R v Link, 2013 SKQB 138 (CanLII). Click here.
R v Link, 2013 SKQB 138 (CanLII)
QUEEN'S BENCH FOR SASKATCHEWAN
Date: 2013 04 16
Docket: Q.B.C. 22/2011
Judicial Centre: Regina
BETWEEN:
- and -
Counsel:
Jerome A. Tholl for the Crown
J. Paul Malone for the accused
JUDGMENT BALL J.
[1] The accused, Klaus Link, carried on business in Saskatchewan through his company, Tri-Link Consultants Inc., for over 25 years. During that time, he received money for investment purposes from various individuals and businesses. He is now charged with two counts of fraud and two counts of theft of that money.
[2] The following decision outlines the charges against Mr. Link and reviews the law of fraud and theft as it relates to those charges. It then summarizes the evidence, beginning with Mr. Link's knowledge and experience as an investment advisor. It deals with why he received money from his clients, and what he actually did with that money. The last portion of the decision considers Mr. Link's conduct in relation to each of the victims named in each count of the indictment. Each count is then amended to conform to the evidence.
[3] For the reasons set out below, I find that Mr. Link committed fraud and theft in relation to each of the victims listed in each of the amended indictments. I determine that the total amount of his fraud and theft exceeded $1.7 million, with no less than $970,000.00 for his personal use and unauthorized business expenses. I find that he used the rest of the money to perpetuate a Ponzi scheme through a pension plan marketed and administered by Tri-Link Consultants Ltd. Although I conclude that Mr. Link is guilty on all four counts in the indictment, I direct a stay of the two counts of theft on the principle that no person is liable to be punished more than once for the same offence.
THE CHARGES
[4] Counts 1 and 2 of the indictment read:
Count 1 THAT HE, the said KLAUS LINK between the 1st day of January A.D. 1997 and the 31st day of December A.D. 2007 at or near Regina, and elsewhere in the Province of Saskatchewan, did by deceit, falsehood or other fraudulent means defraud: Ronald and Irene Parker, John McGregor, George and Jeannette Stefan, Constantin and Tamara Simicorescu, Gerald Sernick, Laurie Sernick, Brian Jennings, Hans Gaastra, 605687 Saskatchewan Ltd., 625252 Saskatchewan Ltd., Kevin
and Sherri Foster, Alvin and Madeline Wigmore, Frederick Casswell, Joseph Miotti, Mark Hergott, Weyburn Inland Terminal Ltd. and employees of Weyburn Inland Terminal Ltd. and Drake Meat Processors Inc. and employees of Drake Meat Processors Inc.; of money, of a value exceeding five thousand dollars ($5000.00), contrary to Section 380(1)(a) of the Criminal Code of Canada.
Count 2 THAT HE, the said KLAUS LINK between the 1st day of January A.D. 1997 and the 31st day of December, A.D. 2007 at or near Regina and elsewhere in the Province of Saskatchewan, did commit theft of money, the property of: Ronald and Irene Parker, John McGregor, George and Jeannette Stefan, Constantin and Tamara Simicorescu, Gerald Sernick, Laurie Sernick, Brian Jennings, Hans Gaastra, 605687 Saskatchewan Ltd., 625252 Saskatchewan Ltd., Kevin and Sherri Foster, Alvin and Madeline Wigmore, Frederick Casswell, Joseph Miotti, Mark Hergott, Weyburn Inland Terminal Ltd. and employees of Weyburn Inland Terminal Ltd, and Drake Meat Processors Inc. and employees of Drake Meat Processors Inc.; of a value exceeding five thousand dollars ($5000.00), contrary to Section 334(a) of the Criminal Code of Canada.
