Credit union hired fired bank worker

Kirchner, who tendered his resignation to Kawartha Credit Union on Friday, could not be reached for comment, but his Toronto lawyer Symon Zucker said his client will be fighting the allegations. "We deny that he was the so-called inside man on these things. We have not filed a statement of defence but it is being prepared now," Zucker said. "He is fighting the allegations. In the meantime, he has resigned from his job in Peterborough."

The Peterborough Examiner
November 27, 2010

Credit union hired fired bank worker
Galen Eagle

Peterborough's Kawartha Credit Union will be investigating its hiring practices after employing a senior government bank official one month after he was fired for an alleged role in a multi-million dollar conspiracy to rip-off federal loan money.

The Business Development Bank of Canada (BDC) terminated Paul Kirchner with cause in May 2009, claiming in a lawsuit that he was a vital cog in a loan-approving scam.

He approved at least 35 bogus loans on behalf of the Crown corporation in a conspiracy with a group of Toronto-area fraudsters, BDC claims.

Ranging in value from $50,000 to $1 million, BDC claims the loans total as much as $16 million. They were approved while Kirchner was a senior account manager at the Scarborough branch between 2006 and 2008, BDC said.

"BDC alleges that Mr. Kirchner conspired and colluded with various external parties in connection with the fraudulent scheme," the bank released in a written statement.

"BDC is claiming damages against Paul Kirchner for fraud, conspiracy to defraud, deceit, fraudulent misrepresentation and procuring loan advances based on false pretences."

The allegations, which are part of a lawsuit filed in Toronto court in October 2009, have not been proven in court.

Kawartha Credit Union CEO Robert Wellstood said the credit union was not aware of the allegations against Kirchner. Nor was the credit union aware Kirchner had been fired with cause when he was hired locally in June 2009 as a commercial accounts manager.

Wellstood said the credit union undertakes an investigation when someone is hired and he's not sure why Kirchner's firing the month before was not uncovered.

"I'm really not sure how to answer that question," he told The Examiner. "We do a full investigation with any employee when we hire them and that investigation did not uncover any of these allegations."

The bank did verify references Kirchner provided during his interview process, Wellstood said.

Kirchner, who tendered his resignation to Kawartha Credit Union on Friday, could not be reached for comment, but his Toronto lawyer Symon Zucker said his client will be fighting the allegations.

"We deny that he was the so-called inside man on these things. We have not filed a statement of defence but it is being prepared now," Zucker said. "He is fighting the allegations. In the meantime, he has resigned from his job in Peterborough."

A civil suit won't likely be Kirchner's only problem. The RCMP is investigating the alleged frauds and Zucker anticipates criminal charges to be laid against his client.

"There is a good possibility (charges will be laid). There is a criminal investigation," he said. "At this time we are working closely with both the BDC and with the RCMP in trying to sort out matters."

As a Crown corporation, BDC loans money from government coffers. The alleged fraud involved the fraudulent procurement of multiple commercial loans for numerous companies, some of which were real companies in need of capital, others of which were shell corporations with no genuine business, BDC claims.

The fraudulent loans were made to appear as loans to purchase equipment over which BDC would have security but in fact either no equipment was acquired or the equipment acquired had a substantially lesser value than had been represented to BDC, the lawsuit alleges.

In late 2008, BDC said it discovered certain irregularities in connection with loans initiated and administered by Kirchner, who had been working at the bank since 2004.

BDC suspended Kirchner in January 2009, initiated an investigation and fired Kirchner May 2009.

Wellstood said there is "absolutely no" indication Kirchner was engaging in any fraud at Kawartha Credit Union in the 17 months he worked there.

As a commercial accounts manager, Kirchner was responsible for interviewing loan applicants, doing credit investigations and making recommendations to advance a particular loan or not.

The credit union was surprised to learn of the allegations, chronicled in a Toronto Star article Friday, Wellstood said.

Kawartha Credit Union will be reviewing the files Kirchner oversaw in Peterborough, but the credit union's customers shouldn't have anything to fear, Wellstood said.

"I don't believe that our members have any reason to be concerned about that," he said.

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