David Baines
Sun
Martin Wirick faces multiple charges as a result of a six-year investigation into one of the biggest frauds in B.C. history. Vancouver Sun files
A marathon investigation into one of the biggest financial frauds in B.C. history concluded Tuesday with multiple charges against former Vancouver lawyer Martin Wirick and Vancouver real estate developer Tarsem Singh Gill.
Wirick was arrested at his Vancouver workplace, Koko’s Gourmet Pet Foods in North Vancouver, and Gill near his Ross Street home in South Vancouver on Tuesday by members of the special RCMP-Vancouver police task force that conducted the six-year investigation.
Both men were later released. They are scheduled to make their first court appearance on Sept. 15.
Wirick and Gill are charged with two counts of fraud and theft against 77 different homeowners, and two counts of fraud and theft against lenders in 30 different loan transactions.
Wirick is also charged with two counts of uttering false documents and Gill with one count of possession of stolen property.
The total amount of money alleged to have been unlawfully taken from homeowners and lenders exceeds $30 million.
The biggest victim, however, was the B.C. Law Society. Its special compensation fund, which insures clients for lawyer fraud, paid out $38.4 million in claims on account of Wirick’s alleged misconduct.
“As far as we know, not a single person lost their home over this,” society president John Hunter said in an interview. “We are quite proud of that.”
To pay for the claims, the law society imposed special assessments of $600 per year on each of its 10,000 lawyer members. (That assessment has since been reduced to $150 per year.)
Gill’s method of operation — as described in the Benchers’ Bulletin (the law society’s in-house publication) — was to develop a property and sell it to one of his nominees. The nominee would arrange a mortgage on the property and then sell it to an innocent purchaser.
The purchaser, in turn, would arrange financing from his lending institution and forward the money to Wirick on his undertaking to pay off the original mortgage loan and register a new first mortgage. But rather than disburse the money as promised, Wirick simply paid the funds to Gill and his Vanview group of companies.
In many cases, Wirick would provide false discharge documents, and a portion of the purloined money would be used to keep the original mortgage payments current, so neither the purchaser nor the original mortgage lender would be any wiser.
The new mortgage lender, meanwhile, naturally assumed he had obtained a first mortgage against the property. But since the original mortgage hadn’t really been discharged, he was actually in second position.
In some cases, this process was repeated, enabling Gill to mortgage the property many times over and generate more money than it was worth. Eventually the scheme collapsed, revealing a tangled web of transactions, mortgages and competing claims.
When the scheme was uncovered, law society officials took over Wirick’s practice and audited his books and records. They also obtained access to Gill’s records through the court, which gave them a good idea of where the money went.
The society found that, from January 1998 to May 2002, $52.7 million passed through Wirick’s trust accounts to Gill and his companies.
Of this amount, $32.6 million was used for development and construction costs; $12.5 million was paid to lending institutions to keep mortgages up to date, including those that should have been discharged; $3.2 million was paid to Gill and related parties and only $600,000 to Wirick.
The fraud was discovered in the spring of 2002. Wirick resigned from the society in May that year. He subsequently declared bankruptcy and obtained relatively menial employment at the pet food business. Gill has continued to develop property in the Vancouver area.
After the alleged fraud was detected, Vancouver police embarked on what they described as the biggest commercial crime investigation in VPD history. So big, it turns out, that they couldn’t handle it.
In June 2004, after several false starts, the Vancouver RCMP commercial crime section and the Vancouver police financial crimes unit formed a joint task force to investigate the matter.
Law society officials earlier made no secret of their frustration with the pace of the police investigation, but on Tuesday, when charges were finally laid, diplomacy prevailed.
“Obviously they have been some time coming, but we are satisfied that charges have been laid,” said Hunter.
At the time of the alleged fraud, the law society had a $17.5-million annual cap on client claims for lawyer fraud. Clearly this was not going to be enough to compensate Wirick’s victims. So the society, to its credit, removed the cap.
Since then, the law society has moved to limit payouts on account of lawyer fraud to $300,000 per transaction, with a cumulative cap of $17.5 million in any one year.
Hunter also said the law society has stepped up its auditing of lawyer’s trust accounts and directed its members to advise the society when financial institutions take undue time providing mortgage discharges — a procedural weakness that Wirick and Gill used to advance their alleged scheme.
© The Vancouver Sun 2008
