Happy 2nd Anniversary Lawdiva!

Lawdiva is 2 years-old today! What have I learned since we launched on May 10, 2010? Lots! Firstly, I realized how high a bar I set when I began publishing 15 to 20 stories each month, while practicing law full-time.

Regular readers have probably noticed that my attention has been focused elsewhere this month. That’s because I am scrambling to get everything done before my husband and I head to China and Thailand in a few days. I expect to cover some interesting, quirky legal stories from those two countries while I am away.

I also learned what a crazy, mixed-up world we live in and that despite the rule of law, if the justice system can go awry, it will. I found that foreign legal systems struggle with the same issues we do and that Canadian lawyers and judges have the same concerns as their counterparts worldwide, namely, the delay, cost, confusion and rigidity of our court systems and the perception that “justice for all” is an illusory target.

I discovered that the American justice system is very different from our Canadian experience and have mined the most interesting stories from below the 49th parallel.

What can I say about my readers? Firstly, that I am grateful for their interest and passion in responding to my stories and my opinions. I can also say that most of them are not shy about how they feel and what they think.

I have been applauded, lauded, and encouraged by many. I have also been chided, scolded, criticized, and condemned by others. All in all, the debate is always lively and spirited and I appreciate your views, both salutary and savage.

Since mid-2011 many of my stories have been published by the Huffington Post and Postmedia Canada and all of them are available on my Facebook page, where comments also abound, and on Twitter.

Thanks to everyone and here’s to more happy writing and reading. Cheers!

Lawdiva aka Georgialee Lang

Canada’s Bondage Judge Faces Judicial Inquiry in May

It has been twenty months since Madam Justice Lori Douglas’ world crashed around her when she became the focus of a sexual harassment complaint, but she will have her “day in court” on May 17, 2012 when the judicial inquiry into her personal life begins.

The unsavoury events leading to the inquiry unraveled in September 2010 when Douglas, the Associate Chief Justice of the Manitoba Court of Queen’s Bench, Family Division, stepped down from her post while the Canadian Judicial Council investigated a complaint filed against her involving her husband, prominent family law lawyer Jack King. The complainant was Alexander Chapman, age 45, originally from Trinidad, who retained Mr. King to act for him in his divorce proceedings in 2002.

At the time, Ms. Douglas and Mr. King were partners at a prestigious Winnipeg law firm. Mr. Chapman alleged that after Mr. King completed his divorce, King befriended him and tried to persuade Mr. Chapman to engage in a sexual tryst with his wife, Madam Justice Douglas.

Mr. King gave Mr. Chapman photographs of his wife and a password to a website that caters to those who have an interest in interracial sex. The photos of Douglas portrayed her as nude, except for bondage regalia, and participating in a sex act.

When Mr. Chapman complained to Mr. King’s law firm, King paid Mr. Chapman $25,000 in exchange for Chapman’s agreement to not sue him or his law firm and to destroy the photos.

Jack King resigned from the firm after the payment was made.

Fast forward to September 2010 when Mr. Chapman reneged on the 2003 agreement and sued lawyer King, Justice Douglas and King’s law firm, Thompson Dorfman Sweatman LLP, for sexual harassment, negligence and intentional infliction of emotional distress, seeking $67 million dollars.

Chapman had not, in fact, destroyed the photos and gave some of them to CBC TV and the Manitoba Law Society. The CBC declined to publish them.

In response, Mr. King brought an application to the court to dismiss Mr. Chapman’s lawsuit on two grounds: that Chapman had signed an agreement in 2003 giving up his right to sue and that Chapman had waited too long (seven years) to bring his claim.

The Court agreed with Mr. King and threw out Chapman’s case. Earlier, Mr. Chapman had abandoned the lawsuits against Justice Douglas and Mr. King’s former law firm. The Court also ordered that Chapman cease any further dissemination of the photos, however, earlier this year, the website abovethelaw.com published the salacious photos (they have since been taken down and replaced with written descriptions of the images).

Mr. King’s lawyer explained that Mr. King posted the photos on the internet without his wife’s knowledge and consent while he was suffering from depression. King also admitted to arranging what Chapman referred to as a “first date” with Ms. Douglas: an invitation to join King and his wife on a vacation in Cancun in 2002. Chapman declined the offer.

