News Releases

For immediate release November 25, 1999

Vernon lawyer Kenny admits professional misconduct to Law Society

VANCOUVER – Former Vernon lawyer, Edward Kenny, (called to the BC Bar in 1972) has admitted professional misconduct to the Law Society of British Columbia prior to facing a disciplinary hearing into allegations of misappropriation of client funds. As a result of his admission, the disciplinary hearing into Mr. Kenny’s conduct has been cancelled. A copy of the Agreed Statement of Facts, signed by Mr. Kenny, outlines the allegations and findings against him. (Note: this is a revised copy of the original Agreed Statement of Facts; the names and other identifiers of innocent parties have been removed in order to protect their privacy under the Freedom of Information and Protection of Privacy Act.)

Mr. Kenny, now a former member of the Law Society, has undertaken not to reapply for reinstatement to the Law Society for a period of seven years from the date of the Law Society’s acceptance of his admission, which is not before November, 2006. If, after the seven years, Mr. Kenny applies for reinstatement, his disciplinary record will be taken into account by the Law Society Credentials Committee at the time. Mr. Kenny has also agreed not to apply for membership in any other law society without first advising the Law Society of BC, not to permit his name to appear on the letterhead of any lawyer or law firm without the Law Society’s written consent and to obtain the written consent of the Law Society before working for any other lawyer or law firm in BC.

The Law Society is the governing body of the BC legal profession. It is responsible for the licensing, professional conduct and discipline of over 9,700 British Columbian lawyers.

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Note to journalists:

  • Agreed Statement of Facts (severed) follows.
  • For more information about the Law Society’s disciplinary process, please refer to the Law Society of BC website at www.lawsociety.bc.ca

Background notes on Edward Frederick Kenny:

  • former practice located in Vernon, British Columbia
  • called to the BC Bar in 1972
  • disciplinary investigation commenced in December 1998
  • citation authorized by the Law Society on January 14, 1999
  • citation served on Mr. Kenny on April 13, 1999
  • admission accepted by Law Society on November 4, 1999

For more information contact:
Elizabeth Cordeau, Public Affairs Manager
604-443-5724 or 1-800-903-5300 toll-free in B.C.
E-mail: ecordeau@lsbc.org
www.lawsociety.bc.ca

 

*  *  *  *  *  *  *

 

IN THE MATTER OF THE LEGAL PROFESSION ACT

AND

IN THE MATTER OF A HEARING CONCERNING

EDWARD FREDERICK KENNY

(Ceased Member)


AGREED STATEMENT OF FACTS


1.  Mr. Kenny was a member of the Law Society of British Columbia from May 15, 1972 through to December 31st, 1998, when he ceased to be a member due to non-payment of membership fees. During 1997 and 1998, he practiced law at offices in Vernon and Lumby in association with another member.

2.  On October 26th, 1997 Mr. Kenny entered into a written agreement with "A Ltd." regarding performing services for A Ltd. concerning an investment program. Mr. Kenny was to act as trustee for investor funds, and as trustee was to hold bonds as security for investors’ capital and profits.

3.  The investment program was to secure capital and pay profits to investors as follows:

(a)  for each $100,000.00 U.S. investment, $200,000.00 U.S. plus return of the capital was to be paid to the investor by way of eleven payments over the course of one year and one month. Security for the $100,000.00 U.S. capital was to consist of $300,000.00 U.S. in United States Treasury bonds, or

(b)  for an investment of $100,000.00 U.S. for one year, the investor was to receive $500,000.00 U.S. including the return of his capital one year after investment. The $100,000.00 U.S. invested was to be secured by $500,000.00 U.S. in United States Treasury bonds.

4.  From October, 1997 through to December, 1998, Mr. Kenny accepted funds into his U.S. dollar trust account which were to be invested in this initial program and subsequent programs offered to clients of A Ltd. This Agreed Statement of Facts is not exhaustive regarding these purported investment programs, and is not exhaustive regarding Mr. Kenny’s conduct concerning the programs or investors.

