The years went by uneventfully, but not happily. Wirick did not enjoy practising law as much as he had anticipated. Depression and resentment built within him. He has written about his feelings:2
I didn’t enjoy most aspects of practicing law.… I often thought about what I could do if I quit law.… I wasn’t happy, and wanted to quit law.… I basically felt trapped in a job I hated. The longer it went, the less and less happy and the more stressed I became. I didn’t take vacations over a week or two in length each year because I felt I had too much work to do.
Then, sometime in 1996, he acted for a client who lent money to a Vancouver real estate developer called Tarsem Singh Gill. Reporter Wyng Chow described Gill and his business in a September 21, 2002, story in The Vancouver Sun: “Those who know Gill or had business dealings with him—including several who said they have been ‘stiffed’ by Gill—describe him variously as a ‘super nice guy,’ ‘a good family man,’ a sports enthusiast, and someone who gives generously to the Ross Street Temple. Real estate sources say Gill typically builds 50-to-60 houses a year, particularly in East Vancouver.”3 Even today, Martin Wirick describes Gill (he always refers to him as “Mr. Gill”) as “good-looking, charming and persuasive,” although he reluctantly adds “and a user of people.” Wirick and Mr. Gill got along well together, and Gill asked Wirick to act for him in routine conveyances of residential real estate properties that he was developing.
In the summer of 1999, while working on a Gill transaction, Wirick made an accounting error.4 He underestimated by about $20,000 the amount needed to discharge existing mortgages on a property that Gill had built and was selling. When he realized his mistake, Wirick called Gill and asked for the extra money. Gill didn’t have it. He told Wirick that he was finishing construction of a second property, and, when that second property was sold, some of the proceeds could be used to pay the outstanding mortgage on the first property. He asked Wirick, in the meantime, to hold in trust the insufficient funds, about $60,000, already on hand to pay the first property’s mortgage. Wirick agreed to all this. It seemed reasonable enough. After all, he thought, the wait for funds to make up the shortfall should only be about a month. Gill told Wirick not to worry. He said, “There is enough equity to pay everybody.”
Two weeks later Gill came to Wirick’s office and asked to borrow the $60,000 held in trust. He said he needed the money to finish the second property. Wirick, desperate that the second property be finished and sold so that the mortgage on the first property could be discharged, handed the trust funds over. Much later, Wirick said that releasing these trust funds was his key mistake. “I knew it was wrong,” he said. “I knew I was heading for big trouble.” When asked why he did it, Wirick replied, “I was tired, emotionally drained. My marriage was collapsing. I hated practising law. I just thought, fuck it, I don’t care. Also, I thought, nothing bad has ever happened to me, and never will. I’ll just put the whole thing out of my mind. It’ll be alright.” The current of events carried a tired and depressed Wirick along.
When the second property was finally sold, some of the proceeds, as planned, were used to pay off the first property’s mortgage. But now there were not enough proceeds from the sale of the second property to pay off the second property’s mortgages. Don’t worry, said Gill, that could be done from the sale proceeds of a third property. Gill repeated his reassurance, “There is enough equity.” The relationship between Martin Wirick and Tarsem Singh Gill slid into farce.
Gill kept building and selling properties (by the end, Wirick had acted for Gill in about three hundred separate transactions over a three-year period), “borrowing” the proceeds from one deal to pay off obligations arising from previous ones. Wirick kept telling Gill that he must stop and to settle all the outstanding mortgages. Gill kept assuring Wirick that, overall, he had sufficient equity to pay off everything. But the money was not coming in fast enough from the sales of new properties to pay off the mortgages on the old properties. Purchasers were asking for particulars about the discharge of old mortgages. Banks holding those mortgages began to get suspicious. The Law Society of British Columbia, nervous about rumours, conducted a spot audit of Wirick’s practice, which, surprisingly, turned up nothing. Meanwhile, to raise money, Gill began arranging new “first” mortgages on property without paying off existing first mortgages. Wirick became increasingly upset. Later he said, “We were always one property or more behind. I kept saying to Mr. Gill, sell, sell, sell, let’s deal with this. But Mr. Gill didn’t see it as a problem to be fixed. He thought of it as an opportunity, as a financing method.”
