Great frauds in history... Earl Jones’ 20-year Ponzi scheme

Bertram Earl Jones (known as Earl) was born in Montreal in 1942. In 1963 he began working at Montreal Trust, in various departments including investment management, estate planning and the mortgage department. In 1979 he set up his own (unregistered) financial advice business, giving free financial seminars to local people in order to identify potential investors. He also targeted the trustees of estates that were being liquidated, offering them interest rates that appeared to be much better than they could get from a bank if they temporarily deposited funds with him.

Little or none of the money was actually invested. For at least 20 years, Jones ran a Ponzi scam: the original investors were repaid from the money that came in from those clients who joined later. In order to increase the amount of money further, Jones took out additional loans from lenders by falsely claiming that they would go to those who were due to inherit large sums of money from estates that were in the process of being settled. By the mid-1980s, Jones started to systematically divert a portion of the money from clients’ accounts to fund his lifestyle.

What happened next?

Initially, Jones’ record of paying large amounts of interest regularly ensured that enough cash flowed in to enable the fund to keep running. However, over time, the amount of money left to make payments started to dwindle. Even though he mortgaged some of his properties and took money from his brother in an attempt to keep the scheme afloat, the cheques he wrote to investors started to bounce, causing them to complain. Facing ruin, he briefly disappeared, before surrendering himself to police. In 2010 he pled guilty to fraud and was sentenced to 11 years. After deducting fictitious interest payments, net losses were estimated at around C$36m (£21m at current exchange rates). Following a legal battle with RBC, where Jones had his account, the bank agreed to pay investors around 50% of their losses.

Lessons for investors

One big red flag that should have warned everyone associated with him was that, during the entire time in which Jones operated, neither he nor his firm were registered with the authorities. Investing with an unregistered firm is always a bad idea because you have no recourse to any compensation scheme in the event of fraud.