In April 2011, Mr. King plead guilty to sexual harassment for cajoling his former client to have sex with his wife. Typically, a Law Society disciplinary hearing for sexual harassment will lead to a suspension of a lawyer’s license to practice law, however, in Mr. King’s case, he received a reprimand and costs of $13,650.00.

Mr. Chapman’s life has also been difficult, post-lawsuit. He was fired from Great West Life Insurance where he worked as a computer programmer. He has also had difficulty finding a lawyer to assist him with his case; Chapman is no stranger to the courts, however. He has been convicted for arson, theft, and uttering death threats. He has also been a party in nine other lawsuits including one action that he brought against the Winnipeg Police Department.

In the meantime, the Winnipeg Free Press challenged the Law Society to disclose what they knew in 2003 and what steps they took then to protect the public. A spokesperson for the Law Society revealed they were aware of Mr. King’s conduct, but did nothing because King was not practicing law at the time of their investigation.

Mr. Chapman discredits any alleged Law Society investigation of Jack King, citing the fact that neither he nor the lawyer who negotiated the 2003 agreement between him, King and his law firm were ever interviewed.

Pubic inquires into judicial complaints are a rare event in Canada and are ordered when the complaint against a judge is serious enough to warrant a judge’s removal from office. The inquiry results are then forwarded to the Minister of Justice who, in accordance with Canada’s Constitution can only be removed after a joint address by Parliament.

Does Judge Douglas’ private life render her unfit to continue as a judge or is she a victim of her husband’s breach of her privacy? Is it appropriate for the Judicial Council to scrutinize a judge’s morality?

In my view, it will be very difficult for Madam Justice Douglas to return to her court duties. Respect for the court and its judicial officers is a cornerstone of Canadian justice. Snickers and snide remarks can only undermine her judicial authority.

Lawdiva aka Georgialee Lang

Talking Tough With Judges

The Canadian courtroom is not a venue for the faint of heart. It is “ground zero” for our adversarial system of justice, pitting the state against a criminal accused; corporate titans battling competitors; spouses jousting to establish a fair division of the spoils of their marriage; and average citizens seeking redress for motor vehicle accidents, human rights complaints, estate disputes and so many other legal matters that are part of everyday life.

“See you in court” is a threat that is feared by most people, with the exception of trial lawyers, who have studied, practiced and for the most part, crave the adrenalin pumping through their veins, like gladiators entering the arena.

In hard-fought cases, clients expect their lawyers to champion their cause aggressively with a “take-no-prisoners” zeal. Many trial lawyers are proud to be called “a bulldog, a bruiser, a basher, a pit-bull” and other normally unflattering nicknames.

Within this milieu it is inevitable that advocates will lock horns with opposing counsel, and judges and lawyers will occasionally spar with one other. However, there is a fine line between passionate argument and unchecked invective when the heat in a courtroom accelerates.

In a decision last month from the Supreme Court of Canada, Dore v. Barreau du Quebec, lawyers and judges alike have been provided with guidance on courtroom etiquette that balances an advocate’s duty to aggressively defend a client, with their obligation to maintain professional decorum.

Quebec lawyer Gilles Dore was representing an accused in a criminal matter involving a Hells Angels prosecution before Quebec Superior Court Justice Jean-Guy Boilard. During Mr. Dore’s submissions, Judge Boilard chastised Mr. Dore, saying “an insolent lawyer is rarely of use to his client”, and later criticized Mr. Dore for his “bombastic rhetoric and hyperbole” and dismissed his “ridiculous” application.

After the hearing Mr. Dore delivered a scathing letter to Judge Boilard, calling him a “coward…pedantic…aggressive…petty… arrogant… unjust…that he was of dubious legal acumen” and made “shamefully ugly, vulgar and mean personal attacks on the unsuspecting”.

Mr. Dore also wrote the Chief Justice of the Quebec Court and the Canadian Judicial Council about Judge Boilard’s behavior.

Canada’s Judicial Council determined that Judge Boilard’s remarks were “insulting and unjustifiably derogatory…displaying a flagrant lack of respect for an officer of the court”. The Council also reviewed Judge Boilard’s track record and noted he had “a penchant for leveling personal, denigrating attacks against lawyers”.