Finally, Wirick brought matters to a head. On Saturday, May 18, 2002, at Wirick’s instigation, Wirick and Gill met in Wirick’s office and tried to figure out exactly what was owed. They added up the unpaid mortgages. They calculated the so-called equity. They were $32 million short. Gill broke down and cried. Wirick knew that it was over.
The following Monday, May 20, Wirick sent a letter of resignation to the law society. It began:
This letter is to report that I have made serious errors in my practice of law. I intend to resign as a member of the Law Society of British Columbia as soon as possible.
In the summer of 1999, I made a simple error in calculating a Statement of Adjustments for a long time construction client of mine, named Tarsem Singh Gill. At that time, I was experiencing financial and emotional stress and depression from practicing law, and had not taken a vacation longer than one week a year in approximately 8 years.
The letter described the chain of events in detail. Wirick described the position he took with his client:
I told him [Gill] many times to stop buying, to sell the properties he had picked up in order to reduce his indebtedness, and he would always agree, but then he would carry on doing the same things, saying the only way out of our situation was to build large projects and many houses. I felt helpless to stop what was happening, and too far in to do anything but cooperate and pray that it would work out eventually.
The letter concluded:
I have not taken one cent except in legal fees for work actually done. Mr. Gill did not offer me money to do what I did, and I did not ask for any or take any. I honestly have no idea where that much money could possibly have gone.
Obviously, I am unfit to practice law and I will do everything in my power to wind down my practice or turn it over to the Law Society as quickly as possible.… I wish to say that, except in the matters concerning Mr. Gill, I have always acted properly on my files and complied with all undertakings and trust conditions placed upon me. I am very ashamed of my actions in this matter, and wish to take this opportunity to apologize to the lawyers, notaries, financial institutions and individuals whose trust in me has been betrayed.
The law society arranged for judicial appointment of a custodian for Wirick’s practice. Stories about the catastrophe started to appear in the newspaper. Criticism and abuse were heaped on Wirick’s head. But Wirick felt a sense of relief. The nightmare seemed to be over.
The Law Society of British Columbia quickly began the largest audit and investigation in its history. It took two months just to photocopy all of Wirick’s files and accounting records. The photocopy paper cost $11,000 and the accounting documents—client ledger cards, cancelled cheques, cheque stubs, bank deposit books, bank reconciliations, and bank statements—filled sixty-four large binders. Many of the investigated transactions were very complex (in one case, for example, the proceeds of a single conveyance were traced to more than forty other transactions). The law society team of five forensic accountants, an investigator, a staff lawyer, and a legal assistant, ended up focusing on about 870 of Wirick’s files. The Vancouver police assigned two detectives and a senior sergeant to the case, retained a forensic accounting firm, and sought assistance from the RCMP commercial crime section (eventually the Vancouver police created a special unit—the Lower Mainland White Collar Crime Unit—to investigate the Wirick affair). Jim Matkin, then CEO of the la
w society, was quoted by David Baines of The Vancouver Sun as saying, “It’s like an earthquake. For many years you never have a problem, then you have a problem that is so enormous it is quite frightening.”5 Martin Glynn, president of HSBC Bank Canada, was reported in The Lawyers Weekly as saying that what Wirick had done “affected every lending institution in British Columbia,” terming the losses “unprecedented.”6
In July 2002, Wirick filed for bankruptcy, listing debts of more than $50 million and assets of $467,859. He gave as the reason for filing “failing to pay out mortgages pursuant to my undertakings, but instead paying monies to my client on his promise to pay out the mortgages but who failed to do so.” The largest creditors were VanCity Savings Credit Union, with a claim of about $14 million; CIBC Mortgages, $5 million; Canadian Western Trust, $3 million; and Toronto-Dominion Bank, $1.3 million. Tarsem Gill had himself filed for bankruptcy the month before.
