Lawyers Gone Bad

by Philip Slayton

  Dramatic as these charges were, attention quickly shifted away from Martin Pilzmaker to his erstwhile firm, Lang Michener. The sins of a powerful and wealthy establishment law firm, used to operating behind closed doors, were so much more interesting than those of an upstart rogue lawyer from Montreal. Lang Michener did not file a report with the Law Society of Upper Canada about Pilzmaker until December 1986, about three months after he was expelled from the firm. The big story quickly became the Lang Michener “cover-up,” and the big question was what the law society was going to do about it. Pilzmaker, despised and reviled, quickly became almost irrelevant, a “fifth business” needed only to advance the cover-up story. It was no longer the “Pilzmaker scandal.” It was the “Lang Michener affair.”10

  In August 1989, the Law Society of Upper Canada began an inquiry into the behaviour of five of Lang Michener’s most senior partners who had been members of the firm’s executive committee in the summer of 1986. Four other partners, widely thought to be implicated, were not named by the law society, and Stephen Sherriff, the society’s senior discipline counsel, resigned in protest. The law society charged the five with failing to report promptly what they knew about Pilzmaker, and failing to inform clients of the investigation into Pilzmaker’s activities so that those clients could obtain outside legal advice. The main defence of the “Lang Michener Five” was an all-out attack on their former partner. Victor Malarek attended the twelve days of law society hearings. He reported in Gut Instinct, “Pilzmaker’s name and reputation were dragged through the muck by his former Lang Michener colleagues. No one had a kind word for the man. He was slandered and vilified, described as unethical, devious and dishonest and called a liar, a crook and a dangerous corrupter. The final insult: Pilzmaker was labelled ‘absolutely stupid.’”11

  On January 9, 1990, a law society disciplinary committee found the five partners of Lang Michener guilty of professional misconduct. It said that they “knowingly breached their duty to make timely disclosure to the Law Society of Upper Canada of information known to them respecting the conduct of solicitor Martin Pilzmaker.” It found them not guilty of professional misconduct for omitting to inform Pilzmaker’s clients that he had likely given illegal or unethical advice and advising them to seek independent legal advice. A few days later, the penalty, described by The Globe and Mail as “a private scolding,” was imposed: “Everyone except the committee members and the five lawyers was asked to leave the hearing room at Osgoode Hall, and the reprimand in committee, which is somewhat like a slap on the wrist, was administered immediately.”12 With the Lang Michener partners now suitably (or not) chastised, the law society turned its attention to Pilzmaker. On January 25, 1990, he was disbarred for refusal to cooperate in investigations of his professional conduct, which demonstrated, in law society language, that he was “ungovernable.”

  On Friday, April 19, 1991, two weeks before Pilzmaker was due to face criminal charges in court, his body was found in a room at the Cromwell Hotel on Toronto’s Isabella Street. Two empty pill bottles were found nearby.

  Despite the crisis that had enveloped it, Lang Michener continued as one of Canada’s premier law firms. Most of the partners disciplined by the law society remained senior partners of the firm and, it seems, respected members of the legal community. Today, older lawyers in Canada still sometimes speak of the Lang Michener affair. Martin Pilzmaker is mostly forgotten. The Cromwell Hotel remains open for business.

  WHEN MARTIN PILZMAKER unsuccessfully applied to Blake Cassels & Graydon in 1984, Robert A. Donaldson almost certainly was one of the partners who interviewed him. By 1984, Donaldson was very powerful in the firm, and his agreement was needed if a new partner was to be admitted. Cherishing his establishment persona, Donaldson would have found Pilzmaker, with his Rolls-Royce, fox-fur coat, and frizzy perm, to be an unattractive and embarrassing fringe player in the legal world, quite unsuitable to be a Blakes lawyer. It was the unsuitable Pilzmaker who later became an indirect instrument of Donaldson’s ruin.

