- running cat- and- mouse game with recidivist Richmond lawyer Ted Ewachniuk, who was cited 15 times before he was finally stripped of his licence in 2000.

Contacted in Kelowna on Friday, Welder confirmed that he is still practising law. “I practise in lots of different areas. It’s changed over the years,” he said.

Asked why he has been cited on so many occasions, he replied: “I have to be careful what I say. I’m not stupid enough to say anything that may prejudice what may happen down the road.”

No date has been set for the hearing. In 2007, IFC investors filed a class- action lawsuit against Welder and another lawyer, Sandy McCandless, who was also implicated in the scheme and subsequently disbarred.

The investors eventually settled with the law society’s insurance fund, which covers lawyer negligence. No details were disclosed.

Lee fined and banned

Cheng Han Lee’s stint as a mutual fund salesman was brief, eventful and calamitous.

Lee worked at Investors Group in Kamloops from June 2009 to April 2010, when he was fired for failing to deal fairly with a client.

The client — at Lee’s urging — had redeemed $ 83,513 worth of mutual funds and incurred $ 4,513 in deferred sales charges.

Lee told his bosses the client required the funds to make a major purchase. In fact, the client — once again at Lee’s urging — rolled the proceeds into another mutual fund investment.

The rollover qualified the client for a rebate of the deferred sales charges. However, Lee didn’t tell the client or his employer, enabling Lee to collect $ 2,528 in sales commissions he was not entitled to.

Mutual Fund Dealers Association officials began to look into other possible breaches, but Lee failed to attend interviews or respond to correspondence, contrary to MFDA rules.

He also failed to show up for his hearing, which pretty well sealed his fate. The hearing panel permanently banned him from the mutual fund industry and ordered him to pay a $ 55,000 fine and $ 5,000 in costs.

No word on what Lee is doing now. Collection may prove problematic, to say the least.

WOF fund under fire

Some afterthoughts on the Working Opportunity Fund and, more generally, the labour- sponsored fund program:

It has been 20 years since this illogical marriage of labour and venture capital was forged, and the results have been grim. Huge management fees and low returns have conspired to make this a loser not only for investors, but also for taxpayers who have provided huge tax subsidies, thereby creating the illusion of positive returns.

I have decried this program since WOF’s first fund was started in 1992. With such huge tax breaks, I thought the demands of shareholders, and the pressures on management to perform, would be much reduced.

I didn’t like the fact that such highrisk investments were being promoted to mom- and- pop types, even in limited amounts. I didn’t like the management remuneration formula ( bonuses were paid on the basis of unrealized gains, a methodology that was modified only after pressure by this newspaper).

I thought the stewardship of these funds ( mainly by labour officials) was highly questionable. Also, David Levi, who ran WOF and the management company ( GrowthWorks Capital), had no track record in this area, and in my view he consistently over- promoted the funds. He had an answer for everything, even as the ship was sinking. Consider this exchange with B. C. Business magazine in November 2005:

Q. David Baines has been taking the boots to you in recent months. How do you respond to criticism that the asset class is a lousy performer and GrowthWorks’ bonuses have been out of whack?

A. He writes essentially the same column on us about every two years, so I’m used to it. And for some reason he’s turned it into a personal issue, which diminishes him in writing about the fund. In my opinion, David’s credibility has dropped significantly within the investment community, so I just write it off.

If I had a dollar for every promoter who accused me of having a personal vendetta, I’d be almost as rich as Levi, who has been well remunerated as the skipper of this foundering ship.