Counts 3 and 4 of the indictment read:
Count 3 THAT HE, the said KLAUS LINK between the 1st day of March A.D. 2004 and the 1st day of October A.D. 2004, at or near Regina and elsewhere in the Province of Saskatchewan, did by deceit, falsehood, or other fraudulent means defraud Hans Gaastra, 605687 Saskatchewan Ltd. and 625252 Saskatchewan Ltd., of money, of a value exceeding five thousand dollars ($5000.00), contrary to Section 380(1)(a) of the Criminal Code of Canada.
Count 4 THAT HE, the said KLAUS LINK between the 1st day of March 2004, A.D. and the 1st day of October A.D. 2004, at or near Regina and elsewhere in the Province of Saskatchewan, did: commit theft of money, the property of Hans Gaastra, 605687 Saskatchewan Ltd., and 625252 Saskatchewan Ltd., of a value exceeding five thousand dollars ($5000.00), contrary to Section 334(a) of the Criminal Code of Canada.
THE LAW OF THEFT AND FRAUD
[5] The Crown submits that Mr. Link defrauded and committed theft from the victims named in each of the indictments by receiving money from them to invest on their behalf and, with intent to deprive them of that money, by using it for his own and other improper purposes.
THE CRIMINAL CODE, R.S.C. 1985, c. C-46
322. (1) Every one commits theft who fraudulently and without colour of right takes, or fraudulently and without colour of right converts to his use or to the use of another person, anything, whether animate or inanimate, with intent
(a) to deprive, temporarily or absolutely, the owner of it, or a person who has a special property or interest in it, of the thing or of his property or interest in it;
(b) to pledge it or deposit it as security;
...
(3) A taking or conversion of anything may be fraudulent notwithstanding that it is effected without secrecy or attempt at concealment.
(4) For the purposes of this Act, the question whether anything that is converted is taken for the purpose of conversion, or whether it is, at the time it is converted, in the lawful possession of the person who converts it is not material.
...
330. (1) Every one commits theft who, having received anything from any person on terms that require him to account for or pay it or the proceeds of it or a part of the proceeds to that person or another person, fraudulently fails to account for or pay it or the proceeds of it or the part of the proceeds of it accordingly.
...
332. (1) Every one commits theft who, having received, either solely or jointly with another person, money or valuable security or a power of attorney for the sale of real or personal property, with a direction that the money or a part of it, or the proceeds or a part of the proceeds of the security or the property shall be applied to a purpose or paid to a person specified in the direction, fraudulently and contrary to the direction applies to any other purpose or pays to any other person the money or proceeds or any part of it.
...
334. Except where otherwise provided by law, every one who commits theft
(a) is guilty of an indictable offence and liable to imprisonment for a term not exceeding ten years, where ... the value of what is stolen exceeds five thousand dollars.
...
380. (1) Every one who, by deceit, falsehood or other fraudulent means, ...any person, whether ascertained or not, of any property, money or valuable security or any service,
(a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding fourteen years, where ... the value of the subject‑matter of the offence exceeds five thousand dollars;
RELEVANT CASE LAW
Theft
[6] Theft under s. 322 of the Criminal Code occurs when anything is taken or converted, fraudulently and without colour of right, with intent to deprive the owner of it, temporarily or absolutely.
[7] For the purposes of s. 322, "fraudulently" means intentionally, under no mistake, and with knowledge that the thing taken is the property of another person (R. v. Lafrance , 1973 CanLII 35 (SCC), [1975] 2 S.C.R. 201, at para. 17; R. v. Skalbania, 1997 CanLII 337 (SCC), [1997] 3 S.C.R. 995, [1997] S.C.J. No. 97 (QL), at p. 997)
[8] For the purposes of s. 322 of the Criminal Code, theft occurs when a person receives money for one purpose, knows the purpose to which the money is to be applied, and knowingly, without mistake, applies the money to a different purpose (R. v. Skalbania, supra; R. v. Bast, (1989) 1989 CanLII 4796 (SK CA), 79 Sask. R. 141, [1989] S. J. No. 558 (QL) (Sask. Q.B.), at para. 73)
Fraud
[9] In R. v. Théroux, 1993 CanLII 134 (SCC), [1993] 2 S.C.R. 5, [1993] S.C.J. No. 42 (QL), McLachlin J. (as she then was) stated at p. 15 that the offence of fraud is based on the single precept that "commercial affairs are to be conducted honestly".