  In the eighties, Donaldson, a securities and corporate lawyer, was top dog at Blakes, probably the best-known member of the firm.13 He joined Blakes in 1964, at age twenty-seven, on graduation from the University of Toronto law school (Donaldson obtained a bachelor of commerce from McMaster University in 1961). A former Blakes partner commented to me that “Donaldson started practising securities law when a securities practice didn’t amount to much, and rode it.” He rode it while running the Donaldson Group, consisting at its apex of twenty or so corporate and commercial lawyers, all beholden to him for work and raises in pay. He was the firm’s biggest business-getter, the biggest biller, and one of the highest-paid partners. He was a member, and often chairman, of important firm committees, including the all-important “points committee” that every two years reallocated profit among the partners. A Toronto Star story on May 21, 1992, said, “Until recently, Donaldson was one of the country’s pre-eminent corporate lawyers, riding around in limousines, taking clients to the symphony and the ballpark or rushing to the airport for trips to Paris, London and Japan.”14

  Donaldson was always on the telephone—to top lawyers around the world, important businessmen or politicians, or perhaps the president of the University of Toronto. If not on the telephone, he might be signing letters giving congratulations or condolences, or asking for money for a favourite charity. He was an enthusiastic entertainer, and his rowdy Christmas party for clients, beginning with lunch in a top-floor private room at Tom Jones Steakhouse in downtown Toronto, and going on from there (in a fleet of limousines) to who knew where, and for who knew how long, was famous. White-haired and well-dressed, he wore brightly patterned suspenders and half-frame glasses, smoked cigars when you still could smoke in office buildings, and walked with a rolling gait down the office halls, glad-handing as he went. He arrived at the office very early in his Jeep Wagoneer, and left very late. He was the only partner to have two secretaries, working in shifts. Donaldson, as another former Blakes partner put it, had “unbelievable work and social skills and inspired a lot of loyalty.”

  In April 1991, the same month Pilzmaker killed himself, Donaldson’s secretary, troubled by some of his billing and related practices, took her concerns to firm management, and Blakes began an investigation with the help of forensic accountants. On Monday, April 22, the firm reported the allegations to the Law Society of Upper Canada, which began an immediate investigation. On the same day, at a dramatic early-morning meeting in the basement auditorium of Commerce Court West (the building that houses Blakes’ multi-floor Toronto office), Ted Donegan, then firm chairman, told astonished partners what was going on. He instructed those with responsibility for major clients to contact them immediately, explain the situation, prepare them for adverse publicity about Blakes, and offer reassurances that the firm was taking appropriate steps to deal with the crisis. On Friday, April 26, Blakes issued a press release about the investigation and Donaldson took a leave of absence. On the weekend, in response to the press release, Donaldson released a public letter of apology. It said, “I deeply regret any error in judgment I may have made and offer a heartfelt apology to my colleagues for any embarrassment I may have caused.”

  It had been little more than a year since five senior partners of Lang Michener were disciplined by the law society for not promptly reporting allegations of misconduct by Martin Pilzmaker. The Lang Michener affair—which had become the story of a cover-up—had damaged that firm and was still very fresh in the legal community’s mind. Ted Donegan and the handful of senior partners who ran Blakes, acting with unusual decisiveness, were determined not to make the same mistake, even if one of their own had to be sacrificed in the process. The Globe and Mail Report on Business ran a front-page story titled “Crude justice served.”15 “After years of running with the lions of Bay Street,” the story began, “Bob Donaldson has been declawed. A vague allegation of wrongdoing has left his legal career up in the air amid a swirl of rumours and speculation.�
�� It continued:

  Guilty or innocent, Bob Donaldson is being punished.… Colleagues and competitors on Bay Street (where Mr. Donaldson was a pillar of his firm), of the corporate law bar, of the legal education community and of the Ontario Progressive Conservative Party agree that he can never be made whole again after the press releases of April 26.… “The announcement does great damage to his reputation,” a lawyer said. “It’s like a charge of rape. If the verdict is ‘not guilty’ at the end, nobody’s going to remember.”