5.  Mr. Kenny and the Law Society agree that the recission of the citation by the Law Society as part of this resolution under Rule 4-21 is without prejudice to the right of the Law Society to raise all matters connected with the citation and any matters concerning Mr. Kenny’s conduct in any application Mr. Kenny might make in the future to be reinstated as a member of the Law Society of British Columbia.

6.  Mr. Kenny admits to commission of professional misconduct concerning the following investors:

(1)  [B]
(2)  [C]
(3)  [D]
(4)  [E]
(5)  [F]

Mr. Kenny’s admitted professional misconduct consists of breaching his fiduciary obligations to these investors.

Facts of the matters and specific instances of the professional misconduct admitted regarding each investor are as follows:


A.  [B]

1.  Background Information – Flow of Funds

[B] of Chilliwack, BC, forwarded $100,000.00 U.S. to Mr. Kenny, which was received as $99,990.00 into Mr. Kenny’s trust account on November 4th, 1997 after deduction of a bank fee. The funds were disbursed as follows on November 20th, 1997 from Mr. Kenny’s Royal Bank U.S. dollar trust account:

(1)  cheque no. 001 to [M] - $20,000.00 U.S.D.
(2)  cheque no. 002 to [L]  - $20,000.00 U.S.D.
(3)  cheque no. 003 to [M] - $11,990.00 U.S.D.
(4)  cheque no. 004 to [M] - $16,000.00 U.S.D.
(5)  cheque no. 005 to [M] - $16,000.00 U.S.D.
(6)  cheque no. 006 to [M] - $16,000.00 U.S.D.

Cheque no. 003 was used on November 20th, 1997 to purchase a bank draft to "Ted Kenny" in the amount of $17,051.58, Canadian dollars, which draft was deposited to Mr. Kenny’s general account in payment of a statement of account. None of the funds received from [B] were invested. No funds were returned or paid to [B].

2.  Fiduciary Obligations and Breaches of those Obligations

Mr. Kenny assumed fiduciary obligations in agreements dated October 27th, 1997, and November 12th, 1997, with the November 12th agreement superseding the October 27th agreement. Under the agreement of November 12th, 1997, Mr. Kenny was obligated to ensure that [B]’s capital would remain in Mr. Kenny’s direct control in his trust account unless it was exchanged for U.S. Treasury bonds issued in Mr. Kenny’s name in an amount equal to 500% of the capital. Mr. Kenny was to receive and authenticate a fully verifiable receipt for the issuance of the Treasury bonds prior to releasing the capital, and was to confirm that the bonds were held in his control as security for payment of profits. Profits were to be 15% of capital each twenty "International Banking Days" for a total of ten payments, together with a payment of 130% of capital ten "International Banking Days" prior to the expiry of the agreement. The duration of the agreement was to be one year and one month. If the project did not pay profits as required, Mr. Kenny was to cause the sale of the Treasury bond security with the funds applied in payment of 460% of the capital to [B] and 40% of the capital to [B]’s "Agent of Record".

Mr. Kenny breached his fiduciary obligations as follows:

(1)  The funds were not invested, but rather disbursed as indicated in the Flow of Funds section.

(2)  Mr. Kenny did not retain the capital in his trust account until he had received and authenticated a fully verifiable receipt for the issuance of the Treasury bonds in his name as required.

(3)  Upon non-payment of the profits, Mr. Kenny did not liquidate Treasury bonds to pay profits as required.

In addition, Mr. Kenny wrote correspondence to [B] which misled [B] in relation to the investment. This amounted to a further breach of the fiduciary obligations owed by Mr. Kenny to [B].


B.  [C]

1.  Background Information – Flow of Funds

By January 14th, 1998, $100,000.00 U.S. sent by [C] of North York, Ontario was received in Mr. Kenny’s trust account. On February 3rd , 1998, these funds were combined with $100,000.00 U.S. received from the investor [D], and used as follows:

  February 3rd, 1998:  
     
  (1) wire transfer to [G]
(2) wire transfer to [H]
(3) wire transfer to [I]
(4) wire transfer to [J], another investor

$856.27 US
$856.27 US
$856.27 US
$25,688.21 US

     
  February 4th, 1998:  
     
  (5) wire transfer to [K]
(6) wire transfer to [L]
(7) cheque to [M] indicated as being for "management fees"
(8) cheque to [N] indicated as being for "management fees"
(9) cheque to Edward Kenny as "payment of account"

$11,131.50 US
$15,000.00 US
$11,131.50 US
$11,131.50 US
$8,348.48 US

     
  February 6th, 1998:  
     
  (10) wire to [O], another investor, indicated as being "profits"

$115,000.00 US

     
  TOTAL:

$200,000.00 US

None of the funds sent to Mr. Kenny by [C] were invested.