The Law Society of British Columbia was now under tremendous pressure. Angry people who had bought houses in Gill-related transactions were frightened that their titles were in question. Lending institutions had apparently lost millions of dollars. Standard real estate conveyancing practices stood revealed as vulnerable to fraud. There was no point in any one suing Wirick because he was bankrupt. The law society faced huge claims against its special compensation fund. The society was forced to remove the $17.5 million cap on annual aggregate payments from the fund. The amount payable by each B.C. lawyer to the fund in 2003 was increased to $600 from the 2002 amount of $250.
In June 2002, the law society struck a task force to look into the issues raised by what it delicately called Wirick’s “practice irregularities.” Wirick later said that what bothered the law society most was his dramatic demonstration of weaknesses in the conveyancing system. He’d shown “how easy it was to screw up.” The first report of the task force (called the “Interim report”) came quickly, on August 6. It proposed a two-cheque system in conveyancing: “Purchasers’ lawyers would deal directly with vendors’ encumbrances and, on closing, would provide separate cheques payable to the respective parties entitled to receive the proceeds.” It suggested a special new fee on all real estate transactions to pay for the cost to the law society of the Wirick inquiry and of making restitution to all those who had been cheated.
But the law society had stumbled. The reaction to the task force’s August report was hugely negative. Lawyers in British Columbia made clear that they did not want the two-cheque system.7 They did not want to be treated as if they were children or dishonest. What they wanted was restoration of confidence in the integrity of solicitors’ undertakings (to some extent, the lending community shared this sentiment). And the public (as reported in the newspapers) was outraged by the proposal that the huge costs of Wirick’s defalcations should, by way of a transaction fee on new real estate transactions, be paid by innocent clients who were not at all involved in what had happened. Faced with all this, the law society seemed frightened and confused. The president, Richard Gibbs, in his September 2002 message in the Benchers’ Bulletin, wrote, “Is Wirick a ‘oneoff’ or do his misappropriations tell us that we were gulled into thinking the base level of misappropriation was different from what it really is? Are there other defalcations out there as yet undetected? The last 15 years’ experience tells us the answer is almost certainly ‘yes.’ We don’t know what we will experience, but we do know there is a risk—and it is a bigger and different risk than we thought it was earlier this year.”
In December 2002, the chastened task force issued a new report (called the “Second interim report”) with a completely new set of recommendations. Now it proposed a so-called transparency response, requiring a vendor’s solicitor to provide to a purchaser’s solicitor, within forty-eight hours of the completion of a transaction, evidence that the vendor’s solicitor has repaid existing encumbrances on title. It recommended a “30-30 Rule,” which would allow a maximum of thirty days for a financial institution to provide a mortgage discharge and a further thirty days for the solicitor receiving the discharge to process it through the Land Title Office. And it recommended innocent party insurance coverage for future losses (the insurance scheme that was proposed would not pay for losses already incurred), funded by a combination of a general insurance levy assessed against all practising lawyers and a transaction fee for client matters. These recommendations seemed to be received favourably, the law society moved to adopt them, and the immediate hubbub died down.
That same month, on December 16, 2002, Wirick was formally disbarred (law societies retain the ability to discipline members even though they have already resigned).8 The law society disciplinary panel said this:
The Respondent has brought much shame upon the legal profession. He has misconducted himself to a level that is unprecedented in our history. His actions have had consequences beyond all reasonable contemplation of the Benchers and staff of the Law Society. He has brought significant hardship and harm to a large number of members of the general public.
The members of the Law Society will be paying for the consequences of the Respondent’s misconduct for years to come.… The Respondent’s conduct has been, at all levels, inexcusable.
