Paul Penna took every precaution when he decided to leave his $24-million estate to charity.
Gravely ill with lung cancer, the 73-year old mining promoter hired a respected Bay Street estate lawyer to draft his will in 1996. He then appointed a valued colleague and his long-time banker to be trustees of a fortune he built as the founder of Agnico-Eagle Gold Mines Ltd. Except for the $1-million he set aside for his wife of 43 years, he left the bulk of the childless couple’s savings to about a dozen Jewish, medical and community causes.
It was the parting gift of a colourful mining player whose eccentric generosity was the stuff of mining lore. He gave tubes of gold flakes to shareholders at annual meetings, gifted Agnico stock to friends, kept a stack of winter coats at his office for the homeless and each work morning carted a bucket of corn to a park near his Mississauga home to feed the geese.
Fifteen years after Mr. Penna’s death, his charitable dream has descended into a legal nightmare. His wife Lorraine received no money from the estate before she died in 2003 from Alzheimer’s complications and the charities have given up hope of ever receiving their bequests.
“It's a nightmare. Tragedy. It’s a horrible story,” said Fred Tayar, a Toronto lawyer representing Mr. Penna’s designated charities. “Money that could have been used and was intended to be used and earmarked for good purposes, charitable purposes, was destroyed.”
The sad legacy of Mr. Penna’s deathbed wish is a cautionary tale about gaps in the estates, banking and legal system. Those gaps were exploited by a long-time colleague he treated like a son. Barry Landen, Agnico’s former vice-president of investor relations and one of Mr. Penna’s executors, committed what an Ontario judge called a “massive fraud” on the estate by siphoning millions of dollars without detection for seven years.
Mr. Landen has admitted to pocketing some of the missing millions, but he insists the rest of the estate was lost to bills and depressed stock prices.
Millions of dollars flowed out of Mr. Penna’s estate without any questions from the experienced professionals and financial institutions he counted on to safeguard his money. That so much could disappear for so long without anyone noticing is an alarming comment on the vulnerabilities of an estate system that will soon be handling what is likely the largest intergenerational transfer of wealth ever seen in this country.
Over the next few decades, experts predict Canada’s aging baby boom generation will bequest trillions of savings they have accumulated. A large share of this money is expected to go to charities, which, like Mr. Penna’s hand-picked causes, put enormous faith in the trustees handling the money to act according to the wishes of the donor.
Increasingly, legal experts say they are seeing cases involving trustees who are putting their own interests ahead of the estate by overcharging for their services or pocketing money.
At the same time that Mr. Penna’s estate was being depleted, for example, another high-profile Canadian family saw their charitable bequest hijacked by a family friend they had appointed as a trustee. In 2009, the relatives of Robert and Signe McMichael discovered that the estate’s trustee, former Crown attorney Geoffrey Zimmerman, had helped himself to more than $1-million of a $5-million bequest designated for the McMichael Canadian Art Collection, which houses a renowned collection of Group of Seven works.
It took seven years for Mr. Penna’s other two trustees, lawyer, accounting firm, bankers and brokers to catch on to Mr. Landen’s looting, despite numerous signs. No one asked how Mr. Landen was able to afford a sprawling home in Toronto’s exclusive Forest Hill neighbourhood, a quartet of luxury cars or seasons tickets and entertainment suites for Toronto Raptors and Toronto Maple Leafs games. Astonishingly, no one stopped Mr. Landen from ransacking the estate even after the losses were uncovered by accident in 2004 and a court order had protectively frozen what was left of Mr. Penna’s bank accounts.
“There was no oversight taken there. ... One person can do quite a bit of damage,” said Peter Hubacheck, a former Agnico director and son of Mr. Penna’s long-time friend, company geologist Wencel Hubacheck.