$50,000.00 U.S. was sent to [C] from Mr. Kenny’s trust account on April 9th, 1998. These funds were a portion of investment funds deposited on April 8th, 1998 to Mr. Kenny’s trust account by the investors [E] and [F]. No other funds were returned or paid to [C].

2.  Fiduciary Obligations and Breaches of those Obligations

Mr. Kenny assumed fiduciary obligations to [C] in agreements dated December 15th, 1997 and January 11th, 1998. Under the agreement of December 15, 1997, Mr. Kenny was obligated to ensure that [C]’s capital remained in Mr. Kenny’s direct control in his trust account unless it was exchanged for United States Treasury Bonds issued in Mr. Kenny’s name in an amount equal to 500% of the capital. Mr. Kenny was to receive and authenticate a fully verifiable receipt for the issuance of the Treasury Bonds prior to releasing the capital and was to confirm that the bonds were held in his control in security for payment of profits. [C]’s capital was to be exchanged for the Treasury Bonds within ten international banking days of receipt of the capital, failing which it was to be returned to [C]. Profits were to be paid twenty days prior to the expiry of the agreement, in an amount equal to 420% of capital. The agreement was to have a duration of one year and one month. If profits were not paid as required, Mr. Kenny was to cause the Treasury Bonds to be sold with the funds applied in payment of 420% of the capital to [C] and 80% of the capital to his agent of record.

Under the agreement of January 11th, 1998, Mr. Kenny was obligated to ensure that [C]’s capital remained in Mr. Kenny’s direct control in his trust account unless it was exchanged for United States Treasury bonds issued in Mr. Kenny’s name in an amount equal to 300% of the capital. Mr. Kenny was to receive and authenticate a fully verifiable receipt for the issuance of the Treasury bonds prior to releasing the capital, and was to confirm that the bonds were held in his control as security for payment of profits. [C]’s capital was to be exchanged for the Treasury bonds within ten "International Banking Days" of receipt of the capital, failing which it was to be returned to [C]. Profits were to be paid every twenty "International Banking Days" at the rate of 13% of capital, plus an additional payment of 130% of capital ten "International Banking Days" prior to expiry of the agreement. The agreement was to have a duration of one year and one month. If profits were not paid as required, Mr. Kenny was to cause the Treasury bonds to be sold with the funds applied in payment of 260% of the capital to [C] and 40% to his Agent of Record.

Mr. Kenny breached his fiduciary obligations under both the agreements of December 15, 1997 and January 11, 1998 as follows:

(1) The [C] funds were not invested, but rather disbursed as indicated in the Flow of Funds section.

(2) The funds were not returned to [C] as required when not exchanged for Treasury bonds within ten "International Banking Days."

(3) Mr. Kenny did not retain the capital in his trust account until he had received and authenticated a fully verifiable receipt for the issuance of the Treasury bonds in his name as required.

(4) Upon non-payment of the profits, Mr. Kenny did not liquidate security, if any was held, in order to pay profits as required.

In addition, Mr. Kenny wrote correspondence to [C] which misled [C] in relation to the investment. This amounted to a further breach of the fiduciary obligations owed by Mr. Kenny to [C].