Judge Boilard responded by removing himself as trial judge on the Hells Angel’s trial, while Mr. Dore was defending himself against a complaint made to the Barreau du Quebec, who ultimately found that his letter to Judge Boilard was “likely to offend and was rude and insulting”. Mr. Dore had his license to practice law suspended for 21 days. His suspension was upheld by the Quebec trial and appeal courts.

Canada’s highest court in a 7-0 decision, agreed with the lower courts, but held that judges are not fragile flowers unable to withstand withering critiques from lawyers who argue before them.

Madam Justice Rosalie Abella said “Lawyers should not be expected to behave like verbal eunuchs. They not only have a right to speak their minds freely, they arguably have a duty to do so. But they are constrained by their profession to do so with dignified restraint.”

Judge Abella also recognized the conundrum lawyers face when provoked by opposing counsel or members of the bench noting, “…it is precisely when a lawyer’s equilibrium is unduly tested that he or she is particularly called upon to behave with transcendent civility.”

This case is important, not only for addressing the difficult topic of conflict between counsel and the Court, but also in providing a framework for lawyers and other players in the justice system to understand the boundaries when speaking out about flaws in the system they work in.

While lawyers enjoy freedom of expression, their words must still be chosen wisely in order to balance their obligations to their clients, with the professionalism required of them by their governing bodies and the public.

Lawdiva aka Georgialee Lang

The Latest Gender Phenomenon

As medical experts dig deeper into the world of sexual orientation and gender identity, their research expands this field of knowledge in ways that are nothing less than bizarre. Case in point is the work of Dr. Vilayanur Ramachandran, Director of the Centre for Brain and Cognition at the University of California, San Diego, who claims to have discovered a new gender which is neither male nor female, but bi-gender.

The condition identified by Dr. Ramachandran, called “alternating gender incongruity” or AGI, occurs when people involuntarily switch between male and female. Individuals with AGI experience phantom breasts or genitalia of the opposite sex, according to the highly respected neuroscientist.

His study considered 32 people who registered on an online bi-gender forum, 11 women and 21 men. One-third of the group said their gender switching was predictable; a majority switched weekly while 14 others said they switched once or more daily.

Dr. Ramachandran said that his findings to date indicate that between the extremes of male and female is a “spectrum of a poorly understood and poorly studied group of ambiguously defined sexual identities that are very much part of the human condition.”

He did, however, caution that his results are suggestive, but not conclusive of his theory, and that he still needs to rule out multiple personality disorder or role-playing by his research subjects and ascertain whether there are biological indicators present, such as fluctuating hormone levels.

His research also revealed that those with AGI had a tendency to ambidexterity and bipolar disorder. Nonetheless, while admitting that more work is required, scientists are pushing for a new category of transgender or neuropsychiatric condition.

The medical exploration of strange phenomenon is nothing new for Dr. Ramachandran who earlier investigated “synaesthesia”, a condition affecting millions, where one’s senses are intermingled; people can taste words, hear colours and feel sounds.

Lawdiva aka Georgialee Lang

Calgary Group Introduces Public Sex Offender Registry

You’re a single mom with three young kids and unbeknownst to you, your next-door-neighbour is a convicted pedophile on probation after serving a miniscule prison sentence. Oh yes, he refused treatment while locked up. Don’t you think you’d want to know?

If you lived in the United States you would know, because since 1994 Americans and everybody else, has access to the National Sex Offender Registry operated by the U.S. Department of Justice. A user-friendly site, you just click on the State you want to search, then select a County and presto!…mugshots galore. I checked out our neighbours in Whatcom County, Washington where 59 names, photos and addresses popped up.

So what’s the fuss about Canada Family Action launching their website yesterday at stoppedophiles.ca? What are the civil liberties issues and why was stoppedophiles.ca threatened with lawsuits, as reported in the National Post?

It sounds to me like the usual group of whiners who challenge any activity that supports a law and order perspective. The notion of legal action against these concerned citizens is amusing, since the data collected and listed by stoppedophiles.ca is readily available from many of Canada’s leading news outlets and the website provides readers with their media sources for the information they publish. The site does not print specific addresses, but indicates the city where the offence occurred.