  The Globe and Mail story commented, “There is a strong sense among some lawyers that Mr. Donaldson was caught for an alleged misdemeanour that would not have come to any outsider’s attention except for the Lang case.” The Vancouver Sun later said, on September 19, “Ontario lawyers, skittish after the so-called Lang Michener affair, are often quicker now to report possible misconduct to the body that regulates them.”16

  On September 9, 1991, the law society issued a formal complaint against Donaldson, charging him with unprofessional conduct. The most substantial allegation was inappropriate use of so-called client credits. These credits resulted from mistaken double payment of accounts by some clients, and from premiums created when accounts rendered in Canadian dollars were mistakenly paid in U.S. dollars. The money should have been returned, but instead Donaldson used it improperly. He kept a list of available credits and used them haphazardly for a variety of purposes, often simply instructing his secretary to “use a credit.” For example, he financed a 1990 business trip to Paris using the credit of a client who had nothing to do with that trip, and the same year similarly financed a trip to a Canadian Bar Association meeting in England.

  A second allegation was that Donaldson used airline tickets improperly. He travelled frenetically—the evidence showed, for example, that in a single week he made three round trips between Toronto and Vancouver. Sometimes a client was charged for air tickets that were not used on that client’s business, with the cost not shown as a disbursement but buried in increased legal fees billed to the client. On several occasions, Donaldson personally received a refund for a ticket that someone else had paid for. It was also alleged that Donaldson sometimes failed to account to Blakes for funds advanced for business-related travel, and other times improperly described or charged legitimate expenses. Finally, there was a damaging charge that Donaldson had tried to frustrate the law society’s investigation into all these matters.

  In May 1992, a discipline committee publicly considered the allegations. The committee had before it about two hundred letters of reference praising Donaldson—more than fifty from lawyers at Blakes, more than seventy from other lawyers, about seventy from business associates and clients, and ten from politicians and personal friends. It heard oral evidence in support of Donaldson from ten people, including Robert Prichard, then president of the University of Toronto and now CEO of Torstar, Gerald Schwartz, CEO of Onex Corporation, and John Hunkin, CEO of what was then Wood Gundy and later chairman of the Canadian Imperial Bank of Commerce, Blakes’s biggest client (and landlord) for many years. Donaldson himself gave evidence. The committee noted:

  His evidence … was interrupted by loss of composure and sobbing. He apologized to his firm, his clients, his wife, and the Law Society. His remorse was genuine. He explained, without condoning his errors. He described the devastating effects on him since the disclosure [sic] his dismay and bewilderment, his unhappiness at the manner in which he ran his life, his (now realized) low self-esteem and low self-confidence which drove him to work harder to gain more esteem and confidence on a professional level.

  The evidence showed that Donaldson’s life was in turmoil. A self-confessed “workaholic,” by the late eighties he regularly docketed 2,700 to 2,800 hours a year (at least 1,000 hours a year more than the generally accepted Bay Street standard). One medical report filed in evidence (there were seven, each from a different doctor) estimated that Donaldson spent only one hour a week with his wife (he married his second wife, Marnie, in 1983). Donaldson gave evidence that by the mid-eighties he “couldn’t stop, didn’t want to stop and if [he] wanted to stop, [he] didn’t know how to stop.” In 1989, one of his physicians, Dr. A.G. Swayze, told him that “he was in a boat in the Niagara River and that rainbow ahead was not a pot of gold. He was going to take himself, his wife, children, colleagues and anyone who depended upon him, over the Falls into destruction.” The discipline committee said, “He needed, sought and consistently received professional adulation. Ironically, the more devoted he was to clients and other activities, the more positive reinforcement he received and the harder he worked to obtain that positive reinforcement.… There is no suggestion that money was a motivation.”17 As to how events had affected him, “He has been emotionally devastated. The medical reports and Agreed Statement of Facts refer to his contemplated suicide.”

  In its reasons,18 the discipline committee described Donaldson’s conduct regarding client credits as “wrong,” but noted that the credits were not created deliberately to be misapplied and that Donaldson did not receive direct personal benefit from the misapplication. About the misuse of airline tickets, the discipline committee again described his conduct as “wrong,” but observed that Donaldson only benefited to the extent of approximately $19,000, and that the evidence showed that he personally incurred travel and entertainment expenses of over $100,000 for which he sought no reimbursement. The committee commented, “The proliferation of tickets and recklessness of the Solicitor in attributing the cost of a particular ticket to a specific client created a situation in which the possibility of error was high.” As for the charge of attempting to frustrate the investigation, the discipline committee observed that “the conduct of the solicitor after his misconduct was discovered was incompetent or bungled in that none of his actions had any actual effect on the investigation.”

