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mercredi 23 juillet 2014

Victims of Investment Fraud Regrettably See Their Claim Dismissed Based on the Ground of Prescription

By Sarah D. Pinsonnault

The case of Guerrera (Estate of) c. Iaboni, 2014 QCCS 3348 serves as a sad reminder of the importance of filing one’s lawsuit within the delays prescribed by law.  The Plaintiffs in this case lost their life-time savings because of the Defendant’s false representations which led them to invest in a fraudulent offshore investment company based in the Bahamas (“PML”) that ceased to exist once the investments were made. Despite having found the Defendant responsible “without a shadow of a doubt” for the damages incurred by the Plaintiffs, the Court nevertheless had to dismiss their action for reason of prescription.

Analysis
It is worth noting that the Plaintiffs' action also targeted other parties but, due to namely service issues, the Defendant, Mr. Joe Iaboni (the “Defendant”), was the only party against whom the Plaintiffs were seeking conclusions. The Defendant presented himself to the Plaintiffs as being a financial advisor and persuaded them to not only invest but reinvest in PML.

When the Plaintiffs requested redemption of their investments, the Defendant only did so for a portion of them. With respect to the remainder of their investments, he would continuously reassure them that it would be redeemed, all the while attributing the delays to a myriad of excuses:
“[81]     On December 17, 2004, a letter addressed to Maria Guerrera, on PML letterhead, attributed the delays and problems in redeeming the money to “un-controllable compliance requirements in the international markets” and reassured her that “all redemptions and contracts will be honoured”.

[82]     On April 14, 2005, a further letter on PML letterhead blamed the delays on two hurricanes and on increased North American banks control against money laundering and terrorism. The letter nevertheless reassured the investors that their portfolios were safe with PML.

[83]     On January 18, 2006, PML also sent a letter claiming that the devaluation of the US currency, the poor market performance, the Patriot Act, and compliance issues were causing redemption delays. The letter, which is signed by Mr. Jean-Paul Gauthier, states that the issue should be resolved within a delay of four month or less.

[84]      On February 1, 2006, another letter was addressed to the Guerreras, on PML letterhead, to announce and justify further problems in redeeming the investments. The letter is signed by Mr. Jean-Claude Gauthier, Director of Financial Operations of PML. It reiterates the same excuses and indicates that a period of 24 months or less is expected for the issues to be resolved.” (references omitted & emphasis added for commentary below)

The Defendant was therefore found to have been a key contributor to this fraudulent scheme and liable for all the damages suffered by the Plaintiffs in relation to these investments.

However, after having come to this conclusion, the Court ultimately dismissed the Plaintiffs’ action due to prescription. The Plaintiffs’ action was filed on February 2nd 2011 and the three-year prescription delay applied to their lawsuit. They claimed that the prescription delay began on February 1st 2009; the day the 24-month delay mentioned in the aforementioned letter by Mr. Jean-Claude Gauthier expired and when they realized that the redemption was never going to happen. The Court however found that, based on this argument, the Plaintiffs’ filed their motion one day late because the delay to take action expired on February 1st 2011.

That being said, the Court dismissed this assertion altogether and found that the prescription delay began earlier during a conference call with the Defendant and during which one of the Plaintiff’s admitted in his testimony as being the date that he stopped being under the impression that he would be paid:
“[116]  More importantly, Giulio stated in his testimony at trial that until the conference call which Mr. Iaboni held with all the investors, he was always of the impression that once the problems would be resolved, they would be the first to be paid and that they would be paid in full. This conference call took place on January 19, 2008.

[117]  This conference call is the starting point of the prescription delay.”

The prescription delay therefore expired on January 19th 2011, that being three years following said conference call, and the Plaintiffs’ action was thus prescribed.

To read this decision in its entirety and other elements discussed therein, click here.

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