Some of the victims of financial advisor Earl Jones call for harsher sentences for white collar crimes during a demonstration in front of the courthouse in Montreal, Quebec. Jones is charged with defrauding his clients of over $50 million.Ryan Remiorz/The Canadian Press
Victims of financial fraudster Earl Jones are meeting with revenue officials in Ottawa tomorrow to discuss delays in getting some relief for taxes they paid on fictitious income.
Kevin Curran, a member of the Earl Jones Victims Organizing Committee, says the government told victims last summer to file adjusted tax returns for previous years stating that the fake income provided to them by Mr. Jones was erroneously reported, at which point they would receive tax refunds.
Many of the more than 150 victims did so, but despite a promise to move swiftly, they are still waiting for their tax returns. Some have even received new tax notices telling them that they owe more money. Furthermore, a handful of the victims that would qualify for increased government pensions cannot get them because their income is still wrongly pegged as being too high.
"The government is not considering these monthly interest payments from Earl Jones as fake income and now these people are frozen," Mr. Curran said in an interview. "The government has dragged their feet on this for six months. Some of these people are struggling to afford daily living expenses."
Canada Revenue Agency spokeswoman Caitlin Workman was tight-lipped ahead of tomorrow's meeting. "We sympathize with their situation ... and we hope it will be a productive discussion."
Disgraced Montreal money manager Mr. Jones pleaded guilty in January to two counts of fraud for bilking 158 investors out of about $50-million. The case sparked outrage in Quebec as well as calls for tougher sentences for white-collar criminals.
For more than 25 years, Mr. Jones, an unregistered financial adviser, took but never invested money from clients, providing them with fake "returns" from other investors in a Ponzi-type scheme. Many of his elderly victims were swindled out of their life savings.
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Ginny Nelles, whose family lost more than a $1-million to Mr. Jones's scheme, says her mother recently got a tax notice saying that she owes $3,000 on her 2009 income. "But this is all based on a fictitious amount. So it is not fair - she is not being assessed fairly."
Mr. Curran, whose 77-year-old mother lost roughly $500,000 with Mr. Jones, estimates that in all, the victims of Earl Jones overpaid around $2-million in taxes, declaring interest income that has since been proven to not exist. In reality, his clients were given back their own money or the money of other victims.
Divided among the victims, that might not amount to a large amount of money, but some people who once had an annual income of $50,000 are now living on as little as $11,000 a year, he said. Without the adjusted tax statements, they do not qualify for the government's old age security or the guaranteed income supplement. Around 30 of them remortgaged their homes and, without these income tax returns, will not be able to make mortgage payments.
"Socially and psychologically, this is affecting everyone. Financially, about half of the people are in real need of these income tax refunds," said Mr. Curran, who is going to tomorrow's meeting with CRA and federal revenue ministry officials. "I would really hate to find out that they are making an example of these victims by not giving them their returns."
Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management, says it appears reasonable for the CRA to permit people who invested for the purpose of earning income, in what appeared to be a legitimate investment, to claim such a loss as a capital loss.
However, Mr. Golombek noted that even this treatment may not be of much use to the victims of Mr. Jones, since capital losses can only be deducted against other capital gains, something these investors are unlikely to have enough of in the foreseeable future.
Canada's banking ombudsman, Doug Melville, says the recent high-profile white-collar crimes are simply variances on long-standing routine scams. "What Bernie Madoff and Earl Jones did was not new, it was just big and public."
He urged people to do their own research and make sure they are dealing with a qualified, reputable financial adviser who is regulated. "Shop around, find someone you are comfortable with and above all, deal with a regulated adviser," Mr. Melville said.