British Columbia Securities CommissionLAURA LEYSHON
The British Columbia Securities Commission has fined a Canadian woman $37-million after concluding she ran a Ponzi scheme that raised over $126-million (U.S.) from investors.
The B.C. regulator said Doris Elizabeth Nelson committed fraud and illegally distributed securities in a "widespread Ponzi scheme" involving a payday loan business that operated under the name the Little Loan Shoppe.
The regulator concluded that Ms. Nelson defrauded 121 B.C. residents who invested at least $19-million (Canadian) in multiple deals, and ruled that she breached securities rules in distributing over $3.1-million in promissory notes to 47 investors.
The B.C. fundraising was only a portion of Ms. Nelson's scheme, which also attracted investors across Canada and the United States who were promised commissions if they recruited new investors. Some investors were told they would earn risk-free returns of up to 60 per cent annually.
Ms. Nelson pleaded guilty in U.S. court in 2014 to 110 criminal counts of wire fraud, mail fraud and money laundering, and was sentenced in November, 2014, to nine years in prison. The U.S. court also ordered Ms. Nelson to pay $45-million (U.S.) in restitution to victims in the United States and Canada.
At her sentencing hearing in the U.S. trial, Ms. Nelson's lawyer, Elizabeth Kelley, told the court her client "is a good and trusting woman who got caught up in something that was way over her head," according to media reports.
Ms. Nelson founded the Little Loan Shoppe at a single storefront location in Abbotsford, B.C., in 1997 and moved to Spokane, Wash., in 2001 as she expanded the business. In 2006, she closed the storefront operations and the business became an online provider of payday or short-term loans.
The BCSC ruling quoted from Ms. Nelson's U.S. guilty plea admissions, in which she admitted her operation was a Ponzi scheme that raised at least $126-million from 800 investors worldwide. A restitution order in her U.S. case said investors lost a total of $44.8-million.
Ms. Nelson also admitted in her U.S. plea that she used over $4-million in investor funds "to promote her extravagant lifestyle" and to make luxury purchases, including a motor home and over $400,000 of clothing. She also spent $100,000 on a cruise, when gambling losses and art purchased during the cruise were added in.
Her guilty plea admission also said some of Ms. Nelson's investors took out loans to raise funds to invest, pledging their houses and other assets as collateral. They lost not only their investments but also their homes, life savings and retirement savings in the scheme.
A report by a bankruptcy court examiner that was entered into evidence in the U.S. trial said none of Ms. Nelson's business entities "had any reasonable likelihood of generating revenues sufficient to ever repay their obligations to investors."
The BCSC ordered Ms. Nelson to pay penalties totalling $37-million (Canadian), including a payment of $18.5-million, which was the amount estimated to have been lost by B.C. investors in her scheme, as well as an additional administrative penalty of $18.5-million.
The ruling said the BCSC's penalty for investor losses would be reduced by any payments she makes under the U.S. restitution order.
Ms. Nelson was also permanently banned from trading securities, working as a registrant in the financial industry or serving as a director or officer of a publicly listed company.
She was not represented at the BCSC hearing and made no submissions in the case.
Janet McFarland