Martin Daniel Bell and Graham Mathew Inc. — February 4, 2011

Professional Conduct Decision

What is a professional conduct decision?

An investigation into a Licensed Insolvency Trustees (LIT)'s professional conduct is initiated when there is information to suggest that the LIT has not properly performed the duties of a trustee or there has been improper administration of an estate or lack of compliance with the Bankruptcy and Insolvency Act (BIA).

In some cases, the findings are sufficiently serious to support a recommendation for sanctions against the LIT's licence (cancel or suspend a LIT's licence (subsection 13.2(5) of the BIA) or impose conditions or limitations (subsection 14.01(1) of the BIA)).

The professional conduct decision is deemed to be a decision of a federal board, commission or tribunal and may be judicially reviewed by the federal court.

No: 08-03

Before Mr. James D. Callon, Superintendent of Bankruptcy

In the matter of: Professional conduct proceedings pursuant to Section 14.01 of the Bankruptcy and Insolvency Act and proceedings regarding the suspension or cancellation of a licence pursuant to Subsection 13.2(5)

Proceedings between:

The Office of the Superintendent of Bankruptcy (OSB)

Applicant

-and-

Martin Daniel Bell, Individual Trustee — (Licence #2885)

-and-

Graham Mathew Inc., (GMI) Corporate Trustee — (Licence # 3070)

Respondents

Parties of Record

Office of the Superintendent of Bankruptcy
Mr. Taggart, Counsel

For the Applicant

Martin Daniel Bell
Graham Mathew Inc. represented by Martin Daniel Bell

For the Respondents


Reason for Decision

Introduction of the case

  1. The decision concerns a case involving allegations of professional misconduct by the above mentioned trustees that have been documented in the investigation report filed by the Office of the Superintendent, Senior Bankruptcy Analyst, Mr. David MacPherson with the OSB Professional Conduct Registry and date stamped December 18, 2009.
  2. The Office of the Superintendent of Bankruptcy (OSB) has also advised the Superintendent and the parties that Mr. Martin Bell has been convicted of criminal offences relating to his actions as a licensed Trustee.

Overview of the professional conduct process

  1. When an event, complaint or series of issues are found to warrant a formal investigation regarding the professional conduct of a Trustee, an investigation may be undertaken pursuant to paragraph 5(3)(e). With respect to cases of professional misconduct, the management responsibility for overseeing OSB investigations is delegated to the Deputy Superintendent who represents the OSB as the senior official. The delegation of responsibility to the Deputy Superintendent fully respects the requirement of separating the investigative process from the quasi-judicial decision-making function. The decision making function in the OSB which is the sole responsibility of the Superintendent or an independent person appointed (Delegate) by the Superintendent for the purpose of deciding a professional conduct matter as provided for under section 14.01(2) of the Bankruptcy and Insolvency Act (BIA).
  2. The Senior Bankruptcy Analysts (SBA) are employees of the OSB who may be assigned by a regional manager referred to as Assistant Superintendent to carry out professional conduct investigations. When assigned to commence an investigation, the BIA provides written notification to the Trustee advising that an investigation has commenced. Authority to investigate is delegated to the BIAs under subsection 14.01(2) of the BIA. The purpose of the investigation is to review the conduct of the trustee and to gather the facts as they relate to the conduct. An investigation may involve a review of estate files and banking documentation and a review of correspondence, contracts and any other pertinent documentation that may have a bearing on the matter(s), as well as carrying out interviews.
  3. Once an investigation is completed, a copy of the SBA's investigation report and all relevant documentation relied on by the OSB will be provided to the trustee who is then provided an opportunity to file written comments on and/or objections to the content of the report and may also ask to be heard on the matter.
  4. The investigation report is considered to be a fact-finding report and the burden of rebutting its content is placed on the trustee who can do so by filing his written comments and/or objections. When requested, the trustee is afforded the right to a hearing pursuant to s. 14.02(1).
  5. Unless the facts and alleged actions of misconduct set out in the investigation report are challenged by the trustee either in writing or at hearing, the facts and alleged actions will stand as evidence on which the Superintendent may determine whether there has been non-compliance with the BIA, its Rules and/or the OSB Directives and result in the Superintendent exercising his statutory powers under subsection 14.01(1). Before a decision is made, the Superintendent has an obligation to scrutinize and analyse the evidence submitted and to be satisfied that the content of the report supports the allegations with appropriate evidence.

