A former mutual fund salesman at Investors Group Financial Services Inc. has been sentenced to six years in jail for defrauding his clients after admitting he took more than $6-million from investors and put the money into his own bank account.
Paul Yoannou, 53, was accused of misleading clients by telling them their funds were being invested in Investors Group products, but instead he took the money for himself and sent them falsified account statements.
He was originally charged by Toronto police with 32 counts of fraud involving $6.6-million of investor funds, but pleaded guilty to 15 counts involving a subset of his investors who were defrauded over a seven-year period, from 2004 to 2011.
Speaking quietly, Mr. Yoannou told the court before sentencing that he didn't plan to conduct such a large fraud, but events snowballed. He said he is embarrassed and feels terrible for the pain he caused.
"I did not plan this – it evolved," he said. "Frankly, I'm not that bright to put something together as intricate as it became. It kills me that people held me in such high regard to just hand over money … I kind of wish they didn't."
He did not speak after Judge Ronald Boivin of the Ontario Court announced his sentence, and was led from court in handcuffs.
Crown attorney Scott Patterson told the court Mr. Yoannou's fraud "required a massive amount of deception" over many years and involved hundreds of financial transactions.
"He has jeopardized people who were looking forward to retirement, looking forward to the benefits of a hard-working life, and Mr. Yoannou has taken this from them," Mr. Patterson said.
Mr. Patterson said Mr. Yoannou had a gambling problem and lost most of the money he took from clients on online gambling sites. He said there was nothing to recover when the fraud came to light, and Mr. Yoannou, who has two adult children, has since declared bankruptcy and is living with his wife in a rented apartment.
Many victims in the case were old friends who knew Mr. Yoannou as members of the Toronto Cricket Club. One victim was suffering from dementia and living in a care home.
Former client Bill Dolan made a statement in court, telling Judge Boivin that he has sought medical and psychological help for the trauma he has faced since losing almost $1-million investing with Mr. Yoannou, who was a long-time personal friend.
Mr. Dolan, 67, said his family is under "extreme stress" and he could lose his home.
"My plans for my retirement life are all in tatters," he said.
Investors Group has repaid $5.6-million of losses to some investors, but Mr. Dolan and a group of others have not been reimbursed because they were not recorded as clients of the firm. Mr. Dolan is fighting the mutual fund company, arguing he thought he was a client and didn't know Mr. Yoannou had never registered him as one.
"I believed through that process I became a client of Investors Group," Mr. Dolan said in his court statement Thursday. "The trust, confidence and security I placed in the Investors Group brand name has been betrayed."
In addition to a six-year jail sentence, Mr. Yoannou has been ordered to repay the $5.6-million to Investors Group and the $1-million owed to Mr. Dolan. But his lawyer, James McLaren, told the court Mr. Yoannou does not have any money so the chances of paying restitution "are remote."
Former client Will Stewart, who attended the court hearing, said in an interview Mr. Yoannou was a close friend for many years, "so it was kind of sad" to see his fate. Mr. Stewart said his own losses were "in the six digits" and that he has also been turned down for repayment by Investors Group.
The Mutual Fund Dealers Association of Canada, which regulates the mutual fund industry, has filed a regulatory case against Mr. Yoannou alleging he stole a total of $11.6-million from 55 victims. A hearing is scheduled for March 19.
Investors Group spokesman Ron Arnst said the firm has concluded settlements with "all Investors Group clients" and said the firm has cooperated fully with regulatory and law enforcement officials.