Endorsement 2

Schemes, Scams, Frauds.

Home Up

www.crimes-of-persuasion.com Site Directory


Another small claims court case against the bank which issued and cashed a misendorsed bank draft used as payment to a fraudulent telemarketing operation. This was filed in June, 2001. As such, the claims within have not been proven and are presented as allegations only.


APPENDIX "A"
Superior Court (Toronto Small Claims Court)

B E T W E E N:

KATHLEEN SOMERVILLE   Plaintiff

- and -

TORONTO DOMINION BANK  Defendant

C L A I M

1) The Plaintiff claims against the Defendant:

a) Indemnification in respect of a loss, more particularly described herein;
b) Rescission of any contract between the Somerville and the Defendant and repayment of her monies remitted in relation thereto;
c) In the alternative, damages against the Defendant for breach of contract, breach of collateral contract, negligence, breach of fiduciary duty, breach of statute, and negligent misrepresentation in the amount of $4,000;
d) Further, or in the alternative, exemplary damages against the Defendant for breach of fiduciary duty, negligence, breach of contract, breach of collateral contract, and breach of statute in the amount of $4,000;
e) Interest pursuant to the Courts of Justice Act, R.S.O. 1990, c. c.43 and amendments thereto
f) Costs of this action on a solicitor-client scale plus Federal Goods and Services Tax;
g) Such further and other relief as to this Honourable Court may deem just.

THE PARTIES

2) The plaintiff Kathleen Somerville ("Somerville") resides at North York, Ontario. Somerville is approximately 80 years of age.


3) Toronto Dominion Bank ("TDB") is a bank registered pursuant to the Laws of Canada with offices at 55 King Street West, Toronto, M5K 1A2, with telephone number 982-8089, fax number 982-6166. At all material times, the plaintiff was a customer of TDB.

THE SALE OF BANK DRAFT SERVICES

4) For many years, TDB developed and provided to the public a method of transferring money from one party to another party through is commonly referred to as "bank drafts" ("Bank Draft Services.")

5) Bank drafts sold by TDB require the purchaser pay a fee for TDB's service. In addition, TDB profited by lending out to borrowers the cash paid by the purchaser until such time that the payee of the bank draft managed to encash the draft.

6) TDB sold its Bank Draft Services to the plaintiff on the basis that only the payee would be able to receive the monies entrusted by the plaintiff after the payee provided proper endorsements.

7) TDB developed and marketed its Bank Draft Services with the intention of increasing sales and improving its profitability.

8) In soliciting the plaintiff to use bank drafts, TDB made representations (the "Representations") which were designed to solicit the plaintiff and thus induce the plaintiff to use its Bank Draft  Services.

9) At material times, TDB represented that TDB's Bank Draft Services would provide a  trustworthy method of transmitting the plaintiff's funds.

10) The Representations were made to solicit plaintiff with the intention that such Representations are relied upon. In fact the Representations were relied upon and did induce the plaintiff to purchase TDB's bank drafts.

11) TDB knew that bank drafts were a favorite tool of fraudulent telemarketing operators. The Defendant had a duty and failed in its duty to properly train its staff with respect to handling suspicious bank drafts. Only a small minority of the Defendant' staff actually understood how fraudulent telemarketers were using bank drafts. Hence, at the time of contracting, and at material times, TDB's staff was unable to explain and identify the misuse of bank drafts by fraudulent telemarketers. In addition:

a) The systems in use at TDB lacked sufficient controls to prevent staff from seizing suspicious bank draft activities.

b) TDB had a duty and failed in its duty to require its staff to explain to the plaintiff how bank draft endorsements worked and that the plaintiff's monies could be paid out to a party without the payee providing an endorsement.

c) Although it was an implied term of the contract that TDB would check the endorsement for validity, TDB in fact did not do so.

d) TDB's failure to warn the plaintiff of the possibility of the Bank Draft Services system allowing payments to fraudulent telemarketers at TDB's Queen Mary branch were a consequence of TDB's ignoring of concerns known to TDB, to the detriment of the plaintiff.

e) Some of TDB's tellers and sales staff were not fully aware of the loopholes in the bank draft system and thus could not adequately warn the plaintiff about the potential loss of the her monies.

12) In May 5, 1998, the plaintiff contracted with TDB to deliver her funds listed below to payee[s] (the "Payees") in the amount[s] of:

a) $2,500 to "FRONTIER ENTERTAINMENT" via a bank draft;

13) However, the said draft was deposited, without an endorsement by "Frontier Entertainment," to the account of 1239298 Ontario Ltd., COB as "Mr. Bagel" and COB as "Mr. Baker". The directing mind of this company is Myron Shrybman, a convicted swindler of US and Canadian residents.