Background to the case at hand

  1. On , Martin Daniel Bell was granted an individual trustee licence, number 2885.
  2. Beginning on , he practiced under the corporate licence issued to Graham Mathew Inc., licence number 3070.
  3. On , the OSB took conservatory measures resulting in the OSB taking possession of all files administered by the respondents to ensure the integrity of all transactions and a Guardian Trustee was appointed to manage and complete the administration of the estates.
  4. On an investigation was commenced by the OSB as a result of evidence concerning the alteration of cheques drawn on trust accounts and cash payments not being deposited into trust accounts. The Senior Bankruptcy Analyst (SBA), David MacPherson, was appointed to carry out the professional conduct investigation and subsequently advised Mr. Bell of the investigation, by letter dated September 17, 2007.
  5. On , the licences of Martin Daniel Bell and Graham Mathew Inc. ceased to be valid as a result of non-payment of annual licence fees in accordance with subsection 13.2(3) of the BIA.
  6. On , the BIA filed his investigation report with the Superintendent regarding his findings concerning the professional conduct of Martin Daniel Bell and Graham Mathew Inc. A copy of the investigation report was sent to the respondents with a request that they file their objections to the report in writing. They have not done so.
  7. On , the Superintendent held a conference call with the parties to discuss the option of holding of a pre-hearing conference to clarify any objections to the investigation report and determine whether a hearing was required, and if so, to streamline the administration of the hearing by pre-determining the list of witnesses and the testimony required, narrowing the issues in dispute, preparing an agreed statement of facts and agreeing on the logistics of the public hearing.
  8. On and , 2010, the pre-hearing conference held in Toronto was attended by Mr. Taggart, OSB counsel, and Mr. Bell. The outcome of the meeting was a document of understanding signed on by the parties. The document set out the agreement as to certain facts and areas of disagreement; the list of proposed witnesses and the agreement regarding the logistics of the hearing. In addition, it was agreed that Mr. Bell would be provided with access to his trustee files being held by the OSB, under conservatory measures, in order for him to clarify any of the disputed facts. Mr. Bell undertook to file his written objections to the investigation report by , and agreed that failure to do so meant that the matter could proceed directly to a hearing solely on the issue of the appropriateness of the sanctions recommended by the OSB. If objections were filed, a hearing would be held regarding the matters in dispute. Mr. Bell also agreed to inform the Superintendent as to the status of criminal charges that had been laid against him which he confirmed were in part related to many of the matters set out in the OSB's investigation report.
  9. On , Mr. Taggart filed a further submission with the Superintendent and the respondents addressing the invalid status of the respondents' licences and the standards of conduct that should apply should the Superintendent consider reinstating the invalid licences. Mr. Taggart referred to the fact that the respondents did not pay their licence fees with the result that their licences were not valid. The submission also made reference to the fact that Mr. Bell had already been found guilty of misconduct as a chartered accountant by the Institute of Charted Accountants of Ontario (ICAO), on . A copy of the ICAO decision was set out in the OSB investigation report. Furthermore, Mr. Taggart submitted that Mr. Bell was still facing several criminal charges relating to his actions as a trustee. In considering all these facts, counsel for the OSB argued that even in lieu of the professional conduct matters pursuant to s. 14.01, the currently invalid licences should in fact not be reinstated if the criteria expressed in Superintendent's Directive No. 13R2 and subsection 13.2(5) were to be applied. Therefore, with the licences already being invalid, he concluded 'that the only live issue is restitution.'
  10. Mr. Bell acknowledged receipt of the submission from OSB counsel dated July 8. Mr. Bell was given until July 28th to respond; no response was filed. A second written notice by the OSB Professional Conduct Registrar was sent to Mr. Bell stating that if no written submission was received from him by , the matter would be taken under advisement by the Superintendent.
  11. On , Mr. Taggart wrote to the Superintendent and Mr. Bell noting that he had been advised that Mr. Bell had pleaded guilty to several criminal offences on . Mr. Taggart put forward the following position.