[10] The terms "deceit", "falsehood" or "other fraudulent means" were explained in R. v. Briltz, (1983), 1983 CanLII 2577 (SK QB), 24 Sask. R. 120, [1983] S.J. No. 1120 (QL) (Sask. Q.B.) as follows:
3 To deceive is to induce a person to believe that a thing is true which is false, and which the person practising the deceit knows or believes to be false. A falsehood is a deliberate lie. Other fraudulent means include means which are not in the nature of falsehood or deceit, they encompass all other means, which can properly be stigmatized as dishonest. Fraud is, therefore, some dishonest practice, whether resulting from falsehood, deceit or other fraudulent means resorted to with intent to deprive another of his right or in some way to do him harm. It connotes conduct which is dishonest and morally wrong. Fraud includes all those calculated and wilful false statements, half truths, omissions, every mere secrecy, all those direct and indirect lies and falsehoods deliberately used by its author to his benefit or the benefit of third parties, which create a state of mind inducing a person to follow a course of action to his detriment and injury. ...
[11] In R. v. Horsman, 2002 SKCA 2, [2002] S.J. No. 9 (QL), the Saskatchewan Court of Appeal held that the use of funds for a purpose other than the purpose for which the funds were received is a dishonest act. In R. v. Théroux, supra, the Supreme Court of Canada identified unauthorized diversion and unauthorized arrogation of funds or property as a type of conduct which may be characterized as "other fraudulent means".
[12] The term "defraud" is not defined by the Criminal Code. In R. v. Olan, 1978 CanLII 9 (SCC), [1978] 2 S.C.R. 1175, the Supreme Court of Canada stated the following with regard to the definition of "defraud" at p. 1182:
Courts, for good reason, have been loath to attempt anything in the nature of an exhaustive definition of "defraud" but one may safely say, upon the authorities, that two elements are essential, "dishonesty" and "deprivation". To succeed, the Crown must establish dishonest deprivation.
[13] The Court went on to state (at p. 1182) that "[t]he requirement of deprivation as an element of fraud includes detriment, prejudice or risk of prejudice to the economic interests of the victim. A risk of deprivation is sufficient. There is no requirement that the victim ultimately suffered any actual loss".
[14] In R. v. Zlatic, 1993 CanLII 135 (SCC), [1993] 2 S.C.R. 29, [1993] 2 S.C.J. No. 43 (QL), the Supreme Court of Canada stated (at p. 43):
...that the actus Reus of fraud will be established by proof of:
1. the prohibited act, be it an act of deceit, a falsehood or some other fraudulent means; and
2. deprivation caused by the prohibited act, which may consist in actual loss or the placing of the victim's pecuniary interests at risk.
Correspondingly, the mens rea of fraud is established by proof of:
1. subjective knowledge of the prohibited act; and
2. subjective knowledge that the prohibited act could have as a consequence the deprivation of another (which deprivation may consist in knowledge that the victim's pecuniary interests are put at risk).
Where the conduct and knowledge required by these definitions are established, the accused is guilty whether he actually intended the prohibited consequence or was reckless as to whether it would occur.
[15] In R. v. Théroux, supra,, McLachlin J. elaborated on the test for mens rea at pps. 17-20:
This brings me to the question of whether the test for mens rea is subjective or objective. ... the test for mens rea is subjective. The test is not whether a reasonable person would have foreseen the consequences of the prohibited act, but whether the accused subjectively appreciated those consequences at least as a possibility. In applying the subjective test, the court looks to the accused's intention and the facts as the accused believed them to be: ...
