Law Times

Page 4 January 20, 2014 Law Times • NEWS Lawyer accused of 'theft' against Dr. Bernstein restricted from practising real estate law BY YAMRI TADDESE Law Times A Law Society of Upper Canada hearing panel has temporarily restricted a lawyer from practising real estate law after a court-ordered investigation found her to have diverted millions of dollars from a joint investment without the knowledge of her business partner, wellknown weight-loss physician Dr. Stanley Bernstein. The law society is seeking an interlocutory suspension of Norma Jean Walton and her husband Ronauld's licences to practise law following a finding that their company misappropriated funds. On Jan. 13, lawyers for the couple requested an adjournment of the suspension motion due to the need for additional time for preparation. In the meantime, Norma —"the primary actor" in the financial misuse, according to law society counsel Lisa Freeman — can't practise real estate law. According to court documents in civil proceedings related to the case, mortgages worth $6 million were discharged from joint investment projects the Waltons owned with Bernstein without his approval. A courtordered investigation also found that $2.1 million in mortgage proceeds was diverted from the joint investments. Of that sum, $400,000 went into Norma's personal bank account; $353,000 was used to repay a loan owed by the couple's company, the Rose and Thistle Group Ltd.; and $154,600 was transferred to other companies owned by the Waltons. An additional $268,000 that went into renovating the Waltons' home at 44 Park Lane Circle also has "all the appearances of another case of theft," wrote Superior Court Justice Frank Newbould in DBCD Spadina Ltd. v. Norma Walton on Nov. 5, 2013. The Waltons participated in 31 projects with Bernstein in which they had a 50-per-cent share. Bernstein has invested more than $100 million in the joint projects. In a strongly worded November 2013 endorsement, Newbould said Norma's actions were akin to theft. "Ms. Walton admits that $2.1 million was 'diverted' and used outside the 31 projects. She admits it should not have been done without Dr. Bernstein's consent. She offers excuses that do not justify what she did. What happened here, not to put too fine a point on it, was theft," wrote Newbould. He added: "Ms. Walton was well aware that this was wrong. She is a lawyer and the agreements were drawn in her office." While Freeman argued Newbould's wording in the endorsement included "strong statements" that merit an interlocutory suspension, Norma's counsel, Howard Cohen, said she's appealing the statements made by the judge. Since the matter before the judge wasn't an allegation of theft, Newbould "really went beyond what was before the court," Cohen told the hearing panel last week. He also argued it would be "manifestly unfair" to suspend Norma's licence VIEW T Read it in print or online at www.canadianlawyermag.com/inhouse Live on January 27th vol.8 • issue 5 • 10.13 INHOUSE >> 2 • 04.13 & BUSINESS BOOTS ON LAW FIRM GROUND IN-HOUSE >> INDUSTRY SPOTLIGHT CONS LAW DEPARTMENT MANAGEMENT AND THE PROS 2 TA'S BILL OF ALBER ASSESSING RISK IN-HOUSE THE BRACING FOR CATIONS MAIL AGREEMENT # 40766500 40766500 REEMENT # are in the trenches nies mitigate BASEL III: THE 'GOLDEN ERA' FOR LAWYERS CHINA PENSION B TIME BOM Legal departments DOING BUSINESS WITH INDUSTRY SPOTLIGHT Fred Headon,, counsel assistant general Canada Air >> >> CANADIAN LAWYER INHOUSE AT THE INTERSECTION OF LAW & BUSINESS Chinese-Canadian relations have become big business for both countries and deals are evolving InHouseViewBlakes_LT_Jan13_14.indd 1 practise law in any way," he said, adding his client limits her legal work to her own company. As to any work she's currently doing, Cohen assured the panel that "there are more eyes on her than you can possibly imagine." He added: "Her hands are tied." Both Cohen and Brian Greenspan, counsel for Ronauld, said a licence suspension would unnecessarily ruin their clients' reputations and bias their case in the civil proceedings. But Freeman told the hearing panel chaired by Bencher Barbara Murchie that its prime responsibility is public safety and not the reputation of the lawyers. "It's unfortunate that reputational damage is a biproduct of Law Times Canada's leading CLOs explore their challenges for the year ahead ECTION OF LAW AT THE INTERS It's unfortunate that reputational damage is a biproduct of these orders, but that's not really before the panel. BY YAMRI TADDESE Brought to you by ARTMENT LAW DEP T MANAGEMEN these orders, but that's not really before the panel," she said. Greenspan said Ronauld "does not practise law at all" and that suspending his licence would be "for no reason at all." Freeman said while the law society deems Norma to be the main actor in the alleged breach of the agreement with Bernstein, Ronauld is also implicated as a "beneficiary" of the proceeds. Freeman said that since Norma used her Teranet access to discharge mortgages without Bernstein's approval, the panel should restrict her from making any use of it. "If a licensee is diverting millions of dollars from a business partner, it's a question of integrity," she said. In the compromise that followed, the law society agreed not to suspend Norma's licence in the weeks between Jan. 13 and the motion hearing date as long as Norma doesn't practise real estate law. The motion is scheduled to proceed on Feb. 5. Norma has a disciplinary record with the law society. In 2007, she received a reprimand following a finding of professional misconduct related to "comingling" of client funds with corporate and financial accounts. LT Torys lawyers decry LSUC appeal of panel ruling 2014 vol.8 • issue without giving her a chance to explain herself. Freeman contested Cohen's argument, saying Norma had plenty of opportunity to explain herself as she was able to file three affidavits in the civil proceedings. But Cohen, who noted his client was already "under siege," said there was no need to suspend her licence as she's not a danger to the public. "The situation at the present time is that Ms. Walton does not www.lawtimesnews.com PM 14-01-08 2:53 he Law Society of Upper Canada will appeal a hearing panel decision that fully exonerated two Torys LLP lawyers in a conflict of interest case that dragged on for eight years. The allegations relate to the work lawyers Darren Sukonick and Beth DeMerchant did on the sale of Hollinger International Inc. assets between 2000 and 2003. But in October 2013, a law society hearing panel said it had no evidence to find the pair guilty of professional misconduct. Following the ruling, the law society took heat from the profession for continuing to prosecute the case. But according to the law society's notice of appeal, the hearing panel "failed to appreciate material evidence tendered into the record" showing a conflict of interest and the failure of the lawyers to obtain informed consent from their clients. The appeal notice also claims the panel erred in its interpretation of Rule 2.04 and its predecessors and its "interpretation of the meaning of conflicting 'legal' interests in the context of a commercial transaction." DeMerchant, who commented on the matter for the first time, described the personal and professional toll the case has taken on her. "I am starting my ninth year under the cloud of this case. The appeal will continue to handicap me professionally for most of 2014, which is crushing," she said. "The personal toll is immense. It is hard for me to understand the public interest imperative in the appeal. The hearing panel unanimously concluded that we acted entirely in accordance with the Rules of Professional Conduct. The LSUC presented not even one witness to contradict this conclusion and had no client support for its case." Sukonick had set aside his practice to focus on the hearing for the last eight years. Following the October ruling, he told Law Times he was ready to move forward. Now, he says he "cannot imagine how the law society's prosecutors think this is fair." The law society would offer no comment beyond its notice of appeal. LT

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