Former Scotiabank Analysts Sue Bank Over "Cavalier" Firings
Two brothers who worked as stock analysts for Bank of Nova Scotia are taking the financial institution to court. Michael Doumet and George Doumet lost their jobs in 2024. The bank fired them for allegedly breaking its personal trading policy. Court documents and informed sources reveal these terminations also resulted in three compliance employees being dismissed.
Trial Set for Next Year
A trial is scheduled for next year. The Doumet brothers are fighting Scotiabank's allegations. They claim the bank unjustly dismissed them. They say the company treated them in a "cavalier" manner. Their lawsuit seeks justice for what they call wrongful termination.
The brothers' departures followed months of internal review. Scotiabank's compliance department discovered Michael Doumet frequently traded one small-cap stock. He also maintained regular communication with that company's chief financial officer. These findings came from court filings and an anonymous complaint sent to the bank's whistleblower program.
Bloomberg News obtained a copy of the internal complaint made in January 2024. Scotiabank stated in court filings that both Doumets were fired for breaching bank rules. The violations included the personal trading policy.
Internal Probe and External Investigation
Scotiabank's compliance department started an internal probe. The bank then hired law firm Torys LLP to conduct its own investigation. Court filings show this external review followed the internal examination.
Within one week of the Doumets' firings, Scotiabank let three senior compliance employees go. Four people with knowledge of the matter confirmed this development. They requested anonymity while discussing confidential information. Two sources said the compliance staffers failed to escalate trading concerns. This failure led to their dismissals.
Broader Compliance Scrutiny for Canadian Banks
These dismissals and resulting litigation arrive at a sensitive time. Canadian banks face greater scrutiny over compliance controls. This increased attention follows Toronto-Dominion Bank's historic US anti-money-laundering settlement.
Scotiabank itself paid $127.4 million in 2020. The settlement resolved allegations by US authorities. Officers in the bank's compliance department failed to stop precious-metals traders from manipulating markets. This occurred during a US gold-spoofing scandal. Bloomberg reported last month that Scotiabank now plans to revive its shuttered metals-trading desk.
Scotiabank spokesperson Katie Raskina declined to comment on the Doumets and other dismissed employees. She cited ongoing litigation in the matter. Michael and George Doumet did not respond to multiple requests for comment.
Swift Firings and Career Moves
Michael Doumet worked for Scotiabank for thirteen years. He covered industrial stocks from the company's Montreal office. His total compensation reached about C$400,000 ($290,000) in 2023. Scotiabank terminated him for cause in May 2024. He revealed these details in an application filed with the Superior Court of Quebec in Montreal.
His brother George Doumet wrote research on Canadian consumer companies. He earned about C$490,000. The bank let him go the same day. George provided this information in his own court application.
The firings happened quickly. The brothers attended separate five-minute meetings with their supervisor Jeff Fan. He is head of equity research at Scotiabank. Fan flew from Toronto to Montreal. He handed them signed termination letters. A transcript of Fan's deposition included in the case confirms these details.
Michael Doumet covered waste-management company stocks for National Bank of Canada from March until December. He then resigned from that role. A spokesperson for National Bank confirmed this timeline. George Doumet now works at investor-relations firm LodeRock Advisors Inc. His LinkedIn profile shows this current position.
The two brothers sued Scotiabank for wrongful dismissal in August 2024. They seek a combined C$1.65 million in severance pay and damages. The case is scheduled for a five-day trial starting in September 2027.
Personal Trades and Communications
The terminations trace back to personal trades made by Michael Doumet. A whistleblower complaint and a November 2024 deposition of Jeff Fan reveal regular communication between Doumet and James Lorimer. Lorimer is CFO of Data Communications Management Corp. This small document-management company is based in Brampton, Ontario.
Email correspondence included with the whistleblower complaint shows routine compliance screening flagged Doumet's frequent trades of DCM shares. Further internal monitoring revealed a large portion of his personal portfolio contained DCM stock. The whistleblower complaint estimates Doumet made a profit of C$1 million on these shares over one year through August 2023.
A search of the analyst's emails surfaced exchanges between Doumet and Lorimer. They discussed accounting decisions made by DCM. In one case, Doumet asked for clarification about whether an earnings figure included certain lease adjustments. The analyst and CFO also swapped comments about Doumet's investment performance in DCM. Emails show they made lunch plans and arranged phone calls.
Email Exchanges Revealed
"You shouldn't have sold last week," Lorimer wrote Doumet in one email. He added a smiley-face emoji.
"Lol - you've made me so successful that I have to think about risk," Doumet replied. "Old me wouldn't have done that lol."
On the same day, Doumet emailed Lorimer to compliment him. He seemingly implied he would soon become wealthy enough on his DCM investment to quit his job. "Nice quarter. A few more and I might be sending you this from email from gmail account."
Lorimer did not respond to a request for comment. DCM spokesperson Paul Fitzhenry provided an emailed statement. "DCM is not a party to this litigation but we have concluded there was no material, nonpublic company information provided in any of our communications with the plaintiffs."
Compliance Department Response
Senior employees in Scotiabank's compliance department did not appear concerned about the communications and trading activity. Routine monitoring initially flagged these activities. One compliance staffer suggested in an email that the conversation was normal "banter." Another employee wrote in an email that he reviewed the correspondence. He concluded he wasn't worried about the sharing of material nonpublic information.
The second compliance employee said in the email that concerns about how the conduct reflected on Scotiabank could be addressed by Jeff Fan. Fan was Doumet's manager.
Scotiabank declined to comment on Fan's behalf.
External Probe and Additional Violations
After the compliance department closed the matter in January 2024, the whistleblower complaint prompted Scotiabank's internal legal department to start its own investigation. Court filings confirm this development. The bank later hired Torys to lead an external probe.
Fan had been contacted by the compliance department earlier in the year. Scotiabank's in-house lawyers and Torys partner Andrew Gray then interviewed him.
During these reviews, another issue emerged. Both brothers got married after starting their jobs with the bank. They failed to register their wives' trading accounts as related-party investment accounts. Court filings document this oversight.
The brothers both claim in their lawsuits that Scotiabank provided no details about the actual reason for their termination. They say the bank left them "to surmise that the cause relates to an inadvertent and unintentional failure" to register their wives' investment accounts. Originally filed separately, a judge combined their cases in April.
Bank's Defense and Manager's Testimony
In a brief written defense to Michael Doumet's claims, Scotiabank alleged he "was terminated for serious reasons." These included "serious breaches of his employment duties and policies of Defendant, including notably Defendant's Personal Trading Policy." The bank said it conducted "a thorough investigation" before terminating Doumet's employment "in a proper and reasonable manner."
Scotiabank used the same wording in response to George Doumet's claims.
Fan answered questions from a lawyer for the Doumet brothers about his reasons for firing them. He cited their failure to promptly disclose their wives' investment accounts as violating the bank's trading policy. According to the transcript of Fan's deposition, when asked about Michael Doumet, Fan said, "There were aspects related to DCM that violated the personal-trading policy as well."
Fan said he didn't consider any disciplinary actions short of termination. "Because the violations were serious," he explained.