Two collateral points must be made at this juncture. First, as Williams underlines, this inquiry has nothing to do with the accused's system of values. A person is not saved from conviction because he or she believes there is nothing wrong with what he or she is doing. The question is whether the accused subjectively appreciated that certain consequences would follow from his or her acts, not whether the accused believed the acts or their consequences to be moral. ...
The second collateral point is the oft‑made observation that the Crown need not, in every case, show precisely what thought was in the accused's mind at the time of the criminal act. In certain cases, subjective awareness of the consequences can be inferred from the act itself, barring some explanation casting doubt on such inference. The fact that such an inference is made does not detract from the subjectivity of the test.
Having ventured these general comments on mens rea, I return to the offence of fraud. The prohibited act is deceit, falsehood, or some other dishonest act. The prohibited consequence is depriving another of what is or should be his, which may, as we have seen, consist in merely placing another's property at risk. The mens rea would then consist in the subjective awareness that one was undertaking a prohibited act (the deceit, falsehood or other dishonest act) which could cause deprivation in the sense of depriving another of property or putting that property at risk. If this is shown, the crime is complete. The fact that the accused may have hoped the deprivation would not take place, or may have felt there was nothing wrong with what he or she was doing, provides no defence. ...
[Emphasis added]
THE EVIDENCE
[16] The court heard evidence from 29 Crown witnesses over 28 trial days. The only witness for the defence was Mr. Link. Hundreds of documents were introduced into evidence, including banking records detailing Mr. Link's personal and business affairs between 2002 and 2007. My review of the evidence will begin with a summary of Mr. Link's own evidence regarding his knowledge and experience in the investment industry.
Mr. Link's Knowledge and Experience
[17] Mr. Link, who is now 66, testified that he took accounting and business courses in college, graduating with a B.A. in 1967. He worked with a chartered accountant's office until 1969 and was then hired by Great West Life Insurance Company to work in its Pension, Trust & Titles Department. While at Great West Life, he worked directly with Revenue Canada gaining knowledge and experience in the operation of pensions, savings plans, and deferred profit sharing plans. In 1970, he moved to the insurance division of the Richardson Group in Winnipeg, where his responsibilities included pension plan administration and benefits consulting.
[18] In 1972, Mr. Link was hired by William M. Mercer Company, a national actuarial consulting firm where, he said, he was engaged in "consulting on the pension and benefits side". In 1976, he moved to Regina and opened an office to serve Mercer's clients in Saskatchewan. Three or four years later, he left Mercer's to set up his own business under the name "All Comp Consultants". He began selling group insurance plans on a commission basis, did consulting, and prepared expert opinions with respect to the conversion of defined benefit pension plans to defined contribution (money purchase) plans.
[19] Mr. Link and two partners established Tri-Link Consultants Inc. ("Tri-Link") in 1981. Mr. Link continued to sell group insurance products and registered savings plan investments. He married and, in 1982, purchased a home at 119 Rogers Road in Regina. In 1983, he hired Debbie Standon, who was then 21, to do secretarial and administrative work. Mr. Link described her as a person with "great skills except math and accounting". Ms. Standon had no investment training or experience. She would work with him continuously from 1983 until 2007.
[20] In 1990, Mr. Link acquired a license to sell mutual funds. In 1992, he became associated with Summit Securities Ltd. of Winnipeg, a mutual fund dealer, and became Summit's branch manager in Regina. That same year he bought out his partners and became the sole owner of Tri-Link. Mr. Link then held the majority of the Tri-Link shares, with the remainder held by his wife and Ms. Standon.
[21] From 1992 until the end of her employment in 2007, Ms. Standon was Tri-Link's only clerical employee. For the purposes of these charges, the only other Tri-Link representative was George Stefan, who worked part-time selling group insurance. From time to time Mr. Stefan also referred clients to Mr. Link who were interested in saving for their retirement through a Registered Retirement Savings Plan (RRSP). Mr. Stefan and his wife Jeannette are identified as alleged victims in Count 1 of the indictment.
