W5: Who is protecting your investments?
All that glitters w5
Mary Dartis, W5 Staff
Published Saturday, October 1, 2011 7:19PM EDT
When Genie and Helmut Vollmer's accountant introduced them to a new investment opportunity, they had no reason to doubt their financial advisor and friend of 30 years.
The Calgary seniors were told by Heinz Weis that their principal would be guaranteed, and they could earn as much as 35 per cent annual returns.
"It was more or less guaranteed money and there would be no loss," Genie Vollmer said.
Although they admit that they didn't fully understand all the intricacies of the deal, they trusted their accountant, and on his advice they invested $400,000.
"He was my accountant for thirty years and at the time I thought he was the greatest accountant in the world," Helmut Vollmer recalled.
What the Vollmers were investing in was a company called The Institute for Financial Learning. IFFL, as the company was known, claimed to teach individuals how to develop financial strategies through the restructuring of assets — re-investing money held in RRSPs and home equity. IFFL was run by a Calgary man named Milowe Brost. He held seminars offering investment advice to IFFL members, often suggesting they invest in gold mines owned by another Calgary man, Gary Sorenson.
For years the Vollmers received statements showings substantial gains on their investment. Their accountant even went on a tour of one of Sorenson's gold mines in Honduras, and reported back favourably about the investment. But the golden investment opportunity began to show signs of tarnish. Rumours started to circulate that IFFL could be a fraud.
To the Vollmer's horror, in September 2009 Calgary RCMP arrested Sorenson and Brost and charged them with fraud, The Mounties accused them of operating a Ponzi scheme, which is where the first investors are paid supposed returns by using money obtained from later investors.
Shortly afterward, the Securities Exchange Commission in the United States filed a civil suit alleging that over an eight year period as many as 3,000 to 4,000 investors across North America were defrauded of as much as $300-million. One insider has claimed that amount could be as much as $5-billion.
Under sanction but little action
W5 has learned that over a period of years, starting as early as 2000, the Alberta Securities Commission (ASC) had been investigating Sorenson and Brost or their companies.
In 2005, the ASC referred the case to the RCMP. But it took another four years for the Mounties' Integrated Market Enforcement Team (IMET) to arrest and charge Sorenson and Brost with fraud.
The Vollmers and victims like them can't help but wonder why it took so long for the authorities to shut down the alleged scheme. They suspect that had authorities acted in a timely fashion, victims like themselves could have been spared the financial and emotional burden of loosing their life savings. The family of a woman from British Columbia say that their loved one committed suicide as a result of her financial losses.
Larry Elford is a former financial advisor who has been critical of the RCMP's Integrated Market Enforcement Team—the task force designated to investigate financial fraud. Earlier this year he asked the RCMP Complaints Commission to investigate IMET, claiming that they have failed in their ability to address large and complicated financial crimes. He believes that Canadian authorities should be held responsible for failing to protect victims like the Vollmers.
"Those investors have a claim for damages against the RCMP for doing a negligent job in investigating, and against the Alberta Securities Commission for doing a negligent job as a public interest," insisted Elford. "They [investors] should get all of their money back."
Ermanno Pascutto, Executive Director of FAIR Canada, is also worried about Canada's track record for policing financial fraudsters. His organization is a consumer watchdog whose mission is to provide a national voice for investors.
FAIR Canada recently completed a study into how Canadian authorities deal with large scale complex financial scandals.
The conclusion: the whole system is dysfunctional. Pascutto looked at the Brost-Sorenson case and says that the lack of action fits a cross-country pattern.
"We've seen cases in the past where people have defrauded consumers of millions of dollars and all that's happened to them is they've been told not to do it. And they've walked away" he said.
Despite repeated requests from W5, neither the Alberta Securities Commission nor the RCMP would agree to an interview about Brost, Sorenson or IFFL.
Meantime, Genie and Helmut Vollmer have joined a class action lawsuit against Sorenson and Brost, although Helmut doubts that he and his wife will ever get their money back.
"The only satisfaction I could get out of this here, is if I could live long enough that they're behind bars" said Helmut Vollmer.