TRURO – Keybase Financial Group was more interested in protecting its own interests than that of its clients who were cheated out of million of dollars, a Nova Scotia Supreme Court judge has ruled.
“I infer from the actions of Keybase above described that it was more concerned with protecting its own best interest by trying to preserve the various investment portfolios, thereby keeping its book of business and the associated commissions, with no payouts to make while hoping for a market turnaround,” Justice Robert Wright said, in a recently released written ruling.
Last November, former Keybase financial advisor John Alexander Allen was convicted on four counts of fraud and given an 18-month conditional sentence for his actions while working for the company out of its Truro office.
New Glasgow lawyer Jamie MacGillivray, who is representing 18 of Allen’s former clients in civil lawsuits against Keybase, described the ruling as “good news” for families trying to recoup their losses through the company.
“The focus of the judge’s decision was on Keybase’s supervision of John Allen and how Keybase dealt with the aftermath of John Allen when the fraud was brought to their attention by investment bank in August 2007,” MacGillivrary said, in a news release issued Wednesday.
“Our clients are very relieved with the outcome,” MacGillivray said. “This has been a long ordeal for them. Too long. Keybase was trying to blame their losses on the market crash in the fall of 2008. Our point was that Keybase should have worked to get them out of the investment scheme John Allen set up. The court accepted this point and our clients are grateful that this saga is almost over for them.”
The Supreme Court ruling affects nine of MacGillivray’s clients, including several of whom are located within Colchester County.
“Keybase’s lawyer argued that the victims themselves were partly responsible for the losses,” he said. “The Supreme Court decided in favour of the victims and found Keybase liable for all of their losses.”
During his conviction last fall, Allen was determined to have involved his clients in high-risk loans with investment banks to purchase mutual funds, borrowing much more than any of them could reasonably afford to lose and operating far beyond their investment knowledge.
When the investment market collapsed, the investors were left holding loans that in some cases amount to hundreds of thousands of dollars. In the process Allen forged his clients’ signatures and falsified the loan applications.
All told, his fraudulent activities cheated numerous clients out of approximately $14 million for investments written between 2004 and 2007, when he received approval for approximately 42 trust loans for his clients, most of which were in the amount of $245,000.
A spokesperson for Keybase said the company wished to not comment on the judge’s decision.