Author: Norm Keith

Norm Keith

About Norm Keith

Mr. Keith is a senior partner and member of the White Collar Defence practice group in the Toronto office of Fasken Martineau and the author of 12 books, including Insider Trading in Canada (Lexis Nexis, 2012). Contact him at +1 416 868 7824 or nkeith@fasken.com.

Features of Canada’s New DPA Scheme

The Canadian Government has announced that it will be moving forward, albeit slowly, with a Deferred Prosecution Agreement (DPA) system. The recent announcement from the Government of Canada came on March 27, 2018, in a “Backgrounder” under the heading “Remediation Agreements and orders to Address Corporate Crime.”

Canadian DPAs will be known as the Remediation Agreement Regime (“RAR”). The federal government’s long awaited move towards DPA’s have several specific but not unique features. First,  a RAR would be a voluntary agreement between a prosecutor and an organization accused of committing a criminal offence. A corporation cannot be force into. RARs would set out an end date and would need to be presented to a judge for review and approval.

Second, before approving the remediation agreement, the judge would need to be satisfied of the following:

  1. The agreement is in the public interest; and
  2. The terms of the agreement are fair, reasonable and proportionate.

Third, when these criteria are met, the judge would issue a judicial order approving the RAR. While an agreement is in force, any criminal prosecution for conduct that is covered by the agreement would be suspended. If the accused organization complied with terms and conditions set out in the RAR, the prosecutor would apply to a judge for an order of successful completion when the agreement expires.

The legislation is proposed to have the following terms and conditions: the corporation has accepted responsibility for, and stop, their alleged wrongdoing; it has agreed to pay a financial penalty; it has been disgorged of any benefit gained from the wrongdoing; it has enhanced its  compliance measures; and has made restitution to any victims, including overseas victims, as deemed appropriate in the circumstances.

Fourth, the criminal charges would then be stayed in Court at the request of the prosecutor, and no criminal trial or conviction would follow. The stated purposes of the RAR include the following:

“a. To denounce an organization’s wrongdoing and the harms that such wrongdoing has caused to victims or to the community;

b. To hold the organization accountable for the wrongdoing;

c. To require the organization to put measures in place to correct the problem and prevent similar problems in the future;

d. To reduce harm that a criminal conviction of an organization could have for employees, shareholders and other third parties who did not take part in the offence; and

e. To help repair harm done to victims or to the community, including through reparations and restitution.”

Fifth, however, if the accused did not comply with all of the RAR, the criminal charges would be revived and the accused could be prosecuted and potentially convicted. In other words, all bets are off and the corporation will be prosecuted to the fullest extent of the law.

Sixth and finally, the RAR program will come into effect 90 days after the Budge Implementation Act, is passed into law and given Royal Assent (yes, the Queen’s representative still have to approval all Government of Canada’s new laws. Strangely, the RAR legislation is already being considered by Parliament as part of the Budget approval process, internally and without public hearings.

Jail Term for Construction Superintendent Upheld by Court of Appeal

On January 20, 2018, the Court of Appeal for Ontario released its decision in the Appeal of Vadim Kazenelson (“Kazenelson”) both his conviction and sentence appeal.  Kazenelson was the Project Superintendent/Manager for the Metron Construction Incorporated (“Metron”) project in Toronto that went terribly wrong on December 24, 2009.  Tragically four workers died, and one was seriously injured, when two swing stage scaffolds broke apart, and five out of the six workers who were not attached to a lifeline that was anchored to the building, fell to the ground, over 100 feet below.  Kazenelson had been at the project at the time of the accident and allegedly aware of workers not using fall arrest lanyards at the time of the accident.

Kazenelson was prosecuted for five counts of criminal negligence under the Criminal Code Amendments, often referred to as the Bill C-45 or Westray Mine Disaster Amendments to the Criminal Code.  Kazenelson argued at trial that he was not guilty because he was not the direct supervisor of the crew, he had ensured that the workers had been properly trained and provided with fall arrest protective equipment, that he did raise the concern of workers not being provided with lanyards, when he was on site prior to the accident.

