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Law society confronts alleged money laundering, dodgy foreign investments

A Law Society of B.C. disciplinary hearing has put under scrutiny the legal regulator’s ability to police money-laundering, scams and illicit foreign investment involving lawyers.
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A Law Society of B.C. disciplinary hearing has put under scrutiny the legal regulator’s ability to police money-laundering, scams and illicit foreign investment involving lawyers.

In the face of an overheated real estate market and public concerns about foreign capital last year, the society cited West Vancouver lawyer Donald Gurney for professional misconduct over his involvement in four questionable, three-year-old transactions.

It alleged he ignored numerous badges of suspicion and misused his trust account by allowing $25,845,489.87 of offshore cash to float through it between May and November 2013.

The dodgy money moves occurred under more than 20 “suspicious circumstances,” according to the law society.

With the veneer of legitimacy the lawyer provided, that money was beyond the usual purview of the authorities and could have been used in crime or even to finance terrorism.

Society lawyer Kenneth McEwan said Gurney provided no substantial legal services and there was no need for him to be involved in the transactions that came to light during a society compliance audit, a professional oversight check the society makes on law firms roughly every six years.

In fact, McEwan said the first $5 million went in and out of the trust account before Gurney even met the client, whose identity was protected by order of the disciplinary panel along with other information about those involved.

“Where was the money coming from?” McEwan asked. “That was an inquiry that was not made.”

But lawyer Paul Jaffe fumed that his client was being scapegoated and scoffed that the trust account had been a portal for illegality.

“I’m not trying to embarrass the law society for being wrong or confusing,” he told the panel.

Gurney did nothing wrong and there was no prohibition in B.C. as in Ontario restricting the use of legal trust accounts, he said, adding that the charges of professional misconduct were vague, ambiguous and a “moving target.”

“It’s a very difficult case to defend because the scope of particulars is difficult to establish … but the bottom line is what is the evil?” he asked. “We don’t even know why we are here … What is it that Gurney is supposed to have helped conceal?”

In spite of all the headlines about the market, Jaffe said no lawyer had been cited other than Gurney and the society was not identifying a single rule or professional direction the 48-year veteran had violated.

These were private parties involved in “unconventional” transactions, but that was their right and Gurney decided not to interfere with that.

“This is not clear, cogent, convincing evidence on which to destroy someone’s reputation,” he insisted.

The society maintained a lawyer’s conduct was not governed solely by the set of professional rules, but also involved consideration of broader issues and expectations.

Jaffe, however, responded that lawyers had no responsibility to investigate the source of funds beyond what their client told them.

If there was such a responsibility to know where a client’s money originated, those who handled the sale of a Point Grey home for $30 million, registered in the name of a student, would have to go to Shanghai or wherever to establish the origin of the cash, he suggested.

It was a broadside on the law society’s stand that lawyers play a gate-keeping role recognized by the Supreme Court of Canada to ensure the integrity of trust-account transactions because money that goes in enters a “zone of secrecy” behind the shield of solicitor-client privilege.

McEwan said that curtain blocking the view of financial police and the RCMP imposed a legal duty on lawyers to take reasonable steps before accepting any money to avoid becoming a tool or a dupe of money-launderers, terrorists or those involved in questionable real-estate transactions, apparently a favourite of those engaged in legerdemain.

He dismissed Jaffe’s complaint that the society had not shown and was not alleging any of this money ostensibly transferred for investment purposes was used for illegal purposes: “It is not a question of maybe we got lucky and nothing had happened.”

What happens later, whether for nefarious purposes or not, was a separate issue.

The concern, McEwan explained, was whether Gurney’s behaviour turned his trust account into an “empty vehicle for the potential subversion of the administration of justice.”

McEwan said it was of fundamental importance that lawyers ensured their trust accounts and solicitor-client privilege were not misused.

“When they fail in that obligation there must be robust professional discipline with a view to ensuring public confidence in the profession and its ability to regulate itself,” he emphasized.

The two lawyers on the disciplinary panel — chairman Phil Riddell of Port Coquitlam and Gillian Dougans from Kelowna — reserved their decision late Friday.