C.  [D]

1.  Background Information – Flow of Funds

On January 5th, 1998, $100,000.00 U.S. was deposited to the credit of [D] of Bolton, Ontario, in Mr. Kenny’s trust account. On February 3rd, 1998, these funds were combined with $100,000.00 U.S. received by Mr. Kenny from the investor [C], and used as follows:

  February 3rd, 1998:  
     
  (1) wire transfer to [G]
(2) wire transfer to [H]
(3) wire transfer to [I]
(4) wire transfer to [J], another investor

$856.27 US
$856.27 US
$856.27 US
$25,688.21 US

     
  February 4th, 1998:  
     
  (5) wire transfer to [K]
(6) wire transfer to [L]
(7) cheque to [M] indicated as being for "management fees"
(8) cheque to [N] indicated as being for "management fees"
(9) cheque to Edward Kenny as "payment of account"

$11,131.50 US
$15,000.00 US
$11,131.50 US
$11,131.50 US
$8,348.48 US

     
  February 6th, 1998:  
     
  (10) wire to [O], another investor, indicated as being "profits"

$115,000.00 US

     
  TOTAL:

$200,000.00 US

None of the funds sent to Mr. Kenny by [D] were invested.

$50,000.00 U.S. was sent to [D] from Mr. Kenny’s trust account on April 9th, 1998. These funds were investment funds deposited into Mr. Kenny’s trust account on April 8th, 1998 by the investors [E] and [F]. No other funds were returned or paid to [D].

2.  Fiduciary Obligations and Breaches of those Obligations

Mr. Kenny assumed fiduciary obligations to [D] in agreements dated November 18th, 1997 and January 11th, 1998. Under the agreement of November 18, 1997, Mr. Kenny was obligated to ensure that [D]’s capital remained in Mr. Kenny’s direct control in his trust account unless it was exchanged for United States Treasury Bonds issued in Mr. Kenny’s name in an amount equal to 500% of the capital. Mr. Kenny was to receive and authenticate a fully verifiable receipt for the issuance of the Treasury Bonds prior to releasing the capital, and was to confirm that the bonds were held in his control as security for payment of profits. [D]’s capital was to be exchanged for Treasury Bonds within ten "international banking days" of receipt, or returned to [D]. Profits in the amount of 420% of capital were to be paid twenty banking days prior to the expiry of the agreement. The agreement was to have a duration of one year and one month. If profits were not paid as required, Mr. Kenny was to cause the Treasury Bonds to be sold with the funds applied in payment of 420% of the capital to [D] and 80% of the capital to his agent of record.

Under the agreement of January 11th, 1998, Mr. Kenny was obligated to ensure that [D]’s capital remained in Mr. Kenny’s direct control in his trust account unless it was exchanged for United States Treasury bonds issued in Mr. Kenny’s name in an amount equal to 300% of the capital. Mr. Kenny was to receive and authenticate a fully verifiable receipt for the issuance of the Treasury bonds prior to releasing the capital, and was to confirm that the bonds were held in his control as security for payment of profits. [D]’s capital was to be exchanged for Treasury bonds within ten "International Banking Days" of receipt, or returned to [D]. Profits were to be paid every twenty "International Banking Days" at the rate of 13% of capital, plus an additional payment of 130% of capital ten "International Banking Days" prior to the expiry of the agreement. The agreement was to have a duration of one year and one month. If profits were not paid as required, Mr. Kenny was to cause the Treasury bonds to be sold with the funds applied in payment of 260% of the capital to [D] and 40% of the capital to his "Agent of Record."

Mr. Kenny breached his fiduciary obligations under both the agreements of November 18, 1997 and January 11, 1998 as follows:

(1) The [D] funds were not invested, but rather disbursed as indicated in the Flow of Funds section.

(2) The [D] funds were not returned to [D] when they were not exchanged within ten days for United States Treasury bonds as required.

(3) Mr. Kenny did not retain the capital in his trust account until he received and authenticated a fully verifiable receipt for the issuance of the Treasury bonds in his name as required.

(4) Upon non-payment of the profits, Mr. Kenny did not liquidate security, if any was held, in order to pay profits as required.

In addition, Mr. Kenny wrote correspondence to [D] which misled [D] in relation to the investment. This amounted to a further breach of the fiduciary obligations owed by Mr. Kenny to [D].