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Radiohead stage collapse victims let down by the justice system


On September 5, 2017, Justice Nelson of the Ontario Court of Justice stayed all quasi-criminal charges against the three corporate and one individual accused in the deadly stage collapse at the Radiohead concert in Downsview Park on June 16, 2012.  These charges under the Occupational Health & Safety Act (“OHSA”) are some of the latest in a series of serious regulatory and criminal charges, that have been stayed for unreasonable delay as a result of the Jordan decision of the Supreme Court of Canada.

Radiohead, a British rock band, was scheduled to perform at a concert in Toronto at Downsview Park.  Just hours before the start of the concert, the stage superstructure collapsed.  Scott Johnson, a drum technician, and resident of the United Kingdom,  was fatally injured.  Others were also seriously injured.

On June 6, 2013, the Government of Ontario’s Ministry of Labour laid charges against a number of parties under the OHSA, including but not limited to, Live Nation Canada Inc., Optex Staging & Services Inc., and the professional engineer who provided advice and engineering drawings and certification, Domenic Cugliari.

The case was factually and legally serious and complex.  It proceeded to trial in November 2015, before Justice Nakatsuru, of the Ontario Court of Justice.  Although during that trial, there had been an Application for Delay, after the Jordan decision was released by the Supreme Court of Canada on July 8, 2016, it was rejected by the trial judge.  The trial proceeded, the prosecution and defense evidence was completed, and the lawyers were in the process of making final, written submissions on the merits of the prosecution.

However, on April 12, 2017, before all the final arguments were made, Justice Nakatsuru was appointed to the Ontario Superior Court of Justice, by the Federal Attorney General, Jody Wilson-Raybould.  As a result, and under instructions from the Department of Justice not to do any further work on any matter, including the completion of the Live Nation case, Justice Nakatsuru ruled that he had no jurisdiction to continue the trial, and declared a mis-trial.

The  policy and practice of the Department of Justice did not permit Justice Nakatsuru to complete the trial, after his appointment to the Superior Court of Justice in Ontario.  Justice Nelson, was appointed to be the second trial judge. On a pre-trial Charter delay motion, to stay the OHSA charges for a breach of s. 11(b) of the Charter, said the following at paragraph 70:

[70] Both Cugliari and Live Nation submit that Justice Nakatsuru’s appointment should not be treated as a discrete event because although unforeseen by the Crown in this case, it was not unforeseen by the state.  Further, the state failed to take reasonable steps to mitigate any delay that did ensue.  Specifically, counsel point to the following:

  • The Provincial government failed to pass legislation which would have permitted Justice Nakatsuru to complete the trial;
  • Justice Nakatsuru would have known that he was presiding over this trial when he applied to the Superior Court bench thus risking the mistrial;
  • Justice Nakatsuru could have deferred his appointment until after he completed this case;
  • The Federal government should have ensured that Justice Nakatsuru was not appointed until this trial was completed.[1]

Although the Crown prosecutor persuaded Justice Nelson that the judicial appointment was a discrete exceptional event, it still did not permit this type of overall delay that occurred in this case.  The trial justice held that even if one was to give thirty (30) months to complete this type of trial, rather than the presumptive eighteen (18) months, that the delay still far exceeded that period of time;  the case having been in the judicial system for almost five (5) years.

The charges were stayed for breach of the constitutional right, under the Charter, to a trial within a reasonable period of time under section 11(b).

[1]       Ibid., para. 70.

ISO 37001: The New Anti-Corruption International Standard

The International Organization for Standardization (ISO) has recently entered the fray by establishing an ISO certification standard 37001 specifically addressing anti-bribery in corporations by providing a structure for organizations to assist them in the implementation or management of anti-bribery managements systems.  So what is ISO 37001?  Simply put, it is an international standard for anti-bribery management systems.  The beauty of ISO 37001 is the global acceptance of the standard for anti-corruption compliance.

