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Title: Bank Error in Your Favour: Collect $17-Million

Brokerage Mistake Leaves Investor Disgusted

JOHN PARTRIDGE The Globe and Mail Tuesday, April 11, 2000

Toronto -- Mark Baily should make it into Ripley's with this one.

Believe it or not, Bank of Nova Scotia's discount stock brokerage accidentally put $17.1-million of somebody else's money into the Toronto doctor's account last year. Believe it or not, the firm took four months to figure out it had screwed up and sort out his account.

The kicker? Scotia Discount Brokerage then had the nerve about two months ago to issue a tax form saying he'd earned $753.42 in taxable interest income on the $17.1-million that wasn't his to start with.

Finally yesterday, after 14 months, the embarrassing series of goofs drew to a close when Dr. Baily, 48, opened his mail to find another tax form from the brokerage cancelling out the first one.

"But there was no letter of apology, no nothing," the family physician said disgustedly, adding he plans to have "nothing further to do" with Scotia Discount.

Stories about banks and brokers misplacing customers' funds are a dime a dozen. But they usually involve wrongful debits, and rarely involve as many missteps or amounts as high as in this case.

In fact, Robert Pitfield, executive vice-president of wealth management for Scotiabank, to whom Scotia Discount reports, was red-faced about the goof yesterday, acknowledging that he hasn't come across anything even close.

Calling it a "horror story," he said: "This is a wild and weird thing. Things went wrong, from posting the entries to mistakes in reversals to a customer simply not being treated very well at all.

"I'm going to call the customer and tell him I'll contribute $753 to any charity of his choice and write him an apology. It's a situation that's very unfortunate."

Dr. Baily has been fighting for weeks, lately with the help of the manager of the Scotiabank branch he uses in Thornhill, Ont., where he lives, to get the brokerage to acknowledge that, having erred in the first place by depositing the $17.1-million in his account, it had done so again by issuing the T-5. However, until he received the cancellation form yesterday, his calls had gone largely unacknowledged.

So had faxes marked "urgent" that his branch manager sent to senior officials at the brokerage in an effort to resolve the matter.

Mr. Pitfield attributed the debacle to "stresses" on the discount brokerage system at large, flowing from massive increases in consumer stock trading over the past couple of years. This has led to industry-wide, customer-service problems, not the least of which are huge backlogs of uncompleted transactions and other work.

He also said a "massive, massive cleanup" has been under way at Scotia Discount for the past two to three months and that the firm is in the process of instituting "world-class" customer service standards that will mean "we won't have this happen again. Ever."

Dr. Baily's saga began early last year, when he opened an account at Scotia Discount so that he would be able to do some on-line trading.

He got a shock when he received his first monthly statement for the account, for February. He discovered that even though he hadn't yet used the account, the brokerage had credited it with three guaranteed investment certificates, one for about $2-million, another for about $5-million and a third for about $10-million.

His curiosity not surprisingly aroused, he recalled yesterday, he promptly called Scotia Discount and a representative confirmed the figure and told him that if he needed to use any of the funds, " 'Just let us know and we'll send you whatever you want.' "

Dr. Baily said he also immediately called the then manager of his Scotiabank branch in Thornhill -- where he and his family have banked for 17 years -- and told her about the magic millions. As well, he told his lawyer and several friends, "so that nobody could say, 'Well, how come you didn't tell us? You were going to try and scam us.' "

However, he said he also told them that, although he did not plan to touch the money, he wanted to see for curiosity's sake "how long it takes for these bimbos to pick up on" their error.

Eventually, in May, he got a call from someone at the discount brokerage saying the firm had spotted the problem and planned to take back the $17.1-million.

Pressed for an explanation, the brokerage representative blamed the then manager of Dr. Baily's bank branch. "Of course, when I told her that, she was livid with rage . . . because she said she had nothing to do with it," he said.

Dr. Baily said he thought that was the end of it, until he received the T-5 slip earlier this year. He also figures Scotia Discount was fortunate that someone such as he ended up as the victim of the initial $17.1-million error. "If I wasn't a doctor with parents and kids and a whole life here, if I was some member of the underworld, I would have been tempted to take off with it somewhere."

As for precisely how the screwup really did occur in the first place, he still does not know -- and neither, apparently, does Scotiabank.

"In actual fact, we're still working through that," Mr. Pitfield said.

http://www.theglobeandmail.com/gam/National/20000411/UMILLN.html

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-- (Dee360Degree@aol.com), April 11, 2000