The issue of the civil rights of convicted sex offenders is more complicated with the main concerns focusing on vigilantism and false identification, both issues that have been endlessly debated in the United States.

The United States Supreme Court has examined the laws on sex offender registries in two cases. In Smith v. Doe, Alaska’s highest court held that the retroactive registration of offenders in their public database was punitive and therefore, unconstitutional. The U.S Supreme Court overturned their finding in a 6-3 decision and upheld the Alaska law, reasoning that the law was civil, not criminal and not punitive.

In Connecticut Department of Public Safety v. Doe, America’s highest court overturned the Connecticut Appeal Court who found that the public disclosure required by the Connecticut law was unconstitutional. The Justices held that injury to reputation in and of itself, even if defamatory, was not a deprivation of liberty and was not unconstitutional.

If Canada Family Action continues to obtain their data from reliable major media outlets, it is unlikely they will fall afoul of legitimate privacy issues. Vigilantism is a rare event in Canada but stoppedophiles.ca recognizes the potential problem and displays a disclaimer warning their readers against it.

In my view, stoppedophiles.ca is a helpful compilation of information gleaned from major media sources, gathered by proactive citizens who place a greater value on protecting the vulnerable than coddling criminals.

Lawdiva aka Georgialee Lang

How to Predict Celebrity Divorce?

In a tongue-in-cheek article in the New York Times, writer John Tierney re-introduces his practically fail-proof formula, designed in 2006, for predicting the demise of Hollywood marriages, by relying on his friend, Garth Sundem’s statistical expertise, and his own in-depth literature review of articles published and sold in reading material at supermarket check-out lines. All in all a very impressive and scientific analysis!

The formula they have devised includes considerations of the relative fame of the husband and wife, their ages, the length of their courtship, their marital history, and perhaps most importantly, the sex-symbol quotient of the wife, ascertained by looking at her first five google hits and counting how many of them feature either no attire, or skimpy attire.

In their 2012 New York Times update, they confirm the relative success of the Sundem/Tierney Unified Celebrity Theory by pointing out their accurate predictions in respect of the collapse of the unions of Demi Moore/Ashton Kuchter, Pamela Anderson/Kid Rock, and Britney Spears/Kevin Federline.

They also herald the success of their formula with respect to the intact marriages of Jennifer Garner/Ben Affleck and Matt Damon/Luciana Barroso. Their few failures include Tom Cruise and Katie Holmes, but time will tell.

While they modestly don’t mention it, it seems their equation also works in respect of the relationships of Jennifer Lopez and Marc Anthony, Hulk and Linda Hogan, Tiger Woods and his lovely ex-wife, and so many others.

In light of their recent reassessment of their theory, they have refined certain of their criteria; the major change being the recognition that rather than reviewing Google hits, a more effective formula is measuring the number of New York Times references, divided by the number of mentions in the National Enquirer.

As they move forward with this important research they acknowledge that a wife’s tabloid fame is now probably the best indicator of the success or failure of a marriage.

I’m glad these guys don’t take themselves too seriously!

Lawdiva aka Georgialee Lang

The Other Side of the Coachella Music Festival

Last year I fell in love with California’s Coachella desert after spending several months in La Quinta, lounging (and writing) by the shimmering pool in my La Quinta winter get-away home. At the time, I had no idea that my haven of temporary reprieve from the Vancouver rain was across the street from America’s premier music festival: Coachella.

My friendly Canadian neighbours (yes, we have taken over the California desert) alerted me to the explosion that would erupt on the polo grounds adjacent to our gated community in April. I was told that no one of sound mind, over the age of fifty, remained in the neighbourhood during Coachella weekend.

That admonition was enough to compel me to stay to find out if the rumoured evils of Coachella were truth or fiction.

The town of La Quinta began to take on a different flavour as the weekend approached. The local Ralph’s, a high-end grocery store, usually a mecca for those who crave a taste of the best of sea and land, were nowhere to be seen. In their place were hordes of scantily-dressed young women surrounded by young men, many with dreadlocks and all with an array of body art, none of it particularly artistic.

