'Naive' Toronto cop turned lawyer helped scammers launder $1.7 million stolen from B.C. city

A former Toronto cop who resigned at 40 to study law “was willfully blind to fraudulent activity” when he helped scammers trying to launder $1.7 million, according to a decision from Ontario’s law society tribunal.

It heard that Ganesh Balaganthan, who spent 14 years in the Toronto Police Service before travelling to England to study law, failed to properly check out his first client, who hired him to draft a joint venture agreement aimed at laundering part of a $2.1 million haul that had been scammed from the City of Surrey, B.C.

“We conclude that the respondent was inexperienced and naive. He was also dealing with tragically difficult circumstances in his personal life that had some effect on his judgement,” tribunal chair Paul Aterman wrote in a recent decision from the three-person panel.

“Despite this, the respondent was not simply negligent. He was wilfully blind to the fact that he was being used as a tool in a money laundering scheme. He knew that the transaction was suspicious, but he turned a blind eye to it. He also failed to make reasonable efforts to find out the purpose of the retainer, and he used his trust account for purposes other than legal services.”

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The tribunal heard that in 2019, the City of Surrey was defrauded of $2.1 million.

“Using a fake email, the fraudsters tricked the city into routing the money to the wrong account. The money ended up in an escrow account operated by an Ontario paralegal. The fraudsters then tried to launder the money.”

Part of the scheme involved engaging the services of Balaganthan, who had recently qualified as a lawyer, said the decision dated Sept. 12.

“To advance this scheme, an individual named Sung Hyang approached the respondent, and asked him to draft a joint venture agreement. The four parties to the joint venture wanted to buy shares in a company.”

Balaganthan didn’t know Hyang, said the decision. “He was the respondent’s first client.”

His assignment was to draft a joint venture agreement for four parties who wanted to buy shares in a company and represent Hyang when the deal closed. His fee was $1,500 and Balaganthan was also to be paid one per cent of the value of the share purchase transaction if the deal went through.

It didn’t go through, however, and that should have ended Balaganthan’s involvement, said the decision.

“But then Hyang asked the respondent to recover the money that the parties to the joint venture agreement had assembled to buy the shares. The paralegal willingly transferred $1,738,287.10 into the respondent’s trust account. This was the first deposit into his newly-opened trust account. It was also the fraudsters’ attempt to launder the stolen money.”

The tribunal heard Balaganthan used that money to pay out several of the parties involved in the share transfer deal that didn’t materialize.

“This was a banking service that was unrelated to providing legal services. It enabled Hyang to route stolen funds through the respondent’s trust account,” said the tribunal.

As soon as bank investigators notified Balaganthan “that he was a participant in a money laundering scheme, he co-operated fully to assist in recovering the funds,” said the decision.

Balaganthan argued “he did not commit any misconduct.”

The tribunal heard that, during his time in the Toronto Police Service, Balaganthan “worked mostly in primary response units, dealing with street policing and crime reports as they arose.”

He didn’t have any “specialist experience or training in financial crime, fraud or money laundering,” said the decision.

The tribunal heard that, at the end of his time studying law in England, Balaganthan “was diagnosed with a heart condition that required an implant as part of the treatment. On his return to Canada in 2014, he was bedridden and depressed because of his health problems. He delayed completing his qualifying exams in the Law Society’s licensing process for foreign graduates until he recovered his health.”

After completing the exams, Balaganthan articled with a criminal lawyer, said the decision. “He had no experience of civil or corporate law.”

Balaganthan was called to the bar in June 2018.

“At this time, he received the devastating news that his eldest son had been diagnosed with terminal brain cancer. His son was 15 at the time. Fortunately, he is still alive, but there is no known cure for the cancer.”

Their youngest of three children also had serious health problems. “These included strokes and partial paralysis. At one point, both sons were on the same floor in the Hospital for Sick Children in Toronto.”

Balaganthan opened his own practice in May 2019.

“The basis for the respondent’s argument that he did not commit misconduct is that he was naive, inexperienced and distracted by the stress of his children’s illnesses. This led him to being duped by the fraudsters,” said the decision.

The tribunal accepted “that personal stress played some role in reducing his ability to critically analyze the situation he found himself in,” said the decision.

“However, there is no evidence before us that suggests he had lost the ability to exercise a level of judgment that would be expected of a reasonable practitioner in similar circumstances.”

The tribunal pointed out a dozen “red flags,” it said Balaganthan should have noticed about the deal.

“Taken together, these red flags paint a picture of Hyang seeking out the respondent and using a sham transaction to route stolen money through the respondent’s trust account. Hyang then convinced the respondent to spread the money around to various recipients,” said the decision. “This was an attempt to make the stolen money more difficult to trace and recover.”

The tribunal concluded that Balaganthan “knew that he was participating in a transaction that was suspicious. He chose not to make the inquiries that would have enabled him to conclude that he was part of a money laundering scheme. In other words, he was willfully blind to the obvious risks of working with Hyang, a fraudster. The Law Society has established that the respondent knowingly assisted in fraud.”

The tribunal heard “all but approximately $78,000 of the stolen $2.1 million was recovered,” said the decision. “The bank chose not to sue the respondent.”

Balaganthan will undergo a penalty hearing at a later date.

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