Fraud Recovery

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On September 2, 2014, the Ontario Securities Commission commenced its high-profile hearing in the case of the Sino-Forest Corporation (“SFC“). SFC is alleged to have engaged in widespread fraud relating to its public financial disclosure. The specific allegations involve the fabrication or overestimation of revenue and assets, falsified evidence of ownership, backdated contracts, and undisclosed control over particular customers and suppliers.
Continue Reading Sino-Forest OSC hearing opens

In October 2011, the Ontario Securities Commission (“OSC“) raised the concept of offering no-contest settlements of the sort commonly employed by the US Securities and Exchange Commission (“SEC“). On March 11th of this year, after receiving some sharply divided feedback in months of public hearings, the OSC announced that it was moving forward with the introduction of a policy that would permit settlement of enforcement proceedings without requiring an admission by the respondent of misconduct (no-contest settlements). The OSC has emphasized that the deployment of this policy will only be available in a narrow set of circumstances. In the meantime, the debate over whether such a policy can achieve its objectives of expedience and efficient resource allocation while at the same time avoiding the risk of letting wrongdoers off the hook, has yet to be resolved.


Continue Reading The OSC’s introduction of no-contest settlement proceedings

Our team has been monitoring some key developments that could soon impact US and Canadian companies that list shares on US exchanges. One of 2014’s most important legal developments is likely to flow from the US Supreme Court’s ruling on “fraud on the market” theory, to be rendered in Halliburton Co. v. Erica P. John Fund Inc. (“Haliburton”). Oral argument in Halliburton took place on March 5, 2014.

In Halliburton, the US Supreme Court has been asked whether “it should overrule or substantially modify the holding in Basic v. Levinson, 485 U.S. 224 (1988) … to the extent that it recognizes a presumption of class-wide reliance derived from the fraud on the market theory.”  The decision in Halliburton is expected to be of importance given that in Amgen Inc. v. Connecticut Retirement Plans, a case decided in early 2013, members of the Supreme Court expressed concern with respect to the fraud on the market theory. 
Continue Reading “Fraud on the market” and securities class actions

How do you uncover a suspected fraud when you cannot obtain any information from the suspected fraudster in the first place? And what do you do if the suspected fraudster has avoided complying with a court order to produce documents? One under-utilized strategy is to seek to appoint a receiver over the books and records of the alleged fraudster.
Continue Reading Strategy for uncovering a suspected fraud

In Hryniak v. Mauldin, released January 23, 2014, the Supreme Court of Canada upheld the finding of fraud against Toronto businessman Robert Hyrniak on a summary judgment motion. The unanimous SCC found that a shift in culture is needed to embrace summary judgment motions as an alternative model of adjudicating disputes. The SCC ruled that findings of fraud can be made when the judge is able to reach a fair and just determination on the merits on a summary judgment motion. This will be the case when the motion:

  1. allows the judge to make the necessary findings of fact;
  2. allows the judge to apply the law to the facts; and
  3. is a proportionate, more expeditious and less expensive means to achieve a just result.

In a call to action to improve access to justice, the SCC also called upon lower court judges to take a more active role in case-managing disputes by seizing themselves of cases where they have dismissed a motion for summary judgment. This is a significant departure from current practice. 
Continue Reading Summary judgment for investment fraud upheld by Supreme Court of Canada

Our litigation team recently secured a $10.3 million judgment in fraud.  On the strength of accounts receivable and appraised assets, HSBC extended loans exceeding $10 million dollars to a trucking company called Turbo Logistics Canada Inc., operated by defendants, George Perlin and Alex Ber.  The trial judge, Justice Mesbur, found that unbeknownst to HSBC, there were two other companies using similar names and reporting the same accounts receivables and appraised assets to TD Canada Trust for loans from that bank.  These two companies were operated by family members of George Perlin and Alex Ber.  Our team secured judgments in fraud against George Perlin and Alex Ber for $10.3 million, as well as judgments for conversion and conspiracy against the two companies and one of the individuals running it.
Continue Reading Commercial List fraud trial ends with $10.3 million win for HSBC

In Wolf v Anstett, 2012 ONSC 3220, a creditor used section 5 of the Assignment and Preferences Act (the Ontario provincial legislation which may be applied to set aside transactions made by an insolvent person or a “person in contemplation of insolvency”, with an intent to give an unjust preference to a creditor) and Rule 16.08(16) of the Rules of Civil Procedure[i] to halt a would-be fraudster from attempting to thwart a previous judgment by using a newly incorporated entity to receive payments that should have went to the plaintiff.
Continue Reading Attempt to thwart a previous judgment through a related corporate entity found to be preference under the Assignment and Preferences Act

In Canada Mortgage and Housing Corp v. Gray (Canada Mortgage and Housing Corp v. Gray, 2013 ONSC 1986), the Canada Mortgage and Housing Corporation (“CMHC”), the insurer of mortgages, attempted to block the release of a mortgage debt from a bankrupted individual who was a victim of a fraudulent scheme, but in CMCH’s view, was either aware of the scheme or that he was reckless and/or willfully blind to the scheme.
Continue Reading When would silence or non-disclosure of material facts amount to fraudulent misrepresentation?