Lawyer avoids discipline over work with fraudster husband while his law licence was suspended

Margaret McCarthy billed for legal work done by John Findlay after he lost his licence for stealing almost $2 million from trust funds

A Brantford, Ont. lawyer who helped her soon-to-be disbarred husband perform legal work will not face formal disciplinary proceedings after a Law Society of Ontario committee ruled her conduct was adequately dealt with at a regulatory meeting.

Margaret McCarthy and John Findlay were previously partners in law as well as in marriage at their firm Findlay McCarthy LLP, before Findlay’s licence was suspended with his consent in mid-2017 for his role in the misappropriation of nearly $2 million from a class action settlement fund.

Findlay was ultimately disbarred in May 2019 and later imprisoned after pleading guilty to charges of fraud and breach of trust in relation to the missing money.  

However, according to information provided by the LSO, McCarthy took help from Findlay in her legal practice and assisted him in the provision of legal services in the period between the suspension of his licence and its final revocation.

McCarthy allowed him to run name searches and file a corporate document, before billing the work through her own practice, says a notice published by the regulator.

“She also knew he was drafting legal documents, incorporating companies, and assisting in preparing material for a court motion,” the notice adds.

The LSO concluded that McCarthy breached Rule 7.6.1 of the Rules of Professional Conduct, which bars facilitating the practice of law by an unauthorized person. In addition, she ran afoul of Rule 7.6.1-1, which prevents lawyers from associating with suspended or disbarred lawyers without the express approval of the Law Society Tribunal.

Still, the LSO’s proceedings authorization committee determined that a regulatory meeting – used to settle matters where a licensee’s conduct must be addressed, but formal discipline proceedings are not warranted – was appropriate in McCarthy’s case after she acknowledged her professional obligation to prevent the unauthorized practice of law.

“The presiding members of the Committee concluded that, having addressed with the Lawyer the conduct that gave rise to the regulatory issues, there would be no further action regarding this matter,” the notice concluded.

Findlay had already served a two-year suspension between 2001 and 2003 for a less spectacular misappropriation of about $75,000, long before his legal troubles escalated. But the roots of his disbarment can be found in a major professional success, according to Law Society Tribunal decisions in his case.

Acting as class counsel, Findlay helped around 700 residents of a controversial Caledonia housing project reach a $20-million settlement with the provincial government and the Ontario Provincial Police over property damage and business disruption caused during a reclamation effort by members of a local First Nations community.

Following the settlement in 2011, the tribunal decision says Findlay McCarthy LLP received the entire $20 million in trust, with Findlay himself handed responsibility for the distribution of the funds to class members. A judge approved a payment to the firm of $3.4 million in fees and disbursement for its work on the file, with the rest of the money invested while waiting to be claimed. Any remaining funds were to be repaid to the province under the compensation plan.

A court also ordered Findlay to hold a reserve fund of more than $1.5 million for two years after the final distribution under the plan, but the LSO decision ordering his disbarment says Findlay misappropriated almost $2 million between 2012 and 2014.

“He began stealing in a systematic way, moving money from the fund to his personal accounts,” the panel concluded. “He covered up his transactions and knowingly misled the court to believe the trust fund was intact. He was hopeful that he would have time to generate interest that he could use to pay back the initial settlement fund amount to be held in trust.”

Things came to a head in May 2017, when Findlay wrote a letter reporting himself to the LSO, telling the regulator that neither his wife nor the fund administrator had any idea that he had “used the hold back funds” and “was not able to replenish” them. The lawyer agreed to an order suspending his licence on an interlocutory basis days later, and remained suspended until his disbarment.

In its decision confirming the revocation of Findlay’s licence, the disciplinary tribunal also ordered him to reimburse the law society’s compensation fund for any money paid, up to a total of $1.75 million – the amount that should have been available for distribution to class members. By the time of the April 2019 hearing, the fund had already received 195 claims worth $1.8 million in aggregate, although they remained undetermined at that stage.

According to a Brantford Expositor report on his sentencing, Findlay received a two-and-a-half-year prison term in August 2019 after he pleaded guilty to charges of fraud and breach of trust arising out of the incident. By the time of his arrest, the newspaper said that he had repaid $50,000 as part of his restitution efforts.

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