Obviously an anti-bribery system is to prevent bribes from being given or offered by corporate individuals representing business interests of the organization.  As with all ISO certification standards there are specific elements that must be met by the organization in order to be certified.  The system is set up that there is a consistent review of the system in order to ensure compliance and continual improvement.

While national laws may differ regarding anti-corruption compliance, the idea, as with any standard, is to provide a common ground where all global branches of an organization, no matter the location, have the same basis for compliance.  Keep in mind that ISO 37001 only addresses bribery.  Other white collar compliance issues such as fraud, ant-trust offences and other types of corrupt practices activities are not within the scope of this standard.

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Inside Baseball: Former Baseball Star Convicted of Insider Trading

The phrase “inside baseball” took on new meaning for a former baseball star, Doug DeCines, who was recently convicted on insider trading and securities fraud charges.  Inside baseball is a term that usually refers to a detail-oriented approach to any subject, which requires a specific knowledge about what is being discussed, with nuances that are not easily understood by outsiders.  This term became reality for DeCinces when he was convicted on Friday, May 12, 2017 of illegal insider trading for a stock buy that earned him more than $1 million.

DeCines was no stranger to white collar crime allegations. On August 4, 2011, DeCinces, along with three others, was charged with securities fraud by the Securities and Exchange Commission (SEC).  The SEC alleged that DeCinces and his associates made more than $1.7 million in illegal profits when Abbott Park, Illinois-based Abbott Laboratories Inc. announced its plan to purchase Advanced Medical Optics Inc. through a tender offer. Without admitting or denying the allegations, DeCinces agreed to pay $2.5 million to settle the SEC’s charges.

Then in November 2012, DeCinces received a criminal indictment on insider trading in a related matter and was charged with securities fraud and money laundering.  Evidence at trial was that DeCinces was tipped off in 2009 that a Santa Ana-based medical device firm, Advanced Medical Optics, was going to be sold. The information came from the company CEO, James Mazzo, who was DeCinces’ neighbor in Laguna Beach, California, prosecutors argued. DeCinces bought more than 90,000 shares in the company days before Abbott Laboratories bought the firm, and he sold the shares for a profit of about $1.3 million, prosecutors said.[1]  On May 12, 2017, after a nearly two-month trial, a federal court jury in Santa Ana, California found him guilty on 13 charges.[2]

DeCinces, who is now 66 years old, will remain free on bail until sentenced. A hearing date was not immediately set for sentencing.  At the time of the merger, Advanced Medical Optics had seen its stock price plunge from more than $30 to under $10 in the wake of the 2008 Wall Street crash. It more than doubled after the merger was announced.

Canadian insider trading laws have not been as aggressively enforced as those in the U.S. The epic failure of the Ontario Securities Commission to secure a conviction in the prosecution of John Felderhof arising from the Bre-X Minerals scandals has now gained notoriety in the Hollywood movie Gold.[3]  There has only been one prosecution for insider trading under the Criminal Code, resulting in a guilty plea and a 39 month jail term for Stanko Grmovsek.[4]  Canada’s team, the Toronto Blue Jays major league baseball franchise, have been largely scandal free and is celebrating their 40th season in Toronto.

[1] http://www.nydailynews.com/newswires/sports/ex-baseball-star-doug-decinces-guilty-insider-trading-article-1.3160385

[2] Hannah Fry, Former Angels player Doug DeCinces found guilty of insider trading, Los Angeles Times (May 12, 2017). Retrieved on May 13, 2017.

[3] https://en.wikipedia.org/wiki/Gold_(2016_film)

[4] See, Insider Trading in Canada, 2nd Edition, 2017, Lexis Nexis, N. Keith, pp. 88-94