Larry MacDougal/Canadian Press
Michael Freedman, a Calgary entrepreneur, was a victim of the advance-fee fraud fronted by ex-lawyers Peter Leich and Glenn Sacks. Freedman says he would not have forwarded more than $10,000 in “processing fees” had it not been for the assurances of the lawyers that the scheme was legitimate.
The Calgary entrepreneur with a dream of starting a smart card business believed he had struck a promising deal to obtain the financing he needed to get his idea off the ground.
The company that made the offer was directed by two Canadian businessmen, assisted by veteran Toronto lawyers, Peter Leich and Glenn Sacks. The lawyers were identified in company literature as “trustees” of the finances and Leich personally vouched for the legitimacy of the company.
Freedman said he took “great comfort in that.”
So did at least 96 other unsuspecting entrepreneurs from across North America, who were bilked out of $1.5 million in “processing fees” they wired directly to the lawyers’ trust account.
“Had it not been for the fact that their money was going into the lawyer’s trust account, (the entrepreneurs) would not have sent the processing fee,” the Law Society of Upper Canada submitted as part of its discipline case against the two lawyers.
As the law society would later conclude, Leich and Sacks fronted a textbook “advance-fee fraud,” orchestrated by one of their clients.
These entrepreneurs paid fees they were told were needed to access a pool of collateral that would help them obtain business loans. Too late, they learned the collateral was bogus. Leich and Sacks both benefited from the scheme, the law society panel concluded, though to what extent is unclear because they refused to produce full banking records to the investigators.
Leich and Sacks are among 236 lawyers sanctioned by the law society, which regulates the profession in Ontario, for criminal-like activity in the last decade. These 236 lawyers were found to have engaged in schemes that led to thefts, frauds and diversions that totaled more than $60 million in client funds. A Star investigation reveals that while most were reprimanded, suspended or disbarred by their professional organization, few were ever charged criminally, and only a handful sentenced to jail.
The law society does not, as a rule, report these lawyers to police.
Soon after Freedman’s processing fees disappeared, complaints to the law society about Leich and Sacks started rolling in. But the lawyers, both 30-year veterans operating out of a non-descript office on the Danforth, continued practicing for five more years, even as evidence mounted that the investment company they were vouching for was a sham.
In 2006, Leich was disbarred for “knowingly assisting” in the fraud and Sacks was deemed “willfully blind,” and allowed to resign his law licence. Neither has ever faced criminal charges.
The law society has said very little about the case. A spokesman refused to tell the Star whether investigators ever reported the lawyers to police.
Through interviews with victims, a review of civil court documents and law society case files, the Star has pieced together the story of a fraud that shattered business dreams, a regulator that did not take action to stop the scheme until it was too late, and two lawyers who escaped criminal charges.
Ex-lawyer Peter Leich was disbarred by the Law Society of Upper Canada for his role in an advance-fee scam that bilked $1.5 million from 97 businessmen across North America.(Dale Brazao/Toronto Star)
Glen Sacks was allowed to resign his lawyer’s licence after he was found to have played a role with former partner, Peter Leich, in an advance-fee scam that bilked $1.5 from 97 businesspeople across North America. (Dale Brazao/Toronto Star)
For entrepreneurs like Freedman, looking for financing, the pitch from Equity Investments International was hard to resist.
Here’s how the program was supposed to work: An entrepreneur would submit a business plan. Equity Investments, run by one of the lawyers’clients, would approve the project. In exchange for a “processing fee” and a stake in the project, Equity would make collateral available so the entrepreneur could get a bank loan. Once a loan was secured, Equity promised to refund the fees held in the trust account of Leich and Sacks.
The processing fees from investors, sent to the lawyers between 1999 and 2002, ranged from $12,000 to $40,000 and were based on the amount of collateral that would be made available. (Freedman sent $12,500 in late 2000 for access to enough collateral to secure $1 million in financing.).
Equity, which was incorporated in the Bahamas and based in Milton, Ontontario targeted entrepreneurs having trouble getting traditional financing.
“We are in the epicenter of this erupting marketplace where opportunity abounds and the future is a golden glow,” the promotional materials read.
Equity said it could make it easier for a deserving project to get a loan because its US$100 million in collateral would reduce the risk perceived by lenders.
In the client introduction, the collateral was described as “gold, bonds, diamonds, etc.” But the bizarre hodgepodge also purportedly included Kazakhstan bonds, selenium contracts and Mexican timber tracts.
Bernd Moos, who was one of Leich’s longtime clients, was identified by the law society as the company’s principle. He signed collateral loan agreements and approved many of the applications, according to law society documents.
Lou Renaud (now deceased) was Equity’s “international Director,” and appears to have handled much of the communications with clients.
Successful applicants such as Freedman received a letter on Sacks & Leich letterhead, signed by Leich, and addressed “To Whom It May Concern.”
“This is to advise you that I act as Escrow Agent for the above captioned Corporation and as such, have personal knowledge of their business,” Leich wrote.
He claimed he possessed all documentation, rights and title to Equity’s collateral, which had been made available to support selected business ventures “in the past and present.”
Michael Freedman, a Calgary entrepreneur, was a victim of an advance-fee fraud fronted by ex-lawyers Peter Leich and Glenn Sacks. Freedman says he would not have forwarded more than $10,000 in “processing fees” had it not been for the assurances of the lawyers that the scheme was legitimate.(Larry MacDougall/The Canadian Press)
In fact, neither Leich nor Sacks independently verified the collateral, according to their statements to the law society. And none of the 97 entrepreneurs Equity approved was successful in using it to get a loan. Moos later testified he could not provide evidence of the collateral’s existence for fear that someone would use that information in a “fraudulent” manner.