These kids, however, did not appear to be shopping. Rather, many of them lurked in front of displays of exotic olives, sundried tomatoes, and other delicious compotes of squid and venison, all of which they sampled freely, while the locals watched in amazement.

An early sign that the big event is around the corner is the appearance of workmen hammering stakes into the ground around the festival site with signs attached reading “Parental Pick-up and Drop-off. There is no age restriction, so throngs of teenage girls and boys, those with naive parents, I assume, can join in with the sex, drugs and indie groove.

The next day a booming electric bass signals the start of the concerts by musicians I had never heard of: Jimmy Eat World, the Bloody Beetroots, Plan B, Good Old War, and dozens of others who made me long for the earlier Coachella days when Paul McCartney and yes, even Madonna were the main attraction.

This year I hear that Snoop Dogg is a headliner, a rapper whose street credibility includes his time as a member of L.A’s Crips gang and despite his acquittal on a murder rap in 1996, he’s an alumni of California’s prison system. While he has apparently sold lots of records, it is not his music that keeps him in the media spotlight, but his regular encounters with Johnny Law.

His professional accomplishments include edicts from the United Kingdom and Australia that he is an undesirable. He is also a member of the Nation of Islam, a fan of Louis Farrakhan and self-identifies as a former pimp, altogether the kind of person that right-thinking people would be aghast to see their children emulate.

Was the festival as loud, carousing and annoying as predicted? Frankly, it wasn’t, however, the burglary of our home on the final day was not endearing. Despite private security guards, it was not difficult for rambunctious petty crooks, who teem to these kinds of events, to crawl over the gates and kick in doors where they saw an opportunity.

Those who were polite enough not to steal cameras, flat-screen TV’s and other high-end electronics simply camped uninvited, in the back yards of nearby homes, using the absent home-owners’ swimming pools and outdoor kitchens for their weekend adventure. This year the festival’s producers have increased security and police presence for the surrounding neighbours, a welcome gesture.

Oh yes, it’s double the pleasure this month as Coachella expands to two weekends. Now if I could only find those earplugs I used last year.

Lawdiva aka Georgialee Lang

Parental Abduction On The Rise

BBC News is reporting that parental abduction is escalating in the United Kingdom, citing statistics from the Office of International Family Justice that show that while there were only 27 cases in 2007, in 2010 there were 92 cases, and 180 cases in 2011.

What accounts for the increase in parents fleeing their home countries and taking their children with them? Lord Justice Thorpe, who heads the Office of International Family Justice, notes that most of the increase involves eastern European countries and says that almost two-thirds of children born in London in 2010 have one “foreign” parent, suggesting that the wrongful abduction of children will likely increase in the future.

A spokesperson for Reunite, Sharon Cooke, points to the relative ease of international travel in the 21st century and suggests that “People are relocating, their jobs take them abroad and therefore the chances of meeting different people are greater”.

It appears she is suggesting that as international travel increases, spouses are connecting with new people and forming new spousal-like relationships, but do not wish to leave their children behind.

Many of these parents accurately predict that their desire to move away with their children will be greeted with alarm and adversity from their partners and decide to employ “self-help” methods, rather than allowing the court to determine whether they should be permitted to move.

These cases, referred to as “move-away” or “parental mobility” applications are some of the most difficult cases that Judges in family law courts face. They are also cases that often do not settle out of court because the end result is “winner takes all”. There is usually no compromise or middle ground which will satisfy both parents.

As for Canadian cases, anecdotally I can say that parental abduction also seems to be on the rise in Canada, based on the increasing number of cases I have personally handled and in regularly reading new cases on the British Columbia Superior Courts website.

Unfortunately, it is difficult to predict the outcome of any particular case when a parent seeks a court order allowing that parent to move with the children. Factors which favour a move include:

-The moving parent is the primary resident parent;
-The “left-behind” parent has a lesser parental role;
-The moving parent can show that the proposed move is an economic improvement for both the parent and the children;
-The moving parent has a reasonable plan to facilitate access for the left-behind parent;
-The move is not too far away: i.e. a move from B.C. to Ontario, rather than a move from B.C. to Australia;
-The left-behind parent pays little or no child support or is in arrears of child support;
-There is no evidence to suggest that the proposed move is intended to thwart the other parent’s relationship with the children.