  Donaldson did not contest the particulars set out in the complaint, and admitted professional misconduct. The discipline committee recommended to Convocation, the law society’s governing body, that he be suspended from legal practice for eighteen months. Convocation changed the suspension duration to twenty-four months. Donaldson, for the moment, disappeared.

  During this time, those interested in lawyers gone bad had more than just Martin Pilzmaker and Bob Donaldson to think about. In the late nineties, the Dan Cooper scandal erupted (the subject of the next chapter in this book). Cooper, a senior partner at Bay Street’s McCarthy Tétrault, had stolen money from the firm and some of its clients. In late 1991, Julius Melnitzer, a prominent and flamboyant lawyer in London, Ontario, pleaded guilty to forty-three fraud-related charges and was sentenced to nine years in jail. Melnitzer forged $100 million in stock certificates, using them as collateral for bank loans.19 At about the same time as Melnitzer went to prison, Ernest Rovet, a partner in the Toronto law firm of Fogler, Rubinoff, was found by a law society disciplinary committee to have made false representations to the Canada Labour Relations Board, and to have assisted in the preparation of false documents in support of those representations. When this was first reported to the law society (by another lawyer, who discovered what happened), Fogler, Rubinoff retained an accounting firm to review Rovet’s fee billings over a two-year period and discovered something else. The discipline committee said, “The personal expenses which the Solicitor charged to clients as fees included such items as newspaper subscriptions, airplane tickets, automobile expenses, restaurant meals, drycleaning, hardware, baseball and theatre tickets, household items, landscaping, photographs, furniture, ski equipment, clothes, books, and art.… The amount is in the range of approximately $35,000.”20 The discipline committee recommended a six-month suspension backdated to when Rovet voluntarily ceased practice. But in January 1992, Convocation concluded that this penalty was not enough, and suspended Rovet for twelve months from the date of the suspension order. Subsequent disciplinary decisions have criticized even this penalty as too lenient.

  When Donaldson’s suspension from the law so
ciety was over, he joined another Toronto law firm. He gave speeches across the country about “wellness” and the need for balance between work and play. He explained that what had happened to him was because he was a workaholic. Then, quite quickly, something went wrong at his new firm (no one I spoke to knew exactly what happened, or would say, although there are many rumours). Donaldson resigned. He became a successful businessman. In 2003, he gave a million dollars to McMaster University, used to create a gathering place for students. The president of the alumni association said, “Bob Donaldson’s leadership in support of students has been exceptional.”

  WERE MARTIN PILZMAKER ALIVE, he might take satisfaction in the idea that he, a classic outsider, had been an indirect agent in the fall of a powerful figure like Bob Donaldson, someone who had once rejected him as a potential partner. He would, no doubt, be disappointed that the events he set in motion are known to history, not as the Pilzmaker scandal, but as the Lang Michener affair. In the end, the unattractive and lonely Pilzmaker—easily reviled, denied eponymous immortality, but impossible to ignore—has left his strange mark. Meanwhile, Bob Donaldson apparently survives comfortably into old age, but he is not what he once was.

  THREE

  JUST BUILDING UP AN ART COLLECTION

  Dan Cooper

  Daniel Gilead Cooper, who stole money from his law firm and clients, was led astray by greed.1 So thought the Law Society of Upper Canada disciplinary committee that disbarred him, and the Crown prosecutor who threw him in jail. If they were right, then Cooper’s story is quite different from Bob Donaldson’s.2 Donaldson carelessly, almost inadvertently, purloined what were small amounts measured by his huge income, and spent the money on things he could easily afford anyway. And if Dan Cooper was motivated by greed, his story doesn’t resemble Martin Pilzmaker’s either. Pilzmaker was superficially greedy, but at heart was driven by a desire to appear more important than he was.