The founder of what was once one of Canada’s largest financial planning companies has been convicted of fraud after he sold millions of dollars worth of shares in mortgage companies that never invested in any mortgages.
David Singh, a once prominent entrepreneur whose Fortune Financial Management oversaw more than $7-billion in the mid-1990s, was also found guilty of failing to register his two mortgage investment companies with the Ontario Securities Commission (OSC), and failing to issue a prospectus for the securities they sold.
The OSC brought the charges after an employee of one of the mortgage companies – Rockfort MIC – complained to the regulator that Mr. Singh was not using investor funds as advertised. The OSC says Rockfort and the other mortgage investment corporation, Greenview Capital MIC, raised more than $5.6-million from 77 investors between 2014 and 2018.
After hearing from an OSC forensic accountant, people who worked for Mr. Singh at both the mortgage companies, and several investors, Justice Mara Greene determined that the businessman never deployed investor funds toward mortgages.
The OSC has alleged Mr. Singh used the money to pay private-school tuition for his children, to buy a sports car, and to pay back other investors.
Two of Mr. Singh’s former employees testified that when they asked to see copies of the mortgages funded by investors, he produced only a single mortgage, which was registered against an industrial property in Timmins, Ont. George Brown, a consultant to Mr. Singh, said the Timmins mortgage document he was shown was dated 2009 – four years before Rockfort was incorporated.
“Mr. Singh was clearly aware that his business was required to use investors’ money to fund mortgages and that this was not happening,” Justice Greene wrote in her decision, which was released on Wednesday.
It is a remarkable turn for an entrepreneur whose high-flying career came to a crashing halt in the late 1990s, when one of Fortune’s star salesmen was accused of selling unsuitable investments to clients. At that time, the OSC alleged Mr. Singh failed to supervise his employee. He settled with the regulator and was issued a five-year trading ban. Mr. Singh sold Fortune to Dundee Wealth Management in 1999.
Unlike the OSC enforcement action, which took place at an administrative tribunal, Mr. Singh’s conviction this week in the Ontario Court of Justice means he could be sent to jail. His sentencing has yet to be scheduled.
His trial did not go smoothly. He arrived in Justice Greene’s courtroom on March 2, 2020, without a lawyer and carrying his documents in a paper bag. The trial was put on hold after two days as the COVID-19 pandemic shut down the legal system and in-person hearings.
But the pandemic is only partly to blame for the length of time it took to complete his trial. Mr. Singh argued that the process was unfair, applied for legal aid seven months after he was charged, changed lawyers midway through, and tried several times to have the matter adjourned. Justice Greene conceded that the proceeding was “not an ideal trial,” but rejected his contention that his right to a speedy trial had been violated.
Mr. Singh also argued that his constitutional rights were violated because most of the proceedings took place over Zoom, saying he couldn’t stay awake in such a setting.
Justice Greene shot down his arguments, saying she noticed him fall asleep only once, at which point she stopped for the day. “I reject his evidence that he was ‘prone’ to fall asleep in the proceedings. This is just not an accurate statement of what occurred during our Zoom court.”
A lawyer for Mr. Singh did not respond to an e-mailed request for comment.
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