Font expert exposes phony trust documents

In a successful motion made by the trustee of a bankrupt estate to access two properties held in a trust, the case turned on the testimony of a typology expert who showed the font used in the trust documents did not exist when the documents were allegedly prepared.

Font expert exposes phony trust documents
Breanna Needham, associate at Lax O'Sullivan Lisus Gottlieb, says a lack of credible evidence was also a significant factor in the decision.

In a successful motion made by the trustee of a bankrupt estate to access two properties held in a trust, the case turned on the testimony of a typology expert who showed the font used in the trust documents did not exist when the documents were allegedly prepared.

In McGoey (Re), trustees to the estate of former telecommunications CEO Gerald McGoey were successful in gaining a declaration that two of McGoey’s properties, which he said were in a trust for his children and his step children, were accessible to creditors.

The two properties, a farm in Caledon and a Muskoka cottage, were purchased in 2003 and 1994 respectively. McGoey said he created the trusts one year after each purchase.

The 1995 trust document for the cottage was written in the font Cambria, which was not available to the public until 2007, according to Thomas Phinney, an expert in design and typography who is frequently used in cases regarding allegedly forged documents in the U.S., the U.K. and Australia.

The font used in the 2004 document concerning the Caledon farm was Calibri, also unavailable until 2007.

“To the best of my knowledge, this is the first time a Canadian or Ontario court has found a document to be invalid based on the history or provenance of the font,” says James Renihan partner at Lax O'Sullivan Lisus Gottlieb, who acted for the trustee.

Michael Kestenberg and Thomas Slahta of Kestenberg Siegal Lipkus LLP acted for Kathryn McGoey and Gerald McGoey acted on his own behalf. Both Kestenberg and Slahta said they did not want to comment on an ongoing case.

Renihan says using font experts is not standard operating procedure when dealing with crucial documents. He says suspicions were raised when McGoey produced the documents protecting his properties, based on his conduct in previous litigation, says Renihan.

“Jerry McGoey had been found in previous decisions to be less than totally honest and so the creditors had suspicions about these trust documents and they came as quite a surprise. And so, they wanted to look into the font issue,” he says.

Gerald McGoey held senior executive positions at Bell Canada Inc. and other telecommunications firms and became CEO of Look Communications in 2004. He was also CEO of Look’s parent company Unique Broadband Systems and was also vice-chairman of the board of directors. In 2008, Look was in financial trouble and began a court-supervised auction of assets, receiving $80 million for their licensed broadband spectrum. The company’s board then approved $20 million in compensation to directors and officers, of which McGoey was given $5.6 million.

In 2009, UBS’s shareholders reacted angrily to the deal and McGoey and other directors were removed from the board. McGoey resigned as CEO from both entities. In 2011, he was sued for breach of fiduciary duty, which included the issue that part of his compensation package was justified on shares of the company being worth $.40 each, which they were “nowhere near,” says Renihan.

On June 1, 2017, a Superior Court found McGoey liable for $5,565,696, plus $200,000 for legal fees. McGoey then filed for bankruptcy.

In the subsequent motion, heard Nov. 5, 2018 by Justice Michael Penny, the trustee in bankruptcy KSV Kofman Inc., applied under the Bankruptcy and Insolvency Act for a declaration that the cottage and farm were accessible to creditors. Penny granted the trustee’s declarations finding the “sham trusts” were “fraudulent conveyances, done with the intention to defeat creditors,” he wrote in the decision.

But the finding concerning the date of the font’s creation would not have been enough on its own, says Breanna Needham, associate at Lax O'Sullivan Lisus Gottlieb, who also acted for the trustee. There would still have been a window between 2007 and 2010, where the documents could be alleged to have been legitimately created but improperly dated and could have established a certainty of intention to create a trust, which could be sufficient, she says.

Even though McGoey was not bankrupt until 2017, by 2010 he could foresee that, given his removal as CEO and board member and the litigation stemming from his compensation package, that he would be sued and be in financial trouble, meaning if he then tried to transfer his assets, it would be seen as an unjust conveyance, Renihan says.

“The issue is not when he becomes bankrupt… The issue is, when did he recognize that he was in serious financial jeopardy and had a reason to try and squirrel away assets and hide them from his creditors?” he says. “Because the financial jeopardy he was in gives rise to an assumption or inference that any transfers are unjust preferences or conveyances, permitting you to undo the transaction and bring them back to Mr. McGoey.”

Penny states in the decision that there were several other “red flags” regarding McGoey’s involvement with the properties, including that there was no record of the trusts with the Bank of Montreal which financed the purchases, no registration of the trust on title, the money advanced by the bank was “co-mingled” with the McGoey’s personal funds and “the only document establishing the existence of the trust is a single page created by Mr. McGoey without any input from lawyers or accountants, even though he had regularly used legal and financial professionals, including for the creation of other trusts.”

“Justice Penny found that the totality of the circumstances coupled with the, we’ll say, less than credible evidence of Mr. McGoey, show that not only were the documents backdated or falsely dated, but the trusts, in any event, were shams,” Needham says.

McGoey can now appeal the decision.

The McGoey’s are not the first to be exposed by the Calibri font. It also brought down the Prime Minister of Pakistan in 2017. The 2016 Panama Papers revealed that family members of Prime Minister Nawaz Sharif were linked to companies which owned properties in London. His daughter Maryam Sharif tweeted an image of a disclosure form dated from 2006, which was intended to show she didn’t own the properties. The font in the document was Calibri, not available until the next year.

Pakistan’s Supreme Court found Sharif lied to Parliament and the judiciary and was unfit for office. Sharif resigned.

Alyssa Tomkins is partner at Caza Saikaley in Ottawa and says this creative challenge of the document represents what the future may have in store. With tools like smart contracts, blockchain and digital signatures and as more of ours lives and work is carried out digitally and with more sophisticated technology, there will be new vulnerabilities and strategies available to lawyers to challenge authenticity, with more complex expertise required .

“How did they even think to retain this expert? It’s brilliant,” she says. “That’s not the type of expertise that we’re used to.”

“In other cases I’ve seen handwriting experts, the idea of challenging the authenticity of a document is not unique but this is a very clever way to go about it and not one I’ve seen before.”

Editor's Note: Comments from Caza Saikaley added at 9am on January 18, 2019.

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