Alberta investors and others from across North America who lost millions of dollars when they allegedly fell victim to a Ponzi scheme hope to recoup their losses through a class-action lawsuit that could reach $100 million.

Bill McNally, a Calgary-based lawyer representing the plaintiffs, says that, so far, the clients who have joined the lawsuit have lost about $4 million. All told, the 1,000 or so investors are believed to have lost upward of $100 million since the company started operating in 2001.

The claim alleges that Alberta-based HMS Financial told investors they were investing funds in major projects worldwide that would obtain a high rate of return. Investors were often shown a business plan setting out the investment objectives for HMS.

"HMS was really an umbrella corporation for a number of aggregator companies, and most of the money funnelled up the chain to HMS. And along the way there were commissions back to some of the people who solicited others to participate in the scheme," McNally told Business Edge in an interview.

He said the principals behind HMS, Harold Stark and Robert Fyn of Linden, about 60 kilometres northeast of Calgary, appear to no longer live in Canada.

Last year, the Calgary RCMP commercial crime section raided HMS with a search warrant that alleged the enterprise was a prime bank instrument (PBI) fraud and Ponzi scheme.

A PBI fraud, also known as a high-yield investment fraud, offers high rates of return based on the yields of imaginary banking instruments supposedly traded in secret markets around the world. A Ponzi scheme is a fraud in which investors are paid extremely high interest rates.

The statement of claim names dozens of other defendants, including Garth Bailey, a lawyer who represented HMS.

It is alleged that investors were told that their investments were protected by bonds or cash held by HMS lawyers, including Bailey, but there "appears to have been no valuable security of this kind for the funds provided by investors, and HMS has defaulted in its payment obligations," a news release by plaintiffs' lawyers stated.

Bailey did not respond to a request for an interview.

According to the information posted on its website, the Law Society of Alberta suspended Bailey last March "because Garth Stanley Bailey's conduct is the subject of proceedings under Part 3 of the Legal Profession Act and the benchers considered his suspension warranted in the circumstances."

(John Ludwick can be reached at ludwick@businessedge.ca)