14) The Payees were just a few of the more than 600 business names used by fraudulent Montreal telemarketers that were customers of the Royal Bank of Canada, which negotiated and accepted the draft[s], including Myron Shrybman who was criminally convicted of defrauding US and Canadian residents.

15) At the time the plaintiff purchased the bank draft[s]/money order[s], she had an expectation that the Defendant, the encashing institutions, and the integrity of the cheque-clearing system would protect her funds from being encashed without an endorsement by the payee. This expectation is a result of the plaintiff's business dealings with TDB.

16) Endorsements matching the payee's name were missing from encashed bank draft(s)/money order(s) that are the subject of this proceeding.

17) At all material times, the plaintiff was not in a position to detect the invalid endorsement(s) or seek redress from the encashing parties, who were known only to the Defendant.

18) Due to the fact that bank drafts were not returned to the plaintiff forthwith, Somerville was in no position to be able to detect the fraud nor seek immediate redress from TDB from the unauthorized payment(s) made to the encashing parties.

19) The plaintiff states and the fact is that TDB acted without authority by making payment of the invalidly-endorsed draft(s)/money order(s) from the plaintiff's funds held in trust by TDB. In the alternative, the plaintiff states and the fact is that TDB was negligent in having withdrawn funds from the plaintiff's trust monies without making inquiries of the encashing parties' endorsement(s), which were invalid.

20) In the circumstances, TDB had specific knowledge that the Somerville was elderly and unsophisticated; and, the bank draft(s)/money order(s) purchased would unreasonably reduce her bank account.

21) The Defendant, member of the Canadian Payments Association ("CPA") is required to follow the CPA's rules and by-laws.

22) The plaintiff pleads that CPA rules prevail over common law: Bank of Nova Scotia v Toronto Dominion Bank [2000] O.J. No. 1829 Court File No. 99-CV-169831SR Ontario Superior Court of Justice the Honourable Cameron J. released May 26, 2000.

23) The endorsements on the draft(s)/money order(s) that are the subject of this proceeding do not meet the requirements of the Canadian Payments Association of which the Defendant is member. In particular, the CPA's by-laws define "endorsement" as "a signature."

24) The plaintiff pleads that the markings by the encashing party do not constitute "a signature" under the CPA's by-laws, and in particular that these markings differ from the stated payee(s) on the draft(s)/money order(s).

25) The plaintiff issued written Notice(s) to the Defendant.

26) The plaintiff inquired with the Defendant as to the particulars of the encashing institution and the recipient of her funds.

DUTY OF CARE:

27) The plaintiff pleads that at the time TDB made the representations:

a) The Representations were made by TDB in order to induce the plaintiff to purchase TDB's Bank Draft Services.

b) TDB knew or ought to have known that the plaintiff, being an unsophisticated consumer and a person not possessed with technical knowledge concerning the operation of bank drafts would rely upon the reputation, integrity, and soundness of the banking system in her decision to purchase bank drafts.

c) The Representations did in fact induce the plaintiff to purchase TDB's Bank Draft Services.

28) For the following reasons the plaintiff pleads that TDB owed to the plaintiff the following duties of care (the "Duties of Care"):

a) To ensure that the Representations were accurate.

b) Not to make negligent or false Representations.

c) To disclose to the plaintiff any of the material negative facts or drawbacks to its Bank Draft Services including the possibility that the funds may be encashed by a party whose name differed from that of the payee.

d) To disclose to the plaintiff the problems other telemarketing victims have had with bank drafts.

e) To disclose to the plaintiff the fact that its bank draft system has been the primary route for $100M going annually to fraudulent Montreal telemarketers.

f) To provide sufficient warning to the plaintiff when circumstances allow parties to encash payments through the use of missing, improper, forged, or unauthorized endorsements.

g) To adequately train its tellers and sales staff with respect to the marketing of its Bank Draft Services and to supervise the conduct of its sales staff in selling its services.

h) To ensure that in the written and oral presentations, material facts effecting the risk, advantages and disadvantages of its Bank Draft Services were not omitted or concealed.

i) To act with reasonable care in the preparation of staff training manuals and in the formation of the training program used to deal with elderly customers who purchase bank drafts and money orders.

j) To ensure that the training materials provided to its branches for distribution to potential new sales staff was not deceptive and would provide the plaintiff with correct information to make any informed decision.

