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REGIONAL WRAP-UP ADEQUACY OF INDEMNITY FUND QUESTIONED Quebec's financial market regulator following a $55-million out-of-court settlement for inves- tors duped in the Norbourg financial scandal. The fund — unique in Canada — is Q financed through annual fees paid by Quebec's 32,000 financial advisers to the regulator, the Autorité des marchés financiers (AMF). It has been running in the red — now at a loss of about $16 million — ever since it paid out $31 million in compensation over two years ago to 925 of the 8,300 investors who lost over $100 million combined after it was siphoned off by convicted fraudster Vincent Lacroix through his Montreal-based Norbourg Financial Group. The AMF refused to pay other Norbourg victims on the grounds that mutual fund oversight was not part of its mandate and was challenging a lower court ruling ordering it to pay an additional $7 million to 138 Norbourg investors who had been denied compensation. Under the surprise agreement mediated in a settlement conference presided over by Quebec Superior Court Chief Justice François Rolland, all legal proceedings since the regula- tor froze Norbourg's assets in 2005 causing collapse will come to an end, saving court time, and the equivalent of all funds stolen will be recovered and distributed to Norbourg victims. The AMF, named along with five other par- ties in the class action, will pay about $20 mil- lion of the total settlement but it will come out of operations money, not the indemnity fund. That has given rise to calls for a new fraud indemnity fund that would not be administered by the AMF and could be self-financed by investor contributions — much like paying a few cents for each $100 for insurance or administration fees. "The settlement confirms that the [AMF] fund has become obsolete and moribund," says Robert Pouliot, a lecturer in fiduciary risk at the finance department of the Université du Québec à Montréal. "For different reasons, legal, financial, and others, the fund is not able to respond to the real needs of investors," says Pouliot, a mem- ber of a non-partisan coalition calling for a new self-financed fund for fraud victims. — KL uestions are being raised about the adequacy of an indemnity fund for fraud victims administered by NIAGARA LAWYER WINS LIBEL SUIT AGAINST ONE-TIME CLIENT A Pelham, Ont., lawyer has won a $50,000 libel judgment against a former client who made defamatory comments about his criminal record and disciplinary history in newspaper advertisements and on web sites following a fee dispute. Leigh Daboll says he hopes the case will serve as a "caution- ary tale" to young lawyers. "I can't over-emphasize how care- ful you need to be about who you represent, especially for new lawyers just starting out," he says. "You must screen your clients very carefully to avoid this kind of situation from occurring, which in my case domi- nated nearly a year of my life." He says he has also made submissions for approximately $56,000 in full indem- nity costs on top of the damages award and is waiting for a ruling from the court. Mark DeMarco was referred to Daboll in 2003 on a family law matter but the retainer ended soon after. A lengthy assess- ment process initially reduced the account that was worth less than $4,000 before a review by the court reversed the decision and made a costs award against DeMarco. In November 2008, Daboll finally collect- ed on that judgment with a writ of execu- tion and seizure satisfied by the proceeds from a property sold by DeMarco. Soon after, advertisements began appearing in local newspapers under the title "Lawyer Crime Ontario." The same ads appeared on dirtylawyer.com and law- societiesreform.com, two web sites run by DeMarco. The ads referred to a criminal harassment conviction and Law Society of Upper Canada misconduct findings, which Daboll says mostly arose out of a protracted custody dispute. In 1996, he was reprimanded for fabri- cating a subpoena to witness. In 2003, he spent 65 days in pretrial custody before pleading guilty to criminal harassment of a woman who had previously been in a relationship with him. He received three years' probation, while the law society 8 M A RCH 2011 www. CANADIAN Lawyermag.com suspended him for 30 days. In 2006, the LSUC suspended him for two months, over a conflict of interest by having a per- sonal relationship with the estranged wife of a client while representing him against her in a family law proceeding. In his Jan. 4 decision, Ontario Leigh Daboll Superior Court Justice Richard Lococo said DeMarco couldn't rely on the defence of truth for his comments. "Individual fragments of the advertisement arguably had some basis in fact but they were expressed and juxtaposed in a manner that I find to be inconsistent with the truth," wrote Lococo. "The clear implication of the advertise- ment is that at the time it appeared in the newspapers and/or the websites (that is from November 2009 to the time of trial), Mr. Daboll was allowed to practice law while being at that time on criminal pro- bation and facing a further charge relating to 'sex/personal relations clients wife.'" Lococo found the inflammatory nature of the language used in the newspaper ads and online constituted evidence of malice and noted "the most obvious indicia of malice in this case is the timing of the pub- lication" right after Daboll collected his outstanding costs order against DeMarco. DeMarco knew about Daboll's past well before November 2008, said Lococo. As well as the $50,000 in damages, Lococo also issued a permanent injunction bar- ring the continued publication of defama- tory statements about Daboll. "I'm not pleased with the decision," said DeMarco, noting he plans to appeal and has also launched a negligence claim against the Niagara-region lawyer. Daboll says it upset him to search his name online knowing DeMarco's web site would fill the first page of results. He lost clients as a result and says those dissatis- fied with his family law practice would refuse to pay after seeing the contents. — MICHAEL MCKIERNAN michael.mckiernan@thomsonreuters.com