A Manitoba judge has found Winnipeg-based Great-West Life Assurance Co. responsible for the fraudulent actions of a former advisor and awarded more than $500,000 to a Winnipeg couple.
And it looks like lawyers for the financial services giant might have to get used to the inside of a court room as more former clients of Gary Palmer are accelerating lawsuits of their own.
Manitoba Court of Queen’s Bench Justice Brenda Keyser has awarded Michel and Lorraine Mignault $528, 834, three years after Palmer was convicted of defrauding 23 people, including the theft of $1.5 million during his nearly decade-long spree, and sentenced to eight years in prison.
In their civil suit, the Mignaults maintained that Palmer was acting as an agent for Great-West Life and as such, the company was liable for his actions. Great-West countered that he was an independent contractor and it was not responsible for what he did. However the judge disagreed, saying the Winnipeg-based company “cloaked (Palmer) with the attributions of apparent authority.”
The Mignaults had asked for $665,000 (to cover the $458,789 that Palmer withdrew from their accounts, plus interest) plus $500,000 in punitive damages. Keyser did not feel Great-West’s actions necessitated any punitive damages.
Marlene Klassen, assistant vice-president of communication services for Great-West Life, says the company is “disappointed” with the decision. After more than 115 years in business, she says the company values its reputation in the community.
“This is an isolated incident involving an independent advisor and his clients and their investments through him. We are reviewing the decision and are considering an appeal. This is a rare and unfortunate situation where a single independent advisor was found to have committed fraud,” she says.
Palmer sold insurance annuities for Great-West from 1991 to 2006 but his relationship with the company changed several times. Initially, he signed an agent contract but in 1995 and 1996, concerns arose over his handling of clients and he was terminated. In 1998, he returned to the company as a broker.
The Mignaults went to see Palmer in 1991 with a goal of moving their assets into Great-West products. They were not told of Palmer’s termination and he was allowed by the company to continue servicing their account.
Starting in 1998, Palmer convinced the Mignaults to withdraw money from their annuity accounts and deposit the same amount in J.D. Raleigh & Co. Ltd., a company owned by Palmer.
The Mignaults testified that they believed they were merely moving money from one Great-West account to another. Over time, Palmer bilked the couple of hundreds of thousands of dollars, which he used to fund his insurance business and his high-end lifestyle.
Court documents also show that in March 1995, Palmer’s sister, Gwen Palmer, told Great-West that he had obtained power of attorney on their father and cashed the elder Palmer’s pension cheques for his own purposes. Gary Palmer also stopped paying the rent at their dad’s nursing home.
Gwen Palmer said the main purpose for informing Great-West of her brother’s actions was to prevent other people from being hurt. Great-West did not pass the information along to Palmer’s clients.
“If one is to look at the case not from the perspective of the principal, but from the perspective of the vulnerable customer of that principal and the context of the business being done, I have no doubt that GWL as principal must be liable vicariously for the misconduct of Palmer,” Keyser wrote in her decision.
The Mignaults could end up being just the tip of the iceberg. Their lawyer, Dave Hill, a partner at Hill Sokalski Walsh Trippier, says he has another client who used to have money with Palmer who will be suing Great-West.
“I’m very happy for the Mignaults. They had to go through seven years of a lot of angst and the loss of all of their retirement savings,” he says,
In fact, when the couple first launched their legal action after discovering Palmer’s fraud in 2006, their retirement nest egg was worth less than $9,600.
A number of the other defrauded clients, whose lawsuits have been on holding pending the outcome of the Mignaults’ case, are now putting Great-West in their cross-hairs.
One of those clients, Greg Downey, says he would have stopped fighting if the Mignaults had lost because he couldn’t take the risk of continuing his lawsuit and being saddled with legal fees plus the loss of $40,000 in investments. He says he hope’s Keyser’s decision will prompt Great-West to settle with him and the other clients.
“Our lawyers sent each of us a letter saying they’d be watching this trial and seeing what happens,” he says.
“It’s a big expense for us but it’s nothing for (Great-West). I would think it would give Great-West incentive to sit down at the table and say, ‘here’s an offer.”