[22] During the 1990s, Mr. Link continued to sell group life insurance through Tri-Link. He established a number of health and welfare trusts for employer clients. He also started administering client pension plans (e.g. individual RRSPs and employer sponsored Registered Pension Plans) by investing contributions in mutual funds and, to a lesser extent, bonds.
[23] The investments were purchased through Summit Securities Ltd. and held by Montreal Trust as custodian. Montreal Trust provided Tri-Link with regular statements of assets and asset values in client accounts; Tri-Link in turn created its own statements to provide to its clients. The Tri-Link statements were created using a computer program named Bookworker to track assets and values in its clients' accounts, with Ms. Standon entering data in accordance with Mr. Link's instruction.
[24] In March of 1996, Mr. Link instructed Montreal Trust to create four investment categories (or "pools"), with each category to contain specific mutual funds and, to a much lesser extent, strip bonds or cash. Mr. Link referred to the categories as Canadian Bonds, Global (or Foreign) Bonds, Canadian Equity and Foreign Equity. Each of these categories were unitized by Montreal Trust with the number and value of units held by each client in each category reported by Montreal Trust to Tri-Link. In his evidence, Mr. Link habitually referred to this structure as "the program" or "the system". He continued to market it, or something close to it, during the 10 year period referred to in the indictments.
The Tri-Link Retirement Savings Plan ("Tri-Link RSP")
[25] In early 1996, Mr. Link decided to apply to Revenue Canada for registration of the Tri-Link RSP under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) The plan was originally created, he said in his evidence, because it would allow him to "control the asset pool". He persuaded Montreal Trust to apply for registration of the plan on Tri-Link's behalf. In June of 1996, the plan was approved under the Income Tax Act with identification number RSP 314-393.
[26] Tri-Link was the administrator of the Tri-Link RSP. Mr. Link, as the person who made all decisions for Tri-Link, was responsible for keeping accurate records of money received from and paid out to investor clients, investing the funds, issuing account statements, issuing annual income tax receipts, and processing client requests for redemptions and transfers.
[27] Mr. Link opened an account at the Bank of Montreal which was referred to throughout the trial as the "Tri-Link RSP account" or the "BMO 776 account". All cheques written on that account were to be signed by both Mr. Link and Ms. Standon.
[28] Mr. Link testified that he never prepared a prospectus for investors in the Tri-Link RSP because he did not "market to individual investors". In fact, many of the victims listed in the indictment were individual investors.
Tri-Link and W.H. Stuart Mutuals Ltd.
[29] In 1997, Mr. Link severed his relationship with Summit Securities and became associated with W.H. Stuart Mutuals Ltd. ("W.H. Stuart"), a mutual fund dealer headquartered in Ontario. He then became W.H. Stuart's branch manager in Saskatchewan. As branch manager, he was responsible for ensuring that all W.H. Stuart agents in Saskatchewan were properly licensed and compliant with rules governing their business practices. The most basic of those rules - known in the industry as the "Know Your Client" (or, as Mr. Link called it, the "KYC" rule) - is intended to ensure that investment advisors place client money in investments that are suitable for the client's financial situation, knowledge, and risk tolerance.
[30] In 1999, Mr. Link sold his group insurance book of business to WSG Benefit Consulting in Calgary. To a considerable extent, his remaining business was related to the Tri-Link RSP. Mr. Link marketed the Tri-Link RSP on the basis that all member contributions would be invested in pre-determined proportions in the four categories set out above. All investments (consisting primarily of mutual funds) were acquired through W.H. Stuart. For clients with registered accounts, W.H. Stuart provided Tri-Link with a supply of blank receipt forms to be completed and sent to clients showing their tax deductible RRSP contributions.
