Reputation risk Former RBC trader alleges he was fired on the word
More Peter J Thompson/National Post In responses filed in court, RBC denies that its employees knew about Kurgan’s entanglement with Lake Shore when he was hired. Even if they had, the bank says, they were not aware of the full extent of his involvement with the firm or with Baker.Royal Bank says it first learned of Kurgan’s connection to Lake Shore and Baker when he advised his superiors at the bank in early August, 2017, that a reporter had contacted him and was working on a story about Baker and his release from prison and return to Canada, according to court documents.RBC’s review turned up ‘a number of concerns that had not been adequately addressed’ by Kurgan John Kurgan is seeking more than $5 million for wrongful dismissal and other damages, according to court documents.Peter J Thompson/National Post Share this story’Reputation risk:’ Former RBC trader alleges he was fired on the word of a ‘convicted fraudster’ Tumblr Pinterest Google+ LinkedIn Twitter “I helped them with whatever I could, and what I couldn’t, I couldn’t,” Kurgan said in an interview, recalling a discussion with U.S. authorities that took place in 2008. “When I came out of that meeting at the end, everybody thanked me, shook my hand, (and said) thanks for helping us, assisting us.”“There was never a hint of culpability on John’s part,” added his lawyer Michael Meredith.More importantly, Kurgan contends that officials at RBC were aware of his association with troubled Lake Shore more than seven years ago when he was being recruited — long before the two stories featuring Baker and his tale of disgrace were published in late 2017. In court filings, he also alleged that key players at the bank were aware of a previous attempt to “implicate” him in Lake Shore’s collapse, prior to his hiring at RBC Dominion Securities. The curious case of a disgraced ex-hedge fund manager and the trader he says was his partner Donald ex machina: The strange role of a mogul-turned-President in the ongoing saga of Conrad Black The return of Boaz Manor: Co-founder of failed hedge fund Portus turns up at U.S. blockchain startup under new identity The allegations, which have not been proven in court, are at the heart of the wrongful dismissal suit, which heads into mediation on Monday after working its way through the courts since early last year. Kurgan is seeking more than $5 million for wrongful dismissal and other damages, according to court documents, claiming the termination “effectively ruined (his) ability to ever work in the industry again” and “wrongly and unfairly telegraphed to both clients and prospective employers … that Baker’s allegations have credence.”RBC denies that its employees knew about Kurgan’s entanglement with Lake Shore when he was hired What set the wheels in motion for his dismissal, court documents allege, were reports in the Financial Post and The New York Times about Philip Baker, Kurgan’s former friend, who had returned to Toronto after serving a portion of a 20-year prison sentence in the United States for fraud. Baker had given a series of interviews about his fall from grace as head of Chicago-based Lake Shore Group of Companies.He named Kurgan — who was never implicated in Baker’s crimes — as a business partner in an operation that, at its peak, stretched to London, Turks and Caicos and the British Virgin Islands.Toronto-born Philip Baker pleaded guilty in 2011 to defrauding investors while running a global commodities trading and hedge fund business. Join the conversation → 1 Comments Comment In his court filings, Kurgan says the bank appears to have taken “illegitimate documents Baker produced during the receivership” at face value, rather than conducting a fair and objective review.“RBC DS ought to have provided Kurgan the opportunity to respond to any alleged concerns it may have had before purporting to end its employment relationship with him on the basis of the allegations of a convicted fraudster,” he says in an April filing.Instead, Kurgan alleges in the court documents, RBC tried to “bully” him into “leaving the firm quietly” and when he refused their offer to buy his book of business for far less than he thought it was worth, he was terminated on Feb. 8, 2018.Neither Kurgan’s allegations nor the bank’s responses and counter-allegations have been tested in court, and RBC said in an emailed statement Thursday that it could not comment on questions posed by the Financial Post while the matter is before the courts.“We are unable to comment on pending litigation,” Louise Armstrong, a spokesperson for RBC, said.———–Long before media reports revisited the collapse of Lake Shore, the tale of Baker’s downfall was documented in real time by media outlets and wire services including Reuters, Bloomberg and the Chicago Tribune. Those stories — dating back to 2007 — chronicled allegations that Baker hid millions of dollars in trading losses, embezzled funds, and misled hundreds of investors. They do not mention Kurgan.Baker and Kurgan agree that they met while both were working at Refco in Toronto in the 1990s, and that Kurgan did some trading for Lake Shore, the commodities trading and hedge fund business that landed Baker in the sights of authorities in the United States, first as a fugitive in Germany, and then in U.S. prisons including the notorious Fort Dix in New Jersey.Baker was the only person charged in the Lake Shore debacle ‘Reputation risk:’ Former RBC trader alleges he was fired on the word of a ‘convicted fraudster’ Years after the collapse of disgraced hedge fund Lake Shore Group, the effects continue to ripple through Bay Street Barbara Shecter Featured Stories Kurgan, a mild-mannered 61-year-old, vehemently denies that he was a partner and has never been sanctioned or charged. He doesn’t deny knowing Baker and doing some trading for a Lake Shore account for commissions, but points out that during the time Lake Shore operated, from 2002 to 2007, he was employed at Toronto-based trading firms Refco Futures Canada Inc. and MF Global Canada Co. In legal filings and interviews with the Financial Post, alongside his lawyer, Kurgan said that he cooperated with authorities looking into the wrongdoing at Lake Shore, including the Federal Bureau of Investigations and the U.S. Commodities Futures Trading Commission.There was never a hint of culpability on John’s partJohn Kurgan’s lawyer Michael Meredith Reddit However, their versions of the depth of Kurgan’s association with Lake Shore and other ways in which their lives intersected could not be more different.While Baker claims they were partners and that Kurgan was the head trader at Lake Shore, Kurgan maintains he was just helping a friend who was down on his luck by signing a few documents and doing limited trading for commissions.“I’m just kind of keeping track of the trades I’m doing. There’s other traders,” Kurgan said of his time working with Lake Shore more than a decade ago. “I didn’t co-found this company. I didn’t own this company. I worked … for Refco, I worked for MF Global, I worked for RBC. I didn’t work for this company.”Baker was the only person charged in the Lake Shore debacle.Facing criminal charges including fraud, embezzlement, and obstruction of justice, Baker was extradited to the United States from Germany, where he had been living. He pleaded guilty to a single count of mail fraud in 2011, admitting to falsifying Lake Shore’s marketing materials to cover up large trading losses. The same year, Kurgan was recruited and hired by RBC Dominion Securities, the wealth management arm of Canada’s largest bank.RBC came knocking when one of the Canadian firms Kurgan was working for — MF Global — ran into problems completely unrelated to Baker and Lake Shore. RBC sought to hire Kurgan and obtain his client list, according to the documents filed in his wrongful dismissal suit.Kurgan’s court filings recount a recruitment process that involved a handful of meetings and discussions with RBC employees. The documents outline one meeting, during which a Lake Shore proceeding Kurgan was involved in was specifically discussed with Paul Sinel, described as an assistant manager at RBC Dominion. However, his LinkedIn page says he is now retired.The discussion took place outside the Library Bar at the Fairmont Royal York hotel in Toronto, according to Kurgan’s filing, and the topic was a motion Lake Shore’s receiver had made to add FTG Capital Canada to Lake Shore’s receivership proceeding. FTG was a company that had been incorporated by Kurgan in the 1990s.“Kurgan advised Sinel that that he had retained legal counsel to respond to the motion and that the motion to add FTG had been dismissed,” the document says. “Kurgan further advised Sinel that he would be happy to discuss this further with RBC DS and to answer any questions they might have with respect to the Lake Shore proceedings. No one at RBC DS took Kurgan up on his offer.”The court filing notes that the receiver’s report, published in April of 2011, “was and remains accessible to the public” and “was accessible at the time RBC DS recruited Kurgan to the firm” that fall.In his lawsuit, Kurgan says James McElrea, a commodities trader at RBC, was also aware of his involvement with Lake Shore, and had spoken about it with George Corneil, who the document describes as the vice-president of futures at RBC.“Corneil assured McElrea that the matter was closed,” according to Kurgan’s filings, which add that the bank “did not have any concerns about Kurgan’s involvement at that time, and was content to have Kurgan join the firm to obtain his book of business.”However, in a court document filed in response, RBC strenuously denied that its officials were aware of Kurgan’s ties to Lake Shore.“Corneil never made such an admission to McElrea” and was not aware of Kurgan’s “association with Lake Shore or Baker,” one of the documents states.If he did disclose his association with Lake Shore, “which is not admitted but specifically denied, such disclosure, or any related discussions, did not involve the irregularities … including the plaintiff’s (Kurgan) involvement with Lake Shore and/or … with Baker,” adds a document filed in April, 2018.Despite its concerns about the Lake Shore matter after the fresh media reports following Baker’s return to Toronto, RBC says it tried, before Kurgan’s dismissal, to negotiate his exit in early 2018 through its business succession program. The program is described as a financial industry framework that effectively transfers the management of clients from one advisor to another at the bank.But as the two sides dug in, the drama intensified. After Kurgan was dismissed without cause, the bank’s court filings say, RBC discovered that confidential information had been “improperly transferred” to Kurgan’s personal unsecured email without the bank’s permission.That discovery a month after his dismissal gave the bank justification for “summarily dismissing” Kurgan with cause, the documents say.The bank demanded that the confidential