Regina vs. Katz, Swanbrough

Real Estate
Investor Fraud

Fraud in a law practice

In this case, Katz and Swanborough operated a successful law practice for many years, but financial problems arising in their related mortgage company, Yorkfield Agencies, led to fraud charges in 1980. ‘Yorkfield’ was responsible for creating Hess Village located in Hamilton, Ontario where older homes were converted into shops, restaurants and galleries.

This case was particularly interesting from the perspective of studying human behavior within a fraud context. Clearly, from the use of funds, one could study the mindset of the accused as the business pressures built, not only at the start of the fraud, but also as the pressure began to threaten the existence of not only ‘Yorkfield’ but also their law practice.

Because the accused were prominently involved in society, the public exposure was painful and one could understand how difficult it would be to admit defeat, ‘hoping in hope’ to avoid any disclosure.

Prosecutor Douglas Hunt said their abuse of client’s money was “a callous and fragrant breach of trust”. Judge George Ferguson stated “This was indeed a major operation carried out over a long period of time involving a lot of money and continual scheming or managing”. He continued, “The Hess Village project served as a means of building up Swanborough’s ego as well as feeding the financial greed and the lifestyle of both Swanborough and his partner (Katz) and became a means to steal from his clients”.

Swanborough’s explanation: “I apologize to anyone I have hurt—I regret my mistakes and I should have known better.”

The ‘hope in hope’ syndrome (a realization that one has no exit strategy from the fraud scheme) is common in a fraud environment and this case is a lesson for a forensic accountant to truly understand the human issues – in particular, to know the answer as to why honest people steal.