Legal Feeds Blog

Monday, 27 August 2012 15:57

Independent counsel for Douglas inquiry quits

Guy Pratte, the independent lawyer leading the inquiry into a Manitoba Court of Queen’s Bench Associate Chief Justice Lori Douglas has resigned, leaving the Canadian Judicial Council scrambling to find a replacement for him at the controversial proceeding.

Guy Pratte has resigned as independet counsel for the Douglas inquiry.

Norman Sabourin, executive director and senior general counsel of the CJC, would not comment on Pratte’s reasons for resigning, saying only that the hunt is on for an immediate replacement.

“My top priority is ensuring that a new independent counsel is appointed and chief justice Wittmann, who appointed Mr. Pratte is considering a successor at this time. We hope that within a few days we can announce an appointment,” says Sabourin.

Pratte declined to comment when contacted by Legal Feeds.

In a statement released today, the council indicated a replacement would be appointed as soon as possible to ensure the hearing continues in a “fair and expeditious manner.”

A council committee is looking into the conduct of Douglas, whose husband posted sexually explicit photos of her online in 2003, when the couple were family law lawyers at a Winnipeg firm.

Douglas’s lawyer Sheila Block has asked the Federal Court to quash the inquiry, arguing questioning by the lawyer acting for the committee members, George Macintosh, was too aggressive and showed bias against Douglas.

Pratte had threatened to quit, insisting the inquiry committee can’t act be a referee of the proceedings and an active participant. But the committee insisted it had a duty to strongly question witnesses. In May, the CJC clarified the role of the independent counsel, noting that: “Independent counsel may make recommendations but must carry out his duties in a manner that does not impinge on the discretionary decision-making responsibility of the committee.”

Sabourin admits it won’t be easy to find a replacement for Pratte.”I’m sure it will be challenging, like in any proceedings where one is called in as a substitute, so to speak. This inquiry is complex, there’s no question, but I’m hopeful with very able counsel things will unfold in a satisfactory way.”

He noted that the inquiry committee hasn’t set dates for its next hearings yet and it was difficult to find the amount of time they feel they need to continue.

“I imagine they will want to hear from the newly appointed independent counsel and hopefully they can agree on dates in the near future,” he says.

Despite the complexity of the inquiry and the complications it has encountered Sabourin said he doesn’t think it will be difficult to find a replacement for Pratte.

“Lawyers at that level of expertise and experience are usually very receptive to answering the call of public duty. This is an important process and we’re a public body trying to get things done in the public interest. Lawyers are often very receptive. We look for seniority and reputation and ideally someone who has knowledge with inquiry committee processes.”

There are pending judicial review applications in the Federal Court and Sabourin said time may be required to take steps to address those issues as well.

“The inquiry committee is there to ensure that there is an investigation and light thrown to the allegations made against the judge. For the council it’s critical that any serious allegation against a federally appointed judge is thoroughly reviewed. Hopefully it can happen in good time, but it is a complex issue and the process has to be fair to everyone. It will have to take the time needed to ensure it continues to be fair.”

Portus officials to learn OSC fate today

The eyes of Ontario’s financial community will be on the Ontario Securities Commission this afternoon as the OSC considers a settlement agreement in relation to three figures in the Portus Alternative Asset Management Inc. investment debacle.

Settlement hearings will take place at 2:30 p.m. for Portus president and director Boaz Manor; at 3 p.m. for former Portus chief compliance officer Michael Labanowich; and at 3:15 p.m. for John Ogg, who succeed Labanowich in the role of chief compliance officer in May 2004.

On Friday, the OSC announced a tentative settlement with the three Portus execs. An OSC panel will consider the settlement today and make details available on its web site if and when it approves it, says OSC spokeswoman Alison Ford.

The case has been going on for years following the shutdown of Portus in 2005 amid allegations the Toronto-based hedge fund, which had by then raised $800 million from 26,000 investors, was nothing more than a sophisticated Ponzi scheme. Of the money raised, Manor invested about $53 million of it offshore in the Cayman Islands and Turks and Caicos, Canadian Lawyer reported this February.

Despite the OSC action, the case has degenerated into a long battle by bankruptcy receiver KPMG Inc. to track down the offshore funds. After hiring local counsel in the Cayman Islands and getting a Canadian order recognized there, for example, the parties discovered the money was in fact in the Turks and Caicos. That led to more legal efforts in a variety of international jurisdictions.

The case also involves a lawyer, Montreal sole practitioner T.R. Anthony Malcolm, who received US$2.7 million to set up Portus’ offshore accounts. In an interview by a lawyer for KPMG, John Finnigan of Thornton Grout Finnigan LLP, Manor blamed Malcolm for the scandal. But the receiver found otherwise and Malcolm has denied knowledge of it.

Michael Mendelson, the co-founder of Portus, pleaded guilty to a single count of fraud in the case. In late 2007, he was sentenced to two years in jail in exchange for agreeing to testify against Manor.

In a deal with prosecutors last year, Manor received a four-year prison sentence for breach of trust and disobeying a court order in relation to the affair. He’ll learn what else awaits him at the OSC today.

Update: Aug. 28

The OSC approved all three settlements yesterday. Manor was permanently banned from acting as a director or officer of any issuer, and also from trading in any securities, except for mutual funds as part of his RRSP, which must be done through a registered dealer. He was also ordered to pay back $8.8 million for the benefit of Portus shareholders. But according to reports, Manor's lawyer Robin McKechney told the commission yesterday that his client is essentially broke so "does not at this time" have the money to satisfy the order.

Former compliance officers Labanowich and Ogg were each barred from acting as a director or officer of any reporting issuer for six years, and ordered to pay $25,000 in costs to the commission.