FIDUCIARY DUTIES:

29) The plaintiff Further, pleads that TDB was fiduciaries of the plaintiff and in addition to the Duties of Care as fiduciaries owed to the plaintiff the following fiduciary duties ("Fiduciary Duties"):

a) To act in good faith and in the best interest of the plaintiff.

b) To ensure that the Bank Draft Services sold to the plaintiff were in the best interest of the plaintiff.

c) To ensure that the audit/review of endorsements for validity were in the best interest of the plaintiff.

REPRESENTATIONS ARE IMPLIED TERMS OF THE CONTRACT AND ARE A COLLATERAL AGREEMENT WITH THE PLAINTIFF:

30) The plaintiff Further, pleads that the Representations, having been made by the TDB to induce the plaintiff to purchase bank drafts and having so induced the plaintiff to purchase bank drafts, constitute implied terms of the Bank Draft Services entered into between the plaintiff and TDB and constitute a collateral agreement between TDB and the plaintiff when the plaintiff purchased the bank drafts that are the subject of this proceeding.

MISREPRESENTATIONS

31) The plaintiff alleges that TDB's Representations with respect to its Bank Draft Services were false. The TDB's actual audit of endorsements were inconsistent with or contrary to TDB's Representations and were inconsistent with its duties under to the Canadian Payments Association.

32) The plaintiff pleads that the Representations by TDB was made negligently and in breach of the Duties of Care and Fiduciary Duties and in breach of the implied terms of the contract and the collateral agreement and the following are the particulars of the misrepresentation ("Misrepresentations") known to the plaintiff:

a) TDB failed to disclose or concealed the fact that Montreal telemarketers in defrauding seniors frequently used its Bank Draft Services.

b) TDB failed to disclose or concealed the magnitude of the laxity existent within the banking system, which allowed fraudulent Montreal telemarketers to use the Bank Draft Services.

c) TDB knew or ought to have known (and concealed such knowledge) that TDB would not challenge invalid/forged endorsements until such time that fraudulent telemarketers would be long gone and the encashing account closed.

d) TDB knew or ought to have known (and concealed such knowledge) that the safety and security of its Bank Draft Services were inconsistent or contrary to the plaintiff's expectations.

e) TDB failed to bring to the attention of the plaintiff, or concealed, the material terms of how bank drafts are negotiated between banks and the liabilities of TDB with respect to the time limits of challenging invalid endorsements.

f) TDB failed to disclose that they were warned by police authorities and its own internal security staff to screen purchases of its Bank Draft Services to elderly customers, but did not, for fear of reducing its sales to competitors.

33) The plaintiff pleads that TDB was aware or ought to have been aware of the Misrepresentations at the time that said representations were made. In the alternative if TDB and its employees were not so aware, (which is denied) TDB was in further, breach of its Duties of Care in failing to adequately train its sales staff and to disclose to its sales staff and employees the fact that the Representations being made by them were Misrepresentations.

34) The plaintiff pleads that TDB's Representations were made with reckless abandon as to be fraudulent. In particular, TDB did not hold an honest belief in the purported security of audits on endorsements.

35) The Plaintiff further, pleads that the Misrepresentations constitute a false, misleading and deceptive consumer representation within the meaning of section 2 of the Business Practices Act R.S.O.  1990 c. D. 18 and plead that as a consequence, the Plaintiff is entitled to the relief as set out below.  The Plaintiff pleads and relies upon section 2 and 4 of the Business Practices Act.

36) The Plaintiff Further, pleads that the misrepresentations constitute a false and/or misleading representation within the meaning of Section 52 (1) and (2) of the Competition Act R.S.C. 1985 c. C-34.

37) The Plaintiffs further, plead and rely upon Section 52 (4) of the Act. In addition, as a result of the aforesaid breach of the Competition Act, the Plaintiffs seek damages as set out in Section 36(1) of the Competition Act.

38) In addition and in the alternative, the Plaintiff pleads that the Misrepresentations constitute a false and/or misleading representation within the meaning of Section 74.01 (1) (a), (b) and (c) of the Competition Act.