    Regardless of whether the Superintendent intends to resolve this matter by way of the BIA's licensing provisions or by way of the professional conduct provisions, it would appear that the only remaining significant matter is that of restitution. Given that no 'written objection' was filed it is our position that the trustees can not challenge the quantum of the losses and therefore restitution to the relevant estates in the amounts set out in the attached Schedule A may be ordered under either regime based on subsection 13.2(7) or paragraph 14.01(1)(f) respectively.
  12. On December 31, 2010, the OSB Professional Conduct Registrar advised Mr. Bell that based on his signed agreement of understanding of June 15, 2010 the matter could proceed to hearing solely on the issue of sanctions. Mr. Bell was asked to confirm to the Registrar by January 17, 2011, whether or not he wished to proceed by way of a hearing. He was further advised that if no response was received, the Superintendent intended to proceed on the basis of the written record and cancel the respondents' licences and order restitution.
  13. To date, Mr. Bell has not filed any written objections in accordance with the June 15 understanding, nor has he filed any written submissions in response to the submissions filed by counsel for the OSB, advised the Superintendent as to the status of the criminal charges pending against him, confirmed the need for a hearing or responded to being advised that it was the Superintendent's intention to then render a decision.

Decision

  1. As outlined in the series of events described above, Mr. Bell has been given ample opportunity to review the allegations set out in the investigation report and subsequent submissions filed by the OSB. He has consistently ignored the generous times he was allowed for filing a comprehensive response.
  2. Mr. Bell was given the option of having a hearing and has failed to respond.
  3. Given that no contradictory evidence was presented by the respondents that would cast doubt on the credibility of the investigation report, this decision relies solely on the investigation report and attached documentation as proof of misconduct on the part of the respondents.
  4. I will not reproduce the extensive list of allegations and documented evidence found in the investigation report; The allegations that I accept as being proven are listed on pages 11, 15, 17 and 26 to 28 of the investigation report date stamped .
  5. Furthermore, I accept as written evidence that a total of $28,218.28 was taken by the respondents from a number of estates as detailed in the investigation report. The breakdown of the $28,218.28 submitted by counsel for the OSB has been reproduced in Appendix A to this decision for restitution to the estates as specified.
  6. Pursuant to subsection 14.01(1), I find that the respondents have not properly performed the duties of a trustee and are guilty of improper management of estates under their administration, and that they have not fully complied with the BIA and the General Rules and Directives, as specified and proven in the investigation report.
  7. Given my findings under section 14.01, there is no need to address any other matters under 13.2(5).

Order

  1. Having provided the respondents with written notice pursuant to subsection 14.02(1), I, James D. Callon, Superintendent of Bankruptcy, issue this decision by virtue of the statutory powers vested in me under subsection 14.01(1) of the BIA and hereby order as follows:

    That the trustee licences of Martin Daniel Bell and Graham Mathew Inc. be cancelled, effective on the date of this decision; and

    That the trustee Martin Daniel Bell and Graham Mathew Inc. make restitution pursuant ss. 14.01(1)(f) of the BIA in the amount of $28,218.28 to the estates set out in Appendix A. The full amount is to be remitted to the OSB forthwith.

    That pursuant to subsection 14.02(3), the names of the estates contain in Appendix A shall not be publicly disclosed in order to respect their privacy.

Signed at Ottawa, Ontario, on

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James D. Callon
Superintendent of Bankruptcy

Observations

  1. I note, on reviewing the evidence submitted in the investigation report that colleagues and certain partners of Mr. Bell had identified serious misconduct by Mr. Bell as early as 2004. There is no indication that these persons reported the misconduct and potentially unlawful behaviour to the OSB or to any other authority for three years. According to the investigation report, the misconduct was not reported to the OSB until August 2007. The report included copies of the interview notes of colleagues of Mr. Bell. The following is a notable admission quoted from one of these interview notes:

    I observed the trustee taking funds in the fall of 2004, normally borrowing $50 to $100 but repaying the funds in a couple of days. However, over time, larger amounts were taken with the repayment taking place over longer periods of time, and eventually not being done as per my email.

    Failure to have reported such behaviour puts into question the integrity of those who had knowledge of wrongdoing. Perhaps one could surmise that the behaviour was not reported out of a sense of loyalty, a fear of reprisal, or a belief that the trustee would correct the transgressions. No matter the excuse, it is unacceptable.

  2. It is my view that the integrity of the insolvency system depends to a large extent on the ethical behaviour of those who are placed in a position of trust. Where serious misconduct is evident, action must be taken to report such matters to the regulator. In turn, the regulatory body will then be able to initiate an inquiry or investigation.
  3. The OSB must continue to promote it's expectation of a culture of compliant and ethical behaviour by ensuring there is a clear and known avenue for reporting serious misconduct that has been observed or becomes evident to others.

Given in Ottawa, Ontario, on

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James D. Callon
Superintendent of Bankruptcy


This document has been reproduced as submitted by the Superintendent of Bankruptcy.

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