… Any system can be abused. The real lesson of Wirick is that it went on so long and involved so much money. Lawyer theft at historical levels we can absorb. The Wirick misappropriations challenge our ability and our willingness to save the public harmless.
With Wirick’s disbarment, a very bad year for the Law Society of British Columbia mercifully came to an end. On January 1, 2003, a new president of the society, Howard Berge, took office, marking, it was hoped, the beginning of better times. When he became president, no one knew that the previous October Berge had driven his Volvo into a brick wall at the Kelowna Golf and Country Club, and that, when the police gave him a Breathalyzer, he blew nearly twice the legal limit. The story broke in B.C. newspapers in January. Once again, the law society was in crisis. On October 9, 2003, Berge pleaded guilty in Provincial Court to driving without due care and attention and had his licence suspended. The judge was highly critical of his conduct immediately after the accident, and as a result Berge resigned as president of the law society.9 On June 30, 2004, the law society issued a citation against its former president10 and scheduled disciplinary hearings. Over a year later, on July 14, 2005, a hearing panel found Berge guilty of conduct unbecoming a lawyer.11 On October 21, the penalty was pronounced: Berge was suspended from the Law Society of British Columbia for one month.12 Berge has since appealed his suspension.
Some time in the summer of 2003, Wirick and Karen separated (there were no children). They divorced in 2004. In September 2003, Wirick applied to the court for discharge from bankruptcy (discharge relieves the bankrupt from debts incurred before the bankruptcy). The law society and others opposed his application, arguing that there should be no discharge because he was guilty of a fraudulent breach of trust. In August 2004, Justice Sigurdson of the Supreme Court of British Columbia decided that creditors opposing a discharge were entitled to a finding that Wirick was guilty of a fraudulent breach of trust, and that accordingly, under the law, Wirick was not eligible for an absolute discharge of bankruptcy.13 In February 2005, Justice Sigurdson ruled that Wirick’s discharge application should wait until the law society had completed its audit in the Wirick matter and full information was available to the court.14 Finally, in June 2006, Justice Sigurdson granted a discharge, but on the condition that Wirick consent to a $500,000 judgment in favour of the law society (Wirick did consent). Said the judge, “There is no evidence that Mr. Wirick misappropriated any funds for his personal benefit.… Mr. Wirick’s fraudulent breach of trust was more a product of weakness in his character than it was greed on his part.”15 Justice Sigurdson added, “Perhaps the only way that Mr. Wirick will ever pay anything to the Law Society is if he wins the lottery.” Wirick considers that he was badly treated by the law society in his attempt to win a bankruptcy discharge. “I coo
perated completely,” he says. “I did what I could to make it better. They were just trying to punish me by opposing my bankruptcy discharge. They wanted to make an example of me. I couldn’t even get a credit card. And the law society is pushing the police to lay charges. It’s not fair.”
By December 2005, the total number of Wirick claims made to the law society was about 555, worth in excess of $80 million (some claims overlap, filed by both a bank and a property owner in connection with one transaction, and others are duplicate claims). About 495 claims valued at $75 million had been considered, and payment from the special compensation fund of $32.5 million had been authorized in respect of those claims. What happened to the money? No one seems to know. There is no evidence that Wirick derived any personal economic benefit (other than $600,000 in legal fees over the whole period). Brad Daisley, public relations officer for the law society, says that “in the forensic audit and in the special fund compensation cases, we have found no evidence that Mr. Wirick profited from his misappropriations.”16 Tarsem Singh Gill, when questioned about the money in August 2003 by a reporter for The Province, said, “I don’t know, you ask Wirick.”17 Wirick thinks a lot of it went to the banks, as interest on unpaid loans. “The only real victims,” says Wirick, “were the lawyers of British Columbia, who had to make it all good through the compensation fund.” A chartered accountant hired by the law society reported in September 2005 that there were no off-shore bank accounts, or identifiable sources of recovery for the law society other than the Gill estate in bankruptcy.18
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