DAMAGES AND RESCISSION

39) The Plaintiff pleads that it is entitled to the following relief from TDB arising out of TDB's breaches of Duty of Care, Fiduciary Duties, implied terms of the contract, collateral agreements and requirements as aforesaid:

a) The Plaintiff pleads that had She had known the true nature of the Bank Draft Services She would not have purchased it.  She does not have the security of the Bank Draft Services that was promised to him. She is entitled to rescission and the return of all monies paid to TDB pursuant to it.

b) In addition, or in the alternative, the Plaintiff has suffered substantial damages. The Plaintiff therefore claims from TDB damages equivalent to the monies paid under the TDB's Bank Draft Services.

40) The Plaintiff alleges that TDB's Representations used to induce the Plaintiff to enter into the contract formed an essential term of contract which the Defendant TDB has breached.

41) The  Defendant TDB only gave the Plaintiff partial and half-truths, imposing a duty of full disclosure on the Defendant TDB.

42) The Plaintiff pleads and relies on Negligence Act, R.S.O 1990, c. N.1.

43) The Plaintiff pleads that the aforesaid conduct of the Defendant TDB, amounts to conduct that is callous, high-handed, intentional, wrongful, outrageous, and shows a wanton disregard to her rights, thereby entitling an award of punitive, exemplary and/or aggravated damages.

44) The plaintiff entrusted TDB with her monies at all material times.

45) The Defendant was a trustee of the plaintiff's funds at all material times.

46) The plaintiff pleads that TDB has a liability under the doctrine of conversion.

47) Further, the Defendant had the "last clear chance" to warn the plaintiff, and thus, prevent her loss.

48) In the alternative, the plaintiff pleads that the Defendant was willfully blind to the activities of the unknown party encashing the money order(s)/draft(s) and therefore liable for the plaintiff's loss.

49) Further, and in the alternative, the Defendant' failure to assist the plaintiff with Further, information as to the recipients and encashing institutions prevented the plaintiff from pursuing other avenues of recovery.

50) The plaintiff's loss would not have occurred had the Defendant properly trained their clerical and counter staff.

51) The defendant failed to perform or supervise all the necessary tasks required for the opening of new bank accounts, thus allowing notorious Montreal telemarketing boiler rooms to acquire a means for which to deposit monies from victims.

52) The defendant and/or its contracting parties and agents should have noticed that the encashing party was a new business and that there were discrepancies in the encashing party's credit bureau report that indicated that something was amiss given the numerous other bank credit checks being conducted, indicating that the encashing party was jumping from bank to bank.

53) The Defendant has in-house staff and programs designed to prevent telemarketing fraud.

54) The Defendant are aware of the seriousness of telemarketing fraud in which the Defendant' facilities are used by boiler-room operators to encash their illegal proceeds.

55) The Defendant' knew, or should have known, that their in-house staff and programs dealing with telemarketing fraud are inadequate.

56) The Defendant failed in their duty to the plaintiff:

a) To ensure that the Defendant' staff reductions -- which were calculated by the Defendant to increase their profits -- would not result in the loss complained of in her claim.

b) To ensure that the Defendant' office procedures, manpower, and staff training would ensure that the draft payment went to the proper recipient.

c) To provide the plaintiff with the necessary information to pursue her claim against the unauthorized recipients of the plaintiff's monies.

57) The plaintiff Further, pleads that the Defendant could have prevented her loss:

a) Had the Defendant acted quickly to reverse the drafts that the recipient would have been charged back; and,

b) Had the Defendant disseminated information received from police authorities such as Phonebusters to their staff; and,

c) Had the Defendant adhered to the CPA's by-laws; and,

d) Had the Defendant abided by their 'know thy customer' obligations; and,

e) Had the Defendant taken proper steps when dealing with Quebec companies that encash large quantities of bank drafts from non-Quebec customers; and,

f) Had the encashing institution taken proper credit checks on the payee(s); and,

g) Had the Defendant checked the Payee(s) against police databases.

58) Telemarketing fraud against the elderly and vulnerable members of society is a practice that has been universally condemned.

59) The Defendant' lack of proper training for their staff resulted and continue to result in about $100 million dollars lost annually by elderly victims to fraudulent telemarketers.

60) The Defendant is in a unique position to serve public Bank Draft Services and prevent telemarketing fraud against the elderly.

61) The plaintiff asks for exemplary damages to force the Defendant to take steps to restore the integrity of the cheque-clearing system, and in the name of public interest.

62) The plaintiff is entitled to rescind the contract with the TDB on the grounds that the TDB has violated several unfair practice provisions of the Business Practices Act, R.S.O. 1990, c.27 (the "BPA.") The plaintiff further, relies on the parol evidence abrogation provisions of the BPA.

