TORONTO (Reuters) - Royal Bank of Canada is facing a C$40 million ($39 million) lawsuit after a Quebec judge ruled on Wednesday that victims of frauds carried out by Montreal financial adviser Earl Jones can proceed with a class action suit.
Jones was sentenced to 11 years in prison in February after being convicted of running a Ponzi scheme not unlike the one that resulted in criminal financier Bernard Madoff being given a life sentence in the United States.
Jones was found guilty of swindling investors by using funds invested by some clients to pay returns promised to others. A group of victims has sought to sue Royal, Canada’s largest bank, alleging that it played a role in the fraud by not being vigilant.
Quebec Superior Court Justice Robert Mongeon ruled that the class action -- which accuses the bank of “negligence and willful blindness” in not properly scrutinizing transactions Jones carried out at the bank -- can go ahead.
The bank did not oppose the motion seeking permission to sue.
“We’re confident in our position and we intend to present a robust defense at the merit stage of the proceedings,” Royal bank spokeswoman Gillian McArdle said. “We were deceived by Earl Jones, just as his clients were.”
Asked if a settlement was possible, she said the bank was reviewing all of its options.
According to the lawsuit, creditors have made claims of about C$70 million to the trustee overseeing the bankruptcy of Jones and his company.
Reporting by Cameron French; editing by Peter Galloway