[31] Investments held in a Registered Retirement Savings Plan ("RRSP"), a Retirement Income Fund ("RIF"), a Locked-in Retirement Account ("LIRA"), a Life Income Fund ("LIF") or other prescribed retirement plans must be held by a trust company as custodian. Initially, the custodian of the investments acquired through W.H. Stuart for the Tri-Link RSP was Montreal Trust. Later, for reasons not pertinent to this decision, Montreal Trust's custodial responsibilities were transferred to Maple Trust.
[32] Mr. Link, through Tri-Link, set up a number of accounts at W.H. Stuart to acquire investments for the Tri-Link RSP. The accounts mirrored his investment "model" – specifically a Canadian Bond account, a Global Bond account, a Canadian Equity account, and a Foreign Equity account.
[33] W.H. Stuart provided regular statements of assets and asset values to Tri-Link and Tri-Link in turn sent semi-annual statements to investors. The Tri-Link statements were based on the concept that each category in the Tri-Link RSP was unitized with units assigned to each investor based on that investor's share of the assets in each category. The statements listed the category (i.e. Canadian Bond, Global Bond, Canadian Equity, Foreign Equity), the number of units held in each category, the unit values, and the total values.
The Winnipeg Condominium
[34] In 1999, Mr. Link lost his wife to cancer. With money inherited from her estate, he decided buy a condominium in Winnipeg which he would rent to his parents. He developed a plan to partially finance the purchase with a loan from his personal RRSP so that interest payments on the mortgage would be sheltered from income tax. There was an impediment to this plan, however, in that Revenue Canada's rules prohibit the holder of an RRSP to lend money from the RRSP to a non-arms length borrower.
[35] Mr. Link's solution was to incorporate a company named 404039 Manitoba Inc., with Debbie Standon as its sole shareholder, director, and officer. The company purchased the condominium. The RRSP advanced money to the company in the form of a loan secured by a mortgage on the condominium. In compliance with Revenue Canada's rules, a trust company acted as trustee of the RRSP mortgage. Rent was paid by Mr. Link's parents to the company at full fair market value. The company, in turn, made the mortgage payments to Mr. Link's RRSP.
[36] Although this structure made it appear that the company and the RRSP were dealing with each other at arms length, Ms. Standon had no real ownership interest in the company. Her evidence was that she was only the owner on paper and that she would have transferred the shares to Mr. Link whenever and to whomever he asked her to. In fact, she would do so a few years later.
[37] Although the Winnipeg condominium would later become important to the fraud charges against Mr. Link as they relate to Hans Gaastra and the employees of Weyburn Inland Terminal, the circumstances surrounding the acquisition of the condominium forms no part of the charges. I have referred to them only because they demonstrate, one, that Mr. Link had a high level of understanding when it came to matters of this kind; two, that when it served his purposes he would use Ms. Standon to hold title to real and personal property in which she had no real ownership interest; and three, that Ms. Standon would do as he asked.
Acquiring Mortgages: Glenn A. Watts
[38] Shortly after becoming associated with W.H. Stuart, Mr. Link met Glenn A. Watts, a mortgage broker and self-described paralegal. Mr. Watts was a representative of W.H. Stuart in Alberta. He operated his mortgage brokerage business through various corporations and business names, including (but by no means confined to) "Canadian Achievers Financial", "Achievers Mortgage Corporation", "The Mortgage House Corp.", and the "Gibralter Group".
[39] Mr. Watts had clients wanting to borrow money secured by second, third and sometimes fourth mortgages on residential property. The clients were often his friends and relatives. They included his brother Tony, who operated a company named Guardian Real Estate, and a long time friend and associate, Robert Thomas, who operated through Guardian Mortgage and Property Corp. and 881885 Alberta Ltd.
[40] Shortly after meeting Mr. Watts, Mr. Link instructed W.H. Stuart to transfer Tri-Link's Global Bond account into a "Gibralter Mortgage" account so that it could hold mortgages in RRSPs belonging to Mr. Watts' clients. In addition, he instructed W.H. Stuart to set up a separate "Canadian Achievers Financial" account, in Tri-Link's name, to hold a number of other mortgages for which Mr. Watts was responsible. In his evidence, Mr. Watts denied knowing of these accounts.