Two recent British Columbia cases from the Court of Appeal add to the body of law that has developed in this area, ( R.E.Q. v. G.J.K. 2012 BCCA 146 and Stav v. Stav 2012 BCCA 154) but Judges and family law lawyers recognize that while precedent cases are helpful, each case has its own twists and turns, as no two cases are identical.

It is unlikely that this difficult issue will get any easier to resolve, despite the additional direction from our Court of Appeal. It is noteworthy that the Court in R.E.Q. v. G.J.K. suggests it may be time for the Supreme Court of Canada to weigh in on the tension between what is in a child’s best interests and the rights of a parent to move if he or she believes it is the best option.

What everyone can agree on is that fleeing with a child is the worst possible scenario.

Lawdiva aka Georgialee Lang

The Pickton Inquiry: What Else Can Go Wrong?

The long, sordid story of serial killer Robert “Willy” Pickton did not end after he was convicted of viciously murdering six vulnerable women from Vancouver’s downtown eastside, said to be the poorest postal code in Canada.

No, his convictions merely heralded the agonizing aftermath of determining how and why the Royal Canadian Mounted Police and the Vancouver Police Department bungled an investigation that could have and should have ended much sooner.

But even before those questions could be answered, the public shook their heads in disgust as they grappled with the outcome: How could a serial murderer only be convicted of second degree murder? What could have possibly led a jury to conclude that the murders were not planned and deliberate?

Of course, the Crown was correct that a first degree murder conviction would not increase his sentence, but it was the ultimate slap-in-the-face to a grief-stricken community, just recovering from the senseless cruelty.

With 49 victims according to Pickton; he travelled from his Port Coquitlam pig farm, intent on plucking the easy-pickings: down-on-their luck working girls whose daily grind of selling sex and buying drugs turned them into defeated and exhausted risk-takers.

Their suffering families, who were used to broken promises, took another blow when the British Columbia government decided not to proceed with the trials of twenty additional women whose DNA was discovered on the farm. Unfortunately, the victims’ families were still in the dark when the announcement was made, another blunder in a case that had become a public relations nightmare.

But there was more to come, much more. In August 2010 informant Bill Hiscox received a portion of the $100,000 reward money for information he provided to the Vancouver Police and RCMP in 1998, yet it took another four years and 14 more missing women, to arrest Pickton, while he continued his unspeakably barbaric activities, only a few miles from the Port Coquitlam RCMP headquarters.

With his arrest in 2002, a trial in 2006, and the last appeal to the Supreme Court of Canada completed in July 2010, it took another 15 months to get the Pickton Inquiry off the ground, but not before the government’s choice of Commissioner was mercilessly attacked.

Former judge and Attorney-General Wally Oppal, had become a sacrificial lamb in the 2009 provincial election, leaving his safe seat in Vancouver for a riskier one in Tsawwassan, an opening that saw ex-VPD and former West Vancouver Police Chief Kash Heed crash and burn after he was elected.

The Liberal government apparently did not foresee the fall-out from their pay-back to cabinet minister Mr. Oppal and despite the outcry, he carried on. But it hasn’t been easy.

The Inquiry has been plagued with controversy. From the outset the Inquiry’s terms of reference, focusing on the role of the police, rather than the social causes of the victims’ vulnerabilities, was criticized.

While a plethora of much-needed community groups were given status to participate in the Inquiry, they quickly realized they could not afford to fund or match the legal talent hired by the battery of senior police officers whose alleged inaction or worse, indifference, became the focus of the exercise.

To his credit, Mr. Oppal made personal overtures to the Liberal government to obtain funding for lawyers to represent the disenfranchised stakeholders. Their answer was “no”. His appointment of two of British Columbia’s leading litigators as pro bono counsel was a boost to the beleaguered Commissioner.

When lawyer Robyn Gervais, appointed to represent aboriginal interests, handed in her resignation in March 2012, the now-frail Inquiry sustained another gut-punch. This one was serious enough to shut down the proceedings until new counsel could be selected, a delay of three weeks.

Mr. Oppal’s request to Attorney-General Shirley Bond to consider extending the June 30, 2012 deadline for the Inquiry to complete its work, was also denied, Ms. Bond citing the $4 million price tag of the Inquiry to date.