information be returned or destroyed, and made a counterclaim against Kurgan for the return of $235,967.82 it says was “improperly” paid to him in termination pay and severance.Kurgan countered in his court filings, saying that the information was contained in an email was sent to him “without his knowledge, consent or direction.” And he added his own salvo, accusing RBC of deploying “harsh” and “malicious” tactics and suggesting the bank may have been motivated by a desire “to prevent any further press highlighting its own involvement in the Lake Shore proceedings.”Royal Bank had money tied up in the now-defunct firm, which came to light during Lake Shore’s bankruptcy proceedings ← Previous Next → Recommended For YouTILT Holdings Announces U.S. $125 Million Convertible Note FinancingMDA, a Maxar Company, Announces Successful Launch of Canada’s RADARSAT Constellation MissionKinder Morgan Declares $0.25 Per Share Dividend and Announces Results for Second Quarter of 2019Canadians lose trust in Facebook as it battles privacy watchdogsAlternative lenders gain ground as mortgage originations slow: CMHC advertisement Facebook As originally reported in the Financial Post, Royal Bank had money tied up in the now-defunct firm, which came to light during Lake Shore’s bankruptcy proceedings in the United States in 2010. A document filed in an Illinois court that year contained a submission from Royal Bank, which was among those asserting claims on Lake Shore’s remaining funds. The Canadian bank weighed in on how available Lake Shore funds should be distributed about those with claims to them.The document did not say how much money Royal Bank believed it was entitled to in the Lake Shore proceedings, but it indicated the bank was part of a group fighting for about $13 million of a $100 million pool of money that had been frozen by authorities.In a statement to the Financial Post in 2017, Royal Bank said the bank “had a very small number of investors who (had) requested exposure to the fund.” The bank’s spokesperson at the time added that Lake Shore funds were never on any list of recommended investments for clients in Royal Bank’s retail channel.In court documents filed last year in response to Kurgan’s wrongful dismissal suit, RBC “specifically denies” that he was terminated due to concerns about exposure of its own involvement in Lake Shore.It’s not clear if Monday’s private mediation will be the final chapter Email For more than six years, John Kurgan worked as a specialist in commodities and futures trading at Canada’s biggest bank. He became a senior vice-president at Royal Bank of Canada’s wealth management unit, where he was the top commodities trader in 2016 and took in more than $3.2 million in revenue for the bank. He was rewarded for his work with offers of trips to Mexico, California, and Miami Beach.All that changed in late January last year, when Kurgan says he was called into a meeting with two of his superiors and told “it would be best if he voluntarily retired.” The meeting is described in documents he filed in a wrongful dismissal suit against the bank in Ontario’s Superior Court of Justice in February last year.Kurgan was told that a decade-old entanglement with a disgraced hedge fund manager in the United States, a one-time friend, had become a “reputation risk” for the bank, according to court documents.John Kurgan was RBC’s top commodities trader in 2016 and took in more than $3.2 million in revenue for the bank What you need to know about passing the family cottage to the next generation Aaron Vincent Elkaim/The New York Times May 24, 20191:52 PM EDT Filed under News FP Street Sponsored By: RBC clients who had exposure to Lake Shore “had requested such exposure,” the bank said. “As part of the bankruptcy proceeding involving Lake Shore, Royal Bank of Canada sought a distribution of the receivership assets on behalf of its clients that had sustained losses.”It’s been years since Lake Shore was wound down, but the ripples flowing from the firm’s existence will be felt Monday in the private mediation scheduled for Kurgan’s wrongful dismissal suit. It’s not clear if that process will be the final chapter.“Mr. Kurgan hopes that the parties will reach a reasonable and fair resolution on Monday,” Meredith, his lawyer, said Thursday. “But if not, he is fully resolved to carrying the matter through to trial and looks forward to obtaining a just result.”• Email: email@example.com | Twitter: In a statement of defence and counterclaim to Kurgan’s wrongful dismissal suit, RBC said it conducted an initial review of Lake Shore, Baker, and Kurgan’s alleged involvement after the newspaper stories were published, between November 23, 2017, and Jan. 25, 2018.That review turned up “a number of concerns that had not been adequately addressed” by Kurgan, including a business agreement he had signed with Baker in 2001, his association with a Lake Shore company called FTG, and what the bank called inconsistencies in responses he gave to a Canadian regulator, court documents say. As a result, the bank told the court it decided to “forego any further review of this matter” and “looked to end the employment relationship with the plaintiff (Kurgan).”For his part, Kurgan says he wasn’t given the opportunity to respond to any of the alleged concerns, even though he offered on “multiple occasions” to meet with RBC, and to bring in Meredith, his long-time lawyer, according to filings in his wrongful dismissal suit.The RBC Plaza which headquarters the Royal Bank of Canada in Toronto.