The Canadian Press
Calgary RCMP have charged four people after a five-year investigation into what they said was a $60-million Ponzi scheme that victimized more than 1,000 people across North America.
“There are no wounds that show on the outside, but on the inside, some people certainly have been crippled,” said Staff-Sgt. Dale Glydon of Calgary RCMP commercial crime section.
A Ponzi scheme is a type of fraud in which early investors receive returns paid for by later investors, with little or no actual commercial activity taking place.
Police say the alleged scheme worked through a company called HMS Financial, which allegedly offered people investment vehicles that promised to pay between eight and 12% return without any financial risk. They say it collapsed in 2004.
HMS Financial has also been the subject of an ongoing civil lawsuit since 2005.
A statement of claim from that class-action lawsuit charges that prospective investors were offered shares in a private investment corporation that was funding major construction projects around the world. The statement, which has not been proven in court, says investors were told their money was secured by bonds and cash held by one of the HMS principals.
“There do not appear to have been any material projects worldwide that were ever funded by the monies of the Plaintiff,” the statement of claim alleges.
The defendants in that civil suit, who include the four who were criminally charged Monday, have denied the allegations in their own court filings.
Glydon said many investors came on board through well-meaning advice from friends or family who may have been investors themselves.
“We did see clusters of friends and families and clusters of people who belong to community groups and church groups who would have learned about the program through each other,” Glydon said.
“When the program fails to pay, it causes divisions in families and groups and friendships.”
Glydon said investigators spoke with many investors who now rent their homes instead of own them, who will have to work long past when they’d planned to retire, or who lost their nest egg.
There is little chance investors will be able to recoup their cash, said Glydon.
“There is no treasure chest. The majority of the money that comes in is used to pay other investors, so it kind of cycles around.
“There is no large pool of money sitting anywhere in this case that is available to repatriate.”
Investigating the case took sorting through thousands of pages of documents, trying to reconstruct a paper trail that wound its way through both Canada and the U.S.
“Thousands and thousands of investigative hours just putting the records straight, finding the appropriate witnesses and lining the witnesses up with the relevant documents,” Glydon said.
Murray Stark, 73, of Three Hills, Alberta; Robert Fyn, 62, of Linden, Alberta; and Garth Bailey, 57, of Okotoks are charged with fraud and conspiracy to commit fraud. All three, as well as Katherine Bailey, 53, of Okotoks, also face money-laundering charges.
The four will appear in provincial court in Drumheller, Alberta, on April 16.
The Canadian Press