63) Further, and in the alternative, the plaintiff pleads that there was no meeting of the minds (consensus ad idem) in respect to the plaintiff's purchase of said money order(s)/draft(s).

ROYAL BANK's QUEEN MARY BRANCH (the "QMB")

64) The QMB was a well-known depository of the Montreal-based telemarketing syndicate. The QMB allowed said syndicate with unusual freedom. Police authorities were aware of the fact that the QMB opened accounts for said syndicate in a pattern inconsistent with its practices at other banking institutions, to the point that QMB staff were suspected (without proof) of collusion with the syndicate.

65) The unusual laxity at the QMB was well-known to at least one building superintendent in the area where the syndicate operated boiler rooms.

66) The Columbia Group was one of the said syndicate's many corporate "fronts". The QMB lost the account application for Columbia Group,

67) The Columbia Group was only one account of many run by the same syndicate at the QMB. Other accounts included companies shown on the attached charts.

68) In or about 1998, after telemarketing victims started threatening to, and suing banks that issued drafts encashed in Montreal, the banks started to decline opening accounts to the syndicate, which resulted in the syndicate depositing its drafts in the Middle East.

69) In or about 1998, after banks were sued by telemarketing victims, banks started to question draft purchasers more rigorously.

ROYAL BANK'S OWN ANTI-FRAUD DEPARTMENT (the "SUD")

70) To its credit, the Royal Bank has personnel assigned to prevent telemarketing fraud, based out of one of its Sudbury branches. This said personnel operate a department (referred to as the "SUD") that has links with police databases. SUD also received data from the Paulos Luizos law firm showing the links between 'front' company names used by the syndicate.

71) SUD was headed by the Royal Bank's Ms. Maryanne Scharf.

72) In or about 1998, Royal Bank sent its SUD staff to C.A.R.P.'s national forum on fraud on the elderly.

73) However, overall, SUD did not forward the information that it received about the syndicate's company names to other Royal Bank branches and departments.

74) The Royal Bank, thru SUD's connections to police databases, knew or ought to have known that Columbia Group and about 600 other company names were known as a depositories of the syndicate.

75) Were it not for the ineffective efforts by SUD, the plaintiff would not have suffered her loss.

76) The defendant and the Royal Bank are members of banking associations and share security information. As such, the defendant knew or ought to have known that Myron Shrybman, who operated "Mr. Bagel" was a con man. Were it not for the lax security systems of the defendant and the Royal Bank as well as their lack of sufficient communication, the plaintiff would not have suffered her loss.


Kathleen Somerville of Toronto is seeking to have her case heard while she is still alive. She is 81 and in deteriorating health. Having been defrauded out of over $70,000 by a Montreal telemarketing fraud ring, she previously filed a linked claim ( Rabko and Horvath ) T18807/99, which was apparently stayed indefinitely without her knowledge or consent. ( see also United States v. Myron and Eric Shrybman 98CR6080),

She has filed an Affidavit in Support of Motion which seeks determination of a novel point of law; that her case be heard immediately, and that the points of law be pre-determined, to "short-circuit" the banks' defence.

She feels the banks are playing a waiting game by continually putting forward motions; two regarding their failure to file a defense in time and one bank's intention to "third party" the responsible bank which they have failed to act upon.

She is seeking damages and needs to show that "under "conversion" damages are presumed and/or need not be proven as defendants are "strictly liable" for the face amount of drafts." In the Boma Manufacturing vs. CIBC case the Supreme Court held that an invalid endorsement rendered the endorsement inoperative. In many U.S. cases a missing endorsement leaves the bank strictly responsible for the amount of the draft.

She notes that under the "fictitious payee" defence, it is up to her to determine whether she paid the drafts to a real person, or to a "ficticious payee". She also notes that an endorsement is mandatory if the payee differs from the person's account; or, is not the intended recipient.

She cites as authority the cases of Bank of Nova Scotia v Toronto Dominion Bank [2001] O.J. No.1717 (O.C.A.) released 9 May 2001, "Bank of N.S. v TD Bank[2000] O.J. No. 1829 (O.S.C.J.) released May 26, 2000 - Reversed on Appeal, and the Table of Authorities - Banking Liability - updated list as of August 10, 2001.

 

[ Home ] [ Up]

 

Order a bookCrimes of Persuasion ISBN 0968713300

Crimes of Persuasionon

Home Page / Model Scams Index / © 2000-2017 /Disclaimer / Privacy Statement