1. In July 1999, a class action was commenced on behalf of investors who, prior to March 22, 1999, invested in Nelbar Financial Corporation ('Nelbar') 'corporate investment certificates' or in any private company through Nelbar or Essex Capital Management Ltd. ('Essex'). The defendants to the action include, among others, Nelbar, Essex, Nelson Allen ('Allen') and Robin Moriarty ('Moriarty'). For further details, please review the statement of claim.
2. On July 29, 1999, a receiver was appointed by the court to manage the affairs of Nelbar and Essex. The receivership order may be reviewed here.
3. On January 4, 2000, the class action was certified by order of Mr. Justice Cumming. The certification order may be reviewed here.
4. On October 23, 2000, Mr. Justice Cumming directed a reference to quantify the amounts owed to each investor. An affidavit of claim was prepared for each investor who registered with class counsel and was submitted to the Court and to Allen and Moriarty. By July 2001, all claims were accepted by the Court.
5. On December 27, 2001, Mr. Justice Cumming granted judgment against Nelbar and Essex jointly in the amount of $10,610,807.94, plus interest. The December 27, 2001 judgment may be reviewed here.
6. Class counsel will continue to pursue remedies in the class action. Any new developments in this regard will be posted on this web site.
CLAIMS TO THE CANADIAN INVESTOR PROTECTION FUND
7. Concurrently with the class action, class counsel have pursued other avenues of redress for investors, including compensation from the Canadian Investor Protection Fund ('CIPF'). The CIPF is a trust, funded by Canadian financial institutions and brokers, for compensating investors who have lost money due to the insolvency of a member institution, in accordance with established guidelines.
8. In September 1999, class counsel filed approximately 136 claim forms with the CIPF in order to meet the CIPF's stringent deadlines for compensation claims.
9. The initial position of the CIPF Board of Governors (the 'Board'), with some exceptions, was to deny all compensation claims. Class counsel have made numerous submissions to the Board and its counsel to assert that all class members are entitled to compensation from the CIPF trust. They have also appealed a number of CIPF decisions. In some cases, the Board has reversed previous decisions to deny compensation.
10. In total, class members have recovered about $3 million from the CIPF.
11. In December 2001, Mr. Justice Cumming ordered that 15% of CIPF awards be reserved for legal fees. The December 2001 costs order may be reviewed here.
IDA PROCEEDINGS AGAINST ALLEN AND MORIARTY
12. On June 26, 2001, the Ontario District Counsel of the Investment Dealers' Association ('IDA'), the regulatory body that oversees investment dealers and advisors, found Allen and Moriarty guilty of failing to observe high standards of ethics and conduct in the transaction of their business and of engaging in conduct unbecoming to the public interest while they were registered representatives with Essex.
13. The IDA determined that Allen and Moriarty were not of good character or business repute. Both refused to attend and give information to the IDA with respect to its investigation of their activities and those of Essex, and they failed to ensure two investments recommended to clients were appropriate for the clients.
14. The penalty imposed against Allen by the IDA, $525,000 plus costs, was the largest in IDA history. Moriarty was also fined $160,000 plus costs. The IDA has undertaken not to stand in priority to class members in the collection of these fines.
15. The IDA news release on the discipline penalties imposed on Allen and Moriarty may be reviewed here.
CRIMINAL PROCEEDINGS AGAINST ALLEN AND MORIARTY
16. On or about March 1, 2000, Allen and Moriarty were each charged with 30 counts of fraud over $5,000, defrauding the public, and falsifying books and records contrary to the Criminal Code of Canada.
17. On February 21, 2003, Allen pleaded guilty to three counts of defrauding members of the public of more than $5,000. The plea was the result of a plea bargain in which the Crown agreed to consolidate the charges against Allen and withdraw the charges against Moriarty.
18. On March 31, 2003, Mr. Allen was sentenced to a four-year penitentiary term for fraud by the Ontario Superior Court. In a brief submission to the court, class action counsel requested a restitution order as a term of Mr. Allen's sentence. The court decided not to impose a restitution order because the civil court is a more appropriate venue to pursue compensation and a class action is already pending before the court.
19. On September 20, 2004, the receiver delivered a new report concerning the receivership of Nelbar and Essex. The receiver's report may be reviewed here.
20. On September 22, 2004, plaintiffs' counsel attended a case management conference at the court. At that time, they advised the court of their intention to bring a motion to amend the statement of claim and certification order and to seek summary judgment against Nelson Allen based on the admitted facts and guilty plea to charges of fraud in the criminal proceedings. The motion was scheduled to proceed on November 1, 2004, however it was adjourned to permit Allen an opportunity to retain counsel to respond. When a new date is set by the court for the rescheduling of the motion, further information will be posted on this website.
21. On December 17, 2004, class counsel brought a motion for an order awarding them a total fee of $900,000.00 inclusive of disbursements and GST. This fee is approximately equal to the actual value of counsel's work calculated based on the total of the number of hours worked multiplied by counsel's usual hourly rates. The fee constitutes 15% inclusive of disbursements and GST of any recovery from the CIPF. Many class members have already remitted this amount or have had it withheld pursuant to the December 18, 2001 order of Mr. Justice Cumming. Other class members have been ordered to pay their respective 15% share into trust. If you did not recover any money from the CIPF or if 15% of your CIPF award was already withheld, you will not be required to pay any fees. If you were awarded money by the CIPF and did not remit 15% to class counsel, you are required to do so by the court. You may view a copy of the motion record here.
22. On December 22, 2004, Mr. Justice Nordheimer released his reasons for decision in support of an order awarding class counsel a total fee of $900,000 inclusive of disbursements and GST. You may view a copy of the reasons here.
23. On December 19, 2005, the plaintiff obtained summary judgment against Nelson Allen. A copy of the judgment may be viewed here. Mr. Allen appealed the judgment. The appeal was heard and dismissed by the Ontario Court of Appeal on May 16, 2006. A copy of the Court of Appeal's endorsement can be viewed here. Class counsel will now proceed to enforce the judgment against Mr. Allen and prosecute the claims concerning Mr. Allen's alleged fraudulent conveyances.
24. The Nelbar class action counsel team consists of Bill Pepall of Heenan Blaikie, Ray Leach of Siskinds, and David Robins and Harvey Strosberg of Strosberg Sasso Sutts LLP.
25. Should you require further information regarding the Nelbar class action, you may send an e-mail message to email@example.com or call the Strosberg Sasso Sutts LLP toll free line 800.229.5323.
26. Please visit this web site regularly for up-to-date information regarding matters relating to the Nelbar class action.
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