Jones used clients' money for personal use
Former Montreal investment adviser Earl Jones has admitted using money from his trust account for personal purposes.
The admission is contained in the roughly 400 pages of a deposition Jones gave during two days of questioning in December by the bankruptcy trustee during hearings regarding his company, Earl Jones Consulting.
The deposition was released Thursday. Jones pleaded guilty Friday to two charges related to defrauding investors of about $50 million.
Under questioning by Neil Stein, lawyer for the bankruptcy trustee RSM Richter Inc., Jones acknowledged he had been dipping into a trust account created for the settlement of accounts for some time.
When asked when he first started using the trust account for his personal benefit, Jones said he guessed it had started about 25 years ago. He said it had continued right up until his business was shut down last summer.
Trouble started a year ago
"The encroachment became larger and larger because of the cash flow that I had to pay out to clients," Jones said.
The money was used for payment of personal credit cards, household items and travel, Jones admitted.
For most of his career, Jones said, he gained clients through word of mouth.
It wasn’t until a year or so ago that he began to have trouble keeping up the scheme, Jones said.
"It just — you know, it built up and built up to the point where, especially as I say the last year or six months … I couldn’t carry on," Jones said. "So, when an opportunity did arise that there was funds available then, certainly I tried to have clients deposit their monies with us."
Jones acknowledged his schemes had included sending clients false statements showing they were earning eight per cent interest at the Royal Bank.
He also admitted to having endorsed cheques that had been made out to his clients, depositing their money into his trust account.
According to the deposition, Jones also acknowledged having created fictitious loan agreements in the names of various individuals.
Accountant had been concerned
Stein asked Jones why his sister-in-law, Diane Gilker, had quit her job as an accountant after 16 years with his company.
At first, Jones said she had wanted to open a decorating firm with her daughter. But pressed on the issue, Jones admitted Gilker had concerns about the way he was using money from the trust fund.
"I think she was concerned," Jones said. "We never sat and talked about it, but that, you know … it was not the right thing to be doing.