A pair of Toronto lawyers accused of embezzling nearly $7 million from real estate clients has been found in contempt of court for failing to hand over financial records and answer questions about where the money went.
Singa Bui and her husband Nicholas Cartel face penalties that could include fines or even imprisonment, and will likely also draw misconduct charges from Ontario’s professional regulatory body for lawyers, two experts in professional legal discipline said.
“Although they must know what happened to the funds, they have refused to provide this information,” Ontario Superior Court Justice William Chalmers ruled in late August.
“Instead of attempting to comply with the orders to the best of their ability, I find that the defendants have taken active steps to hide their finances and to frustrate the court’s efforts to determine what happened.”
It’s the latest development in a case that has underscored how anyone buying or selling a home — typically the most expensive transaction of one’s life — can be vulnerable to fraud by the very lawyers who are required by law in some provinces to handle the transaction, with scant guarantee of any protection from the legal profession itself.
In a phone call last week, Cartel told CBC News he thinks the judge’s decision is mistaken and he intends to challenge it.
“He ignored the facts,” Cartel said. “I’ve delivered all documents in my possession, delivered thousands of pages of real estate files… I will be bringing a motion to either address this, to have it set aside or varied in some regard.”
Trust account deficits
Bui and Cartel were the only partners at the now-defunct firm Cartel & Bui LLP, based in a smartly decorated loft space in Toronto’s Liberty Village neighbourhood.
Bui mostly handled home sales, while Cartel dealt with class actions and litigation.
At some point by 2022, cash started to go missing from the firm’s trust account, a forensic audit filed in court shows.
Lawyers’ trust accounts are tightly regulated by provincial law societies because the money in them doesn’t belong to the firm but to its clients.
The court-ordered forensic audit of that account found “possible inappropriate” payments such as $2,190 a month for child care and more than a million dollars in transfers to American Express cards, which were used for purchases at Christian Dior and Hermes, among other things.
Initially, the shortfalls were covered by new money coming in, but starting in February 2023, payouts to clients of their proceeds from real estate deals began to stall.
Cartel took out a $1.2 million mortgage on his and Bui’s family home. While he later testified under oath that the loan was to pay for repairs after “massive pipes blew up spewing a street’s worth of sewage into the house,” the forensic audit found that the money was in fact deposited into the Cartel & Bui trust account and used to cover shortfalls.
Then, in seven home sales last fall during which the firm acted for the sellers, it didn’t pay off its clients’ mortgages as it was supposed to, according to lawsuits by the buyers. It took the buyers’ money, paid out the home equity to the sellers, but held on to the rest, totalling $3.3 million, the lawsuits allege.
In perhaps the worst alleged embezzlement, some homebuyers who had agreed to buy a house in Toronto forwarded more than $2 million to Cartel & Bui in November toward the purchase. But within days, most of the funds disappeared from the firm’s trust account, the deal never closed and the homebuyers have not recovered the money.
Judge rejects husband’s denials
Cartel has repeatedly claimed that Bui managed the firm’s and their household’s finances and he had no knowledge of, or hand in, what was going on in their various accounts. He’s also repeatedly said that Bui has been ill since late November and was hospitalized with a mental-health condition in February, making it difficult or impossible for him to recover all their firm’s files or ask her what happened to the missing money.
In December, Bui said through her lawyer, in a letter to the Law Society of Ontario, that Cartel was “not responsible for the improper transferring of trust funds, nor is any other associate or employee of the firm.”
The judge addressed that directly in his contempt ruling, calling it “inconceivable” that Cartel doesn’t know what happened to the money and “inconsistent with common sense” that he wouldn’t have asked his wife about it.
CBC News was unable to reach Bui via email or through three lawyers who have represented her in previous hearings.
The judge will next have to hear submissions about an appropriate penalty for the couple, though in almost every contempt case, the violators can escape sanction and “purge” their contempt by complying with the original court orders.
Matthew Wilton, a Toronto litigator whose practice includes representing other lawyers in disciplinary hearings, said that in the worst-case scenarios, some lawyers held in contempt have been thrown in jail, but there are plenty of lesser penalties, such as an order to pay costs.
Cartel and Bui’s law licences have been provisionally suspended since April while the law society investigates their actions. The contempt finding doesn’t change their status, a spokesperson for the society said last week.
But it could strengthen the case for both of them to be eventually disbarred.
Justin Jakubiak, who represents lawyers and other licensed professionals in regulatory matters, said a finding of contempt against a lawyer is “incredibly serious” because it strikes at one of the core obligations of the profession. (Jakubiak works for the same Toronto law firm that is representing two plaintiffs against Cartel and Bui, but he has had no involvement in the case).
“Lawyers have to be seen to be respecting the legal process, respecting judges and the overall court process. So if a lawyer is not doing that, then how can they be expected to practise appropriately?”