D.  [E]

1.  Background Information – Flow of Funds

[E] of Victoria, Australia, forwarded $200,000.00 U.S. to Mr. Kenny’s trust account, with $199,985.00 U.S. deposited to that account after deduction of a bank fee on April 8th, 1998. These funds were pooled with $99,982.00 U.S. deposited to the credit of [F] on April 8th, 1998. These combined funds were disbursed as follows:

  April 9th, 1998:  
     
  (1) cheque to [M] as "management fees"
(2) cheque to [P], a previous investor, as "investment proceeds"
(3) cheque to [Q] as "management fees"
(4) cheque to [K]
(5) cheque to [R], a previous investor, as "investment proceeds"
(6) cheque to [C], a previous investor, as "investment proceeds"
(7) cheque to [D], a previous investor, as "investment proceeds"

$39,000.00 US
$50,000.00 US
$10,000.00 US
$39,000.00 US
$50,000.00 US
$50,000.00 US
$50,000.00 US

     
  April 17th, 1998:  
     
  (8) cheque to Edward Kenny re: payment of account

$12,000.00 US

     
  TOTAL:

$300,000.00 US

None of the funds from [E] were invested. No funds were returned or paid to [E].

2.  Fiduciary Obligations and Breaches of those Obligations

Mr. Kenny signed an initial fiduciary agreement dated March 31st, 1998, in which he assumed the following obligations:

(1) He would keep "contractual control" of the [E] funds at all times.

(2) He would transfer the funds to the investment Program only after having received:

(a) a satisfactory bank guarantee for safe keeping and return of the funds at his call for at least 100% of the capital;

(b) a satisfactory bank obligation or irrevocable bank instrument to pay profits and capital as agreed;

(3) Mr. Kenny acknowledged the capital was to go into "a specific Bank guaranteed investment project."

(4) Profits were to be guaranteed by an "irrevocable bank contractual obligation", and were to be not less than 5% of capital per week. Mr. Kenny was to possess suitable contractual obligations as stated above prior to releasing funds.

These fiduciary obligations were breached as the [E] funds were released without receipt of a bank guarantee for capital or bank obligations securing profits, and were not invested into the specific project, or at all.

In addition, Mr. Kenny wrote correspondence to [E] which misled them in relation to the investment. This amounted to a further breach of fiduciary obligations owed by Mr. Kenny to [E].


E.  [F]

1.  Background Information – Flow of Funds

[F], an Arizona Corporation, forwarded $100,000.00 U.S. on April 8th, 1998 to Mr. Kenny’s trust account, with $99,982.00 U.S. deposited to the trust account to [F]’s credit after deduction of a bank fee. These funds were combined with $199,985.00 U.S. deposited to Mr. Kenny’s account by [E], also on April 8th, 1998. These combined funds were disbursed as follows:

  April 9th, 1998:  
     
  (1) cheque to [M] as "management fees"
(2) cheque to [P], a previous investor, as "investment proceeds"
(3) cheque to [Q] as "management fees"
(4) cheque to [K]
(5) cheque to [R], a previous investor, as "investment proceeds"
(6) cheque to [C], a previous investor, as "investment proceeds"
(7) cheque to [D], a previous investor, as "investment proceeds"

$39,000.00 US
$50,000.00 US
$10,000.00 US
$39,000.00 US
$50,000.00 US
$50,000.00 US
$50,000.00 US

     
  April 17th, 1998:  
     
  (8) cheque to Edward Kenny re: payment of account

$12,000.00 US

     
  TOTAL:

$300,000.00 US

None of the funds from [F] were invested. No funds were returned or paid to [F].

2.  Fiduciary Obligations and Breaches of those Obligations

Mr. Kenny received the funds as indicated in the Flow of Funds section on April 8th, 1998, knowing these funds were for investment in a specific investment project. Mr. Kenny did not apply these funds in that fashion, but rather disbursed them as indicated in the Flow of Funds section, thereby breaching his fiduciary obligation to [F].

In addition, Mr. Kenny wrote correspondence to [F] which misled them in relation to the investment. This amounted to a further breach of the fiduciary obligations owed by Mr. Kenny to [F].


Dated: October 20, 1999

 

[Signed by Edward Frederick Kenny]
______________________________
  [Signed by Todd Follett]
_____________________________
Edward Frederick Kenny
  Counsel for the Law Society of
British Columbia