Decisions
DOUGLAS LAURENCE MASON [Decision]
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BCSECCOM #:
2001 BCSECCOM 981
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Document Type:
Decision
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Published Date:
2001-10-09
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Effective Date:
2001-10-05
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Details:
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2001 BCSECCOM 981
COR#01/112
IN THE MATTER OF THE SECURITIES ACT, R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF DOUGLAS LAURENCE MASON
APPLICATION
PANEL
Brent W. Aitken
Roy Wares
Diane K. Wolch
DATE OF APPLICATION
September 18, 2001
DATE OF RULING
October 5, 2001
APPEARING FOR DOUGLAS LAURENCE MASON
Robert W. Taylor
Catharine M. Esson
APPEARING FOR COMMISSION STAFF
James A. (Sasha) Angus
Joseph A. Bernardo
RULING OF THE COMMISSION
BACKGROUND
[para 1]
This is an application by Douglas Laurence Mason for disclosure of materials in the possession of Commission staff.
[para 2]
Mason is the subject of a notice of hearing issued by the Executive Director on October 30, 2000. The notice of hearing alleges that Mason failed to file insider trading reports when required, manipulated the share price of various companies, and made an illegal distribution from a control block of one of the companies.
[para 3]
The allegations involve Mason and an Irish company called Forthdale Investments Limited. The notice of hearing alleges that Mason established a trust, called the Piper Trust, with Ryco Trust Executor & Trustee Company, Limited of Jersey, United Kingdom, as trustee. Staff says Ryco then acquired all of the shares of Forthdale for the trust. (Ryco was later sold to Integro Societe de Finance and its name changed to Integro Trust (Jersey) Ltd.) We will refer to Ryco and Integro as the trustees.
[para 4]
The staff allegations are essentially that the Piper Trust is a sham. Staff alleges that Mason directed Forthdale’s trading activities through instructions he gave to the trustees, or alternatively that Mason never surrendered beneficial ownership of the trust’s assets, or that the beneficiaries of the trust are Mason’s nominees.
[para 5]
Mason intends to argue that his relationship with Forthdale is at arm’s length. This will be a central issue in the hearing.
[para 6]
Staff’s investigation of Mason is not an isolated matter. The seeds of the investigation into his affairs were sown in the course of an earlier investigation into the affairs of Terry Alexander (that matter eventually settled). As a result of the Alexander investigation, staff obtained information that led it to begin investigations of Michael Siefert, David Patterson and Mason. Each of these investigations were conducted by separate investigators under separate investigation orders. (Commission staff has settled with Siefert and Patterson.)
[para 7]
The three investigations were conducted separately but more or less simultaneously. As a result, some interviews conducted by Commission staff and some documents obtained by Commission staff related to the activities of more than one of the individuals under investigation.
[para 8]
Commission staff has already disclosed much material to Mason and the disclosure process continues. There is a long trail of correspondence between staff and Mason’s counsel about the adequacy of that disclosure.
[para 9]
In making its disclosure to Mason, staff has withheld materials that relate to the other investigations and that are not, in staff’s view, relevant to the allegations in the notice of hearing against Mason. The materials withheld include:
portions of witness interview transcripts,
§ information about interviews and discussions with some witnesses,
§ some reports, and portions of reports, prepared for the Jersey Financial Services Commission in connection with the operation of the trustees, and
§ some information about the trustees’ general operations, and about the general operation of trusts structured along the lines of the Piper Trust.
[para 10]
Mason says he needs to see the materials withheld so his counsel can determine their relevance, assess the credibility of staff witnesses and prepare for cross-examination. He says these materials are also relevant to his argument that the Piper Trust is legitimate and operates like other trusts of its ilk.
[para 11]
Mason says the materials withheld appear to be relevant and their relevance ought not to be determined by Commission staff.
DISCUSSION
[para 12]
Mason argued at some length about the application of R. v. Stinchcombe [1992] 1 W.W.R. 97 (S.C.C.). However, this Commission has consistently ruled that the standard of disclosure that applies to Commission hearings is not the standard discussed in Stinchcombe, but that set forth in Re Cartaway Resources Corporation et al. [1999] BCSC Weekly Summary 22. In that case, the Commission said (at page 39):
“In our view, disclosure and the demands for disclosure of materials must have some relevance to the proof or defence of allegations in the section 161(1) notice of hearing. By necessity this means that Commission staff counsel will have to exercise discretion and judgment in determining what materials fit within those parameters. In our view, if Commission staff counsel view materials as ‘potentially relevant to the respondents’ the materials would fit within the above parameters and should simply be disclosed as relevant materials but materials upon which Commission staff may not rely. In our view, it is not appropriate to permit fishing expeditions into Commission staff files for purposes unrelated to