Outside his home in a cul-de-sac in Scarborough’s established Rouge Hill neighborhood, Leich told a reporter he could not comment because he is “still bound by solicitor-client privilege.”
“I’d love to tell you all about it, but I can’t,” he said.
Sacks, who established his law practice with Leich in 1974, and lives in a detached house in the heart of the Beach, also declined to comment.
At the law society hearing, the panel heard testimony that Moos was the one who told the two lawyers what to do with the money collected from investors.
The Star located Moos, 69, at a Burlington office building, where Moos’s son, Jason, runs a company called Sandor Capital Corporation.
After a brief chat in the parking lot, Moos escorted a reporter into a utility room down the hall from his office. When asked why the interview couldn’t be conducted in his office, Moos said there were people in his office and that he went there “once in a while” to help his son.
He strongly refuted the law society’s findings, saying the organization was “triple-A wrong.”
Moos branded the late Renaud as “the fraudster.”
“I think he knew he was dying and he took the money,” he said.
(When Renaud died in Calgary in 2009, he was facing eight fraud-related charges in connection with another scheme.)
Moos described Leich as “fair and honest.” He said most of the processing fees went toward leasing the collateral, which he still claimed was “absolutely real.”
When Moos testified at Leich’s discipline hearing, the panel concluded the evidence he offered was “so completely lacking in credibility, and was, in fact, so outrageous that it did nothing but support the contention that the entire transaction was in fact an advance-fee fraud.”
Moos, who declared bankruptcy in 2002 — owing creditors $1.8 million — told the Star he was putting together “a task force to sue the law society” for “fraudulently misrepresenting” him in the way he is portrayed in the disciplinary decision.
Moos told the Star in a later telephone conversation that he lives in a trailer, but would not say where. The Star found a stately home on Lakeshore Road in Burlington owned by Moos’ wife, Judith, that has a mortgage of $1.85 million held by the couple’s son, Jason.
Across the street, Jason owns another home valued at $1.9 million that is registered to him and his mother. That home is currently the subject of an arson investigation by the Halton Regional Police and the Ontario Fire Marshal after it sustained $750,000 of damage in a mysterious fire last year.
Bernd Moos, was identified by the Law Society of Upper Canada as a principal of Equity Investments International, the company that advertised the availability of collateral for entrepreneurs. He signed collateral loan agreements and approved many of the applications, according to law society documents. (Dale Brazao/Toronto Star)
Where did the money go?
That is a question the law society never fully answered. But the banking records make one thing clear: The lawyers moved the processing fees out of their trust account almost as soon as the money landed.
A law society accounting reveals the following recipients of money from the trust account managed by the two lawyers: $362,000 moved into a bank account attached to a numbered company registered in the maiden names of the wives of Sacks and Leich; Renaud’s wife, who got $330,858; Moos’ wife, who received $127,500; and a financial services company registered in Moos’ name, which got $76,000.
Moos told the Star he couldn’t remember why any processing fees went to his wife. He said his company “probably” took the money as a loan.
Numerous other payments were made, including one to an auto repair shop ($2,500), one to an electrical company ($2,000) and another to a bank account in the Bahamas ($90,000). Another $65,000 went to pay off a personal judgment against Leich. The law society was only able to obtain partial banking records, so its accounting is incomplete.
Leich and Sacks insisted they did not personally benefit from that money, and that Moos directed them where to move the funds, a claim Moos denies.
In 2003, Sacks told a law society investigator Moos “basically told them what to write and what to say and who to pay and they just followed instructions and didn’t ask any questions.”
Sacks said he believed the numbered company had been set up so Moos could avoid Revenue Canada, a charge Moos also denies.
Despite repeated requests from law society investigators to produce the banking records for that account, neither Leich nor Sacks ever did.
Law society spokesman Roy Thomas told the Star that pursuing a court order for the banking records of the numbered company registered to the lawyers’ wives would have been “an unnecessary step which would have delayed the investigation and prosecution.”
“For the purposes of the regulatory prosecution, it was sufficient to establish that they (Leich and Sacks) had benefitted,” Thomas said.
The Star was unable to reach Leich’s wife, Claudia Choquette.
In a brief phone conversation with the Star, Sacks’s wife, Kate Pocock, said she did not know a numbered company had been set up in her name, and she was not involved in the law practice.
She said she has “no idea” what happened to the $362,000 her husband moved from trust into the bank account attached to a company in her name.
“I had nothing to do with any of it,” she said. “One of the questions is: Where is the money? I’d like to know as well.”
entrepreneurs tried — and failed — to use the collateral loan agreement to get financing, many reached out to Sacks and Leich.
As his business venture disintegrated, Freedman continued to press Leich for answers. In a fax to Leich in late February 2001, Freedman said he had brought his “concerns” about Equity to a number of law enforcement agencies.
“All those people suggested that (Equity) is either perpetrating a fraud, scam or swindle; or alternatively, they are simply inept businessman with no regard for their clients or the law,” he wrote.
Leich responded with a letter to Freedman’s Calgary lawyer. He said Equity was suspending Freedman’s business transaction, and preparing to sue him for “libel, slander and damages.”
“Your client wanted to play with big dollars but must also be prepared to pay the cost of his actions,” Leich wrote.
Equity then filed a statement of claim against Freedman seeking $1 billion. (The suit never materialized.)
Equity’s list of victims, meanwhile, continued to grow.
Vancouver resident Eklas Miller says she was “devastated” when she lost more than $12,000 in the Equity Investments International advance-fee fraud. (Jeff Vinnick/for Toronto Star)