Shocking details released in Blott case

 By Kathleen Martens
 APTN Investigates

WINNIPEG – Did a disgraced Calgary lawyer resign or was he fired?

The answer was learned today with the release of a report by the Law Society of Alberta (LSA).

The organization that regulates the conduct of lawyers has been under fire for letting David Blott resign last month while under investigation for misconduct.

Former Blott clients slammed the move, claiming it was not the same punishment as disbarring him.

The LSA’s resignation committee seems to agree, as it writes in the report: “In some cases – as perhaps such is the case in this matter – disbarment is not of sufficient consolation to those who have been wronged or hurt by the lawyer’s conduct.”

“Unfortunately, however, our role as a regulator of our profession does not extend to awarding damages for inappropriate conduct or to impose harsher penalties against a member as might be available in a criminal prosecution.”

The committee members say they could have disbarred Blott if their investigation led to a disciplinary hearing. But Blott offered to resign instead.

“In this case, [Blott] has said, ‘I will agree, effectively, to resign on conditions that equate to disbarment.’”

“Some will, no doubt, suggest this is too little consequence for the conduct imputed to the member. To this, we would affirm that from the point of view of the LSA, it is the most serious consequence that we have the authority to impose.”

The LSA had already suspended Blott for not paying his annual dues.

The committee says there are “other courses of retribution for those hurt by Mr. Blott through criminal or civil actions – but those efforts would be outside of the purview of the LSA.”

Those Blott ‘hurt’ include nearly 5,000 former residential school students across western Canada. They are, in fact, suing Blott in a class-action suit for the way he treated them and mishandled their compensation cases.

Blott has said his firm only worked on these compensation cases. At its height, his company employed nine lawyers and earned nearly $20 million from the Independent Assessment Process (IAP). The program was set up as part of the government’s effort to apologize for the abuse inflicted on students at its nearly 100, now-defunct Indian Residential Schools.

Officials overseeing the IAP got Blott kicked out of the program two years ago for charging excessive fees and up to 60 percent interest on improper loans. The Law Society’s resignation committee used some of the findings of that $3.5 million investigation to reach its conclusion on Blott as APTN Investigates reported 3 years ago.

“The tragic reality, however, is that what started as an effort at reconciliation and righting of wrongs, under Mr. Blott’s direction turned into what can only be described as a factory of gross self-interest, where victims of the residential school system were, effectively, re-victimized and treated less like human beings and more like cattle,” the report says.

“They were, in some respects, again dehumanized by a process where the ultimate goal appeared to be making as much money as possible with the least amount of personal attention.”

The disrespect was obvious, the committee adds, because lawyers are not above the law and should treat all clients equally regardless of their race, gender or social position. In fact, these clients were deserving of extra attention, the report continues, because they were vulnerable victims of physical and sexual abuse.

“For this, Mr. Blott, you brought the legal profession in to the worst form of embarrassment.”

Blott is now banned from practising law in Alberta or elsewhere in Canada. He was ordered to pay $60,000 by the end of 2016 to offset the LSA’s $215,000 investigative bill. Blott must pay the balance if he re-applies for his licence, as well as the deductible on any claim paid by the LSA’s insurer.

Further, the LSA is sending its findings to the police for potential criminal charges, saying the double-digit interest Blott charged survivors on improper loans were well above legal rates.

Blott, meanwhile, agreed to a statement of facts but didn’t apologize.

“In order to avoid a lengthy hearing into the merits of my conduct, avoid inconveniencing a significant number of witnesses, and to bring these long outstanding matters to conclusions, I have elected to apply to resign.”

Some of the agreed-upon facts are:

  • Blott used the services of two non-lawyer companies – Honor Walk Ltd. and Residential Schools Healing Society – and their form-fillers to solicit clients and process their claims.
  • Those companies were operated by then-Calgary entrepreneur Thom Denomme, who met Blott in 2005.
  • They charged survivors for their services and, in violation of the IAP, took the money straight from the compensation payout.
  • Using their services implied hiring Blott as their attorney.
  • File administration was done by a third company – Hands-Free Office Systems – run by Denomme’s girlfriend Jennifer Mackenzie, then of Bragg Creek.
  • Employees of all four companies worked out of each other’s offices.
  • Denomme directed form-fillers to stick to certain ‘harms’ Blott said were commonly accepted by adjudicators of the claims.
  • Blott paid Denomme $200,000 a month, amounting to more than $6 million through 2011.
  • Blott lawyers failed clients in most areas, especially when they reviewed applications over the phone instead of in-person and submitted claims.
  • Claims were altered, submitted late and sent in even if clients had died.
  • Documents were pre-witnessed, signatures were cut and pasted onto forms, and wrong dates were used.
  • 1,159 applications were found in storage that clients believed had been submitted.
  • 182 applications were labelled Do Not Qualify while, in fact, some of them did.
  • Four times Blott told clients their claims were rejected by the government when, in fact, it was he who rejected them.
  • Blott charged the highest fee allowable under the IAP of 30 per cent in each case.
  • Clients could not reach Blott & Company lawyers by phone.
  • Blott handled 380 loans for 77 clients contrary to third-party rules in the IAP.
  • 10 lenders loaned the principal amount of $3.3 million.
  • Three of the main loan companies were Settlement Lenders of Edmonton, Bridgepoint Financial of Toronto and Funds Now of Calgary, operated by another friend David Hamm of Calgary.
  • Hamm would sell big-screen TVs and laptop computers to clients from their loans.
  • Hamm received a 20 per cent finder’s fee on each of his loans.
  • Blott’s brother invested in Funds Now.
  • Interest fees on loans ranged from 19.95 per cent to 29.95 per cent annually or between $50 and $500 monthly, and deducted from compensation awards.
  • The fee charged by Funds Now increased the interest to exceed a criminal rate of interest that exceeds 60 per cent annually.

Blott said he doesn’t agree with all of the findings but accepts he could have done some things differently. “Certain actions may be seen as contrary to the spirit and letter of the Code of Conduct and other applicable rules of the LSA.”

He says he closed his practice, severed the relationship with Honor Walk, and reached an agreement with the government of Canada to repay the costs of the IAP’s $3.5-million investigation.

Executive Producer / Ottawa

Todd Lamirande is Red River Metis. Todd first joined APTN in 2000 as a writer - researcher. He went on to be a videojournalist based in Vancouver. Todd has hosted three programs for APTN News and Current Affairs: the national news, Investigates and Nation to Nation.