Quebec judges hand down long jail sentences for financial sector fraudBy Hubert Roy | February 27 2005 03:18PM
Quebec judges cracked down on economic crime by delivering tough sentences for financial sector fraud. On January 28, 2008, judges from the Superior Court of Quebec handed down their rulings in two separate cases.André Charbonneau, founder of the life insurance company L’Alternative, was given a seven-year jail term. He was found guilty of 119 charges. He was convicted of defrauding over 440 investors for a total of $14 million when launching his company. At press time, on Feb. 1, he was released after the Quebec Court of Appeal permitted him to appeal the verdict. A judge sentenced Vincent Lacroix, the former Norbourg CEO, to 12 years less a day in prison, plus a $255,000 fine. He was found guilty of 51 charges of having defrauded 9,200 investors. The victims lost $150 million after he made 137 irregular withdrawals from the Norbourg coffers. He filed a motion to appeal the judgment and was scheduled to be heard on Feb. 8.
Both judges pointed out that the men were trying to fill gaps in their companies. The judge said Mr. Charbonneau used a "Ponzi Scheme," where he found new investors to pay the interest on prior loans and the company’s operating costs. Evidently, the funds collected were not used for the original specified investment purposes.
For his part, Mr. Lacroix was found to have put in place a type of shell game. The judge said he used the money provided by investors in other investment funds he managed to plug gaps in Norbourg. But when the fund continued to sink, he had to dig deeper and deeper into investors’ funds. He then produced false financial statements to mask the irregular withdrawals, and Norbourg inevitably collapsed.
Quebec’s financial markets regulator, the Autorité des marchés financiers (AMF) says it is satisfied with the sentences. The message sent by the judge is unequivocal, said Jean St. Gelais, the CEO of the AMF. "It is an important breakthrough. This sentence will set the guidelines that will be applied in economic crimes. The perpetrators must account for their actions. The very credibility and confidence in the financial sector hangs in the balance."
Luc Labelle, executive vice-president of Quebec brokers’ association the Chambre de la sécurité financière said, "The message these two judgments convey is that fraud equals prison. These fines may therefore have a deterrent effect."
Mr. Labelle is worried that consumers’ perception of the financial services industry has been tarnished as a result of these high profile cases.
He explains that the Norbourg debacle not only plunged thousands of investors into financial distress, but has stained the reputation of the entire industry ever since the story broke. Mr. Labelle also wonders whether these scandals will steer consumers toward online vendors of financial products and sales that do not involve representatives. This may jeopardize the public’s financial security, he told The Insurance Journal.