The latest scandal to hit Mr. Oppal’s faltering ship is the allegation that the Inquiry environment is a sexist, “old boy’s club”, a club that Commission counsel Art Vertlieb denies, but identifies its only possible members as Mr. Oppal, executive director John Boddie, a former VPD police officer, who is now, rather mysteriously, on leave from the Inquiry, and himself.

Can the Pickton Inquiry claim any legitimacy in light of these devastating events? I believe it still can, but only if the Commissioner exposes the unsavory circumstances of a flawed investigation, seeped in internal politics, that screams to be seen in the light of day.

Mr. Ponzi, Meet Ms. Divorce

They say there is a sucker born every minute and I have to agree. The number of Ponzi schemes that have unravelled in the last several years is remarkable. The wave began with the outrageous scandal that Bernie Madoff created when it was discovered he had defrauded $160 billion from his closest friends, his family, and the public for several decades, while he became a fat-cat at the expense of everyone he encountered, including his son, who later committed suicide.

Since then there has been a parade of white-collar con artists whose greed has also done them in, including Earl Jones from Canada and Lou Perlman and R. Allen Stanford from the United States, to name a few.

It was inevitable that in the world of high-stakes investments the collapse of financial empires would impact the milieu of high net worth divorce. Two such cases have wound their way through the New York divorce courts.

One case involves commodities trader Stephen Walsh who defrauded investors of more than $550 million in a thirteen-year Ponzi scheme. While hundreds of innocent investors lost everything, Mr. Walsh’s wife, Janet Schaberg, cashed in during her divorce from Walsh, which predated the demise of his phony financial firm.

While admitting that Ms. Schaberg was innocent, the U.S. Securities Exchange Commission went after her money alleging that her net worth was largely as a result of the fraud her husband had perpetrated during their marriage. As a result almost $8 million in cash was frozen pending the outcome of the SEC’s lawsuit.

Ms. Schaberg won the lawsuit which enabled her to retain the assets she acquired in her 2009 divorce. The New York Court weighed the competing interests of an innocent spouse of a scam artist against the rightful owners of the funds, who had been taken in by a sophisticated fraud.

In ruling in her favour, the Court compared her with an architect who was paid to build a home for a thief. The architect would not be forced to disgorge the funds he had received from the thief and neither should Ms. Schaberg.

In another New York courtroom this week, the final chapter in the Steve Simkin/Bernie Madoff case was written.

Steve Simkin is a prominent real estate lawyer in New York City with blue-chip law firm Paul, Weiss. He and his wife Laura Blank separated in 2002 after 30 years of marriage and entered into a separation agreement in 2006 that divided equally their significant assets including a home in Scarsdale, an apartment in Manhattan and a stock portfolio managed by Bernard L. Madoff Investment Securities. Simkin’s Madoff account statement showed a value of $5.4 million and he paid his wife about $2.7 million as her fifty percent share of the asset.

To fund the payment to her, he liquidated a portion of his Madoff account, retained the balance and continued to operate this account with Madoff.

In 2008 Mr. Simkin learned he was a victim of Maddof’s criminal scheme and there was no account with Madoff’s company. The statements Simkin relied on were fraudulent. Simkin filed a lawsuit seeking to recover the funds he paid his wife for her share of the portfolio. His lawyer argued that Ms. Blank had received a “windfall” and on the basis of a “mutual mistake” the agreement should be varied and Mr. Simkin should receive reimbursement from his ex-wife.

A Manhattan trial judge disagreed and tossed out Simkin’s lawsuit. She ruled there had been no mistake, as at the date of the separation agreement the account held funds, a portion of which were used to payout Ms. Blank.

On appeal the Court revived Mr. Simkin’s suit ordering a new trial, but this week Judge Victoria Graffeo ruled in Ms. Blank’s favour, unwilling to upset the agreement both parties had entered into in good faith.

The rationale is sound for several reasons, not the least of which is the righteous preclusion of a former spouse with investment or real estate losses from looking to his or her ex to regain assets already divided between them, because of changes in the marketplace.

There is a reason why family lawyers remind their clients that “a deal is a deal”.

Lawdiva aka Georgialee Lang