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, well-known 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 court-ordered 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 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 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 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.
