Ontario Bond Scandal

The Ontario Bond Scandal was an alleged scandal that affected the government of Ontario in 1924 and 1925.[1]

Ontario had been governed by the United Farmers of Ontario led by Ernest C. Drury since 1919. In 1920, when Peter Smith was the Ontario Treasurer, the UFO government contracted with Aemilius Jarvis to acquire and retire three series of previously issued Succession Duty free bonds. Four years later in 1924, after the UFO government had fallen and a new Conservative government led by Howard Ferguson had been elected, it was alleged that Smith and Jarvis had conspired with Andrew Harvey ("A.H.") Pepall, a close friend of Smith and the Ontario government agent for the deal, to inflate the price paid for the bonds and to split the excess profit. An inquiry discovered that the Jarvis firm had earned some £130,000 (equivalent to £7,552,181 in 2021) pounds in profit from the arrangement. A very large proportion of that had gone to A.H. Pepall as a commission and a portion of the commission had found its way into Smith's bank account. Criminal charges of theft, fraud and conspiracy to defraud were brought against Smith and Jarvis. A.H. Pepall who was then living in California, was not charged, but Jarvis's son and Andrew Pepall's brother, Harry Pepall, both of whom worked at the Jarvis firm, were.

The only hint of any impropriety before this had arisen in 1922 when a legislative committee had questioned why A.H. Pepall, a close friend of Smith, had been paid the then large sum of eighty dollars per day for the trip, in which he seemed to have done little actual work.

In October 1924 Smith, Jarvis (father and son) and Harry Pepall went on trial. The verdicts were handed down on October 24, 1924. All four were found not guilty of theft and fraud. Harry Pepall and the younger Jarvis were also found not guilty of conspiracy. But in an illogical twist Jarvis and Smith were found guilty of conspiracy to defraud the government. Jarvis was sentenced to six months in prison, Smith received three years.[2] They were each joint and severally liable to pay a fine of CA$600,000 (equivalent to $9,440,000 in 2021), then the largest fines ever imposed in the British Empire. The fines were reduced on appeal and each was made separately liable for their portion.

The next year Andrew Pepall, who was living in California was extradited. At that time conspiracy was not an extraditable offence, so he could only be brought back to Canada to face charges of theft and receiving the proceeds of a criminal conspiracy. He was found not guilty of these in late 1925.

Aemilius Jarvis -a prominent businessman and sports figure- was convicted on the charge of conspiracy despite the fact that he saved the provincial government millions of dollars in the retirement of the Succession Duty free bonds. On being released from jail in six months, he spent the remainder of his life protesting his innocence [3] which was proven when he took the stand, in the trial of Andrew Pepall. He was cleared in the eyes of the public, although his conviction was never overturned or a pardon granted by the courts [4] The Premier of Ontario (from 1919–23), Ernest C. Drury, labelled Jarvis "Canada's Dreyfus," a reference to Alfred Dreyfus who was wrongfully charged and jailed in his native France for blatantly political reasons and the Government of Canada would later be petitioned to pardon Jarvis.[5]