A bankruptcy trustee delving into Earl Jones' decimated financial consultancy company says the financial planner and his wife were spending up to $70,000 a month on everything from jet-setting to fine dining.
With Earl Jones Consultant and Administration Corp. officially declaring bankrupt on Wednesday, trustee Gilles Robillard will have to determine whether anything can be salvaged for investors Mr. Jones allegedly defrauded.
The investigation remains very much in its infancy, but Mr. Robillard said 60 corporate bank accounts contained less than a total of $50,000.
Earl Jones, who is charged with fraud and theft, is rushed out of the courthouse in Montreal July 28, 2009.
Between 100 and 150 investors are accusing Mr. Jones of bilking them out of millions of dollars, while Quebec's financial securities regulator has alleged the amount could be as high as $50-million.
“There's two things that could have happened — either the money was stolen and it's sitting somewhere or it's been lost or spent,” said Mr. Robillard.
“He was paying [offering] a return of 10 to 12 per cent so if he wasn't investing the money, getting nothing, he was draining on capital all the time.
“Plus he was paying the expenses for the people [his clients] and over the years, he had to pay back people who opted out of his management.”
Mr. Robillard said there appears to have been very few new clients enlisted by Jones in the past year.
Mr. Robillard said records show Mr. Jones and his wife paid themselves a total of between $60,000 and $70,000 a month, money that was spent on everything from plane tickets to hotels to fancy meals.
Mr. Jones' wife, who was not apparently part of the business operation, was also paid as an employee, according to the bank accounts.
“From the payments that were doled out, she was the best-paid employee,” Mr. Robillard said.
Mr. Robillard also said other substantial sums of money went to charities, but he declined to name them or the amounts given.
The swift bankruptcy decision in Quebec Superior Court came as Mr. Jones' alleged victims held a protest outside the courthouse alongside other investors who have been swindled by fraudsters.
The 50-odd protesters called for stiffer sentences, pushing the slogan 100 Victims, 100 Years.
“We are here in support of all the victims of all the fraudsters, not only Mr. Jones,” said Danielle Manouvrier, whose family allegedly lost money investing with Mr. Jones.
“We're also here to tell governments that it's time for a change, that the laws have to be changed and we need only one regulator to properly manage this huge industry that touches every Canadian.”
Bankruptcy lawyer Neil Stein said a meeting will be held with creditors in the next 21 days and that five inspectors will be named as the investigation continues.
One of the alleged victims, Mary Sue Gibson, testified briefly at the hearing.
“I'm hoping to be able to get my life back in a few months and somehow have a somewhat normal life,” Ms. Gibson, who alleges she and her husband lost $1-million investing with Mr. Jones, said after the hearing.
“For my family also, it's been a huge, huge change for our family and very emotional.”
Mr. Robillard said the balance of the company's main bank account hovered around $200,000 each month over the last year.
“Money would be paid out during the course of the month to customers and to himself and his wife,” said Mr. Robillard, a partner at RSM Richter Inc.
“There would be some deposits and the balance would come up to $200,000 and it would keep rolling like that month to month.”
But complicating matters is that Mr. Jones' company's financial records have vanished.
“There's a lot of work,” Mr. Robillard said. “You don't go through 20 years of accounting or transactions in three weeks.”
There are also signs Mr. Jones could see the collapse — Mr. Robillard said he cashed in all of his personal investments, RRSPs and surrender-value life insurance in January 2009.
“He's been seeing this coming for quite a while,” he said.
Mr. Jones, 67, was not in court on Wednesday.
He was charged Tuesday with four counts each of fraud and theft, freed on $30,000 bail and told to return to court Sept. 28.
None of the allegations against Mr. Jones have been proven in court.
A petition to have Mr. Jones declared personally bankrupt will be heard Aug. 19.
On Monday, Superior Court gave the green light to appoint an interim receiver, Mr. Stein said, adding that Mr. Jones' property and bank accounts are being seized.
Mr. Robillard said two Quebec properties have been identified as belonging to Mr. Jones — a waterfront condominium in the Montreal suburb of Dorval and a country home in the picturesque Laurentian community of Mont Tremblant.
Officials are looking at two other homes — a condo in Boca Raton, Fla., and a home in an assisted-living complex in Massachusetts.
“Now that we're trustees, we'll have better tools to make sure he talks to us,” said Mr. Robillard, adding he expects to subpoena Mr. Jones in the coming weeks.
Some of Mr. Jones' alleged victims called the court experience very emotional.
“Up until this point, I haven't really been able to cry and I got into the courtroom today and when Mrs. Gibson got up, it just brought everything to a head and I found it very emotional for me,” said Ginny Nelles, whose entire family invested with close family friend Mr. Jones and fears they have been fleeced for close to $1.5-million.
“I think we have a long fight ahead of us.”
