Investment scammer loses appeal

Unregistered adviser hit with $17.5M penalty

A man who perpetrated a massive financial fraud against hundreds of elderly clients has lost his appeal of findings made against him by the B.C. Securities Commission.

Court heard that starting in 2005, David Michael Michaels was featured on a 45- minute weekly radio program that attracted people to investment seminars he hosted in Victoria and Vancouver, the target audience being seniors.

Michaels told his listeners that the average age of his clients was 72 and added: “I love helping seniors make money.”

Between June 2007 and December 2010, Michaels advised 484 elderly clients to purchase $65 million worth of exempt market securities and pocketed for himself $5.8 million in commissions and marketing fees.

But nearly all of the securities are now worthless, resulting in the financial ruin of many of Michaels’ clients.

The B.C. Securities Commission investigated the matter and concluded in 2014 that Michaels acted as an adviser without being registered, made misrepresentations and perpetrated fraud.

A commission panel ordered that he pay back the $5.8 million he’d earned and also imposed a $ 17.5- million administrative penalty on him.

On appeal, Michaels argued that the commission had made a number of errors, including making findings of misrepresentation based on statements that were opinion rather than material facts. He also argued that the panel had imposed an unreasonable penalty.

But in a ruling released Friday, a three-judge panel of the B.C. Court of Appeal has dismissed those arguments and upheld the findings of the commission.

In his reasons for judgment, Chief Justice Robert Bauman concluded that no reviewable error had been demonstrated in the commission’s findings and analysis of the misrepresentation allegations.

Bauman also found that there was nothing inappropriate about the penalties imposed on Michaels.

“In my view, the panel’s reasons for the administrative penalty were clear, principled and intelligible. I would give no effect to this ground of review.”

Justices David Frankel and Laurie Ann Fenlon agreed with Bauman’s ruling.