[41] From that point on, statements sent by Tri-Link to its clients allocated client investments to only three funds rather than four: Canadian Bonds, Canadian Equity and Foreign Equity. (Missing was a reference to a "Global Bond Fund").
[42] Mr. Link began redeeming mutual funds held in the Tri-Link RSP accounts to acquire mortgages brokered by Mr. Watts. He also redeemed mutual funds held in a pension plan administered by Tri-Link for its client Weyburn Inland Terminal Ltd. ("WIT") to acquire mortgages brokered by Mr. Watts. In addition, he arranged for some of his individual clients (Hans Gaastra, Frederick Casswell, Alvin and Madeline Wigmore, Sherri Foster) to invest in mortgages brokered by Mr. Watts. All of these investors are named as victims in Counts 1 and 2.
[43] For now, I will focus on the mortgages acquired with money from the Tri-Link RSP and the WIT Pension Plan. First, in May of 2001, Mr. Link sent $300,000.00 to Mr. Watts at Canadian Achievers Financial for a third mortgage bearing interest at 20%. One-half of the mortgage principal ($150,000.00) was acquired with money from the Tri-Link RSP and placed in the Tri-Link "Canadian Bond Fund" at W.H. Stuart. The other one-half was acquired with money in the WIT Pension Plan and placed in the WIT account at W.H. Stuart.
[44] In April of 2001, Mr. Link sent $379,430.00 to Mr. Watts for a second mortgage bearing interest at 12%. The amount of $279,430.00 was taken up by the Tri-Link RSP as an asset in the "Canadian Equities" account with W.H. Stuart. The remaining $100,000.00 was acquired with money in the WIT Pension Plan. Mutual funds were redeemed in both pension plans to raise the cash required to purchase the mortgages. The mortgages were processed through W.H. Stuart, with Maple Trust Company acting as custodian.
[45] To summarize, the mortgages were divided between the Tri-Link RSP and the WIT Pension Plan as follows:
Total principal Tri-Link RSP WIT Pension Plan
amount portion portion
$379,430.00 $279,430.00 $100,000.00
$300,000.00 $150,000.00 $150,000.00
[46] Mr. Link did not seek the approval of contributors to the Tri-Link RSP or the WIT Pension Plan before redeeming their mutual funds and placing the proceeds in the mortgages arranged by Mr. Watts. He did not inform them in a timely or meaningful way that their money was no longer allocated in the way that he had assured them it would be. Semi-annual statements sent to the pension plan members did not disclose that much of the money in the pension plans was being used to acquire mortgages brokered by Mr. Watts. Rather, they reported the mortgages as if they were Canadian Equities or Canadian Bonds.
[47] Mr. Watts described the mortgage deals as ones in which he would prepare the documents and send them to Mr. Link, who would sign them and send them back with money. Mr. Watts would then "sign on the other end of the deal".
[48] In his evidence, Mr. Link said that he had an unwritten agreement to "administer" the mortgages in the Watts' accounts at W.H. Stuart in return for a two-third/one-third split in Mr. Watts' fees to be paid on an "odds and sods" basis. As part of the administration, he agreed to give reports to Mr. Watts valuing the mortgages at whatever values Mr. Watts told him to use. He testified that he received no information from Mr. Watts with respect to interest accruing or accrued on the mortgages, any payments made, or the balances owing.
[49] In his evidence, Mr. Watts said that he agreed to act as the administrator of the Tri-Link Mortgages through a "mortgage servicing agreement". Under the agreement, he said, he was to receive an administration fee to collect payments from borrowers and send them to Mr. Link with statements showing the balance owing. Many of the mortgage payments received by Mr. Link from Mr. Watts seem to have been made on an ad hoc basis.
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