Surrey investors protest credit union over Ponzi losses
Dozens of people protested in front of a Coast Capital Savings branch in Surrey on Saturday, blaming the credit union for an alleged Ponzi scheme that threatens to cost some their life's savings.
They carried signs outside the Newton office reading, "Coast return our money" and "Coast gave us bad financial advice."
The dispute, which is the subject of lawsuits before the courts, involves Arvindbhai (Arvin) Patel, a former investment advisor at Coast Capital, who has already been banned from trading securities.
He admitted to the B.C. Securities Commission (BCSC) in April that he encouraged his Coast Capital clients, as well as friends and family, to invest in what he called a secure investment guaranteed to pay them 12 per cent a year.
The money went to Vancouver notary public Rashida Samji, who was to keep it in a trust account that would act as borrowing security to the Mark Anthony wine group to expand their winery operations internationally.
The claims were untrue – the Mark Anthony group was never involved – and the now-suspended Samji is accused by BCSC regulators of defrauding investors of $83 million after using money from new investors to pay earlier ones between 2003 and January 2012.
Nearly $29 million was invested in the Samji-led investment by the mainly Surrey residents Patel referred since 2006, according to a BCSC ruling.
Coast Capital claims Patel – who was only authorized to deal in mutual funds – was essentially a rogue employee, acting outside his scope of employment.
"We were actually the ones who uncovered Ms. Samji's scheme and reported it to the B.C. Securities Commission," said Karen McDonald, senior manager of corporate communications at Coast Capital Savings.
She said Patel was relieved of his duties within days of a client complaint that uncovered his activities.
McDonald said Coast Capital is cooperating fully in an ongoing investigation by securities regulators and the RCMP.
Customers who invested through Patel hold the credit union responsible.
Scott Nicholl, a Surrey lawyer representing 90 affected clients, says some invested more than $1 million and have lost much of their net worth.
Some borrowed money through Coast Capital to invest via Patel and may be forced to sell their homes to pay back credit lines.
Nicholl alleges the credit union and its affiliated mutual fund arm failed in their duty to properly supervise Patel when he was providing financial advice.
"There are retired couples who Arvin Patel recommended refinance their clear title houses to invest in this thing," Nicholl said.
He said those affected have asked the credit union for interest relief on the outstanding loans.
"So far Coast Capital has done nothing," he said. "We were hoping they would do the right thing."
McDonald said the credit union is working to respond to the claims against it and recognizes the situation is causing hardship to members.
"We have reached out to each of them and offered them short-term financial aid," McDonald said, adding she could not go into specific details.
The securities commission said in an April ruling that Patel – who put $600,000 of his own money in the scheme – should have known Samji's claims were false and that high returns with no risk are impossible.
Other warning signs included the fact the investment wasn't approved by the credit union, had no disclosure documentation, and was described as an "exclusive" opportunity not available to the general public.
Most of Patel's assets have been seized and Samji's accounts are frozen but it's not clear how much investors may recoup.
The BCSC said a multi-million-dollar fine against the now-unemployed Patel would be appropriate, but pointless, as there is no reasonable prospect of it being paid.
A separate class action lawsuit has been filed against Samji, Patel and Coast Capital, with Delta couple Lawrence and June Jer and Surrey resident Janette Scott acting as lead plaintiffs.
According to the filing, the Jers invested $350,000 in the scheme and received $156,000 in interest payments over four years, paid out in bank drafts that hid the identity of the remitting account.
The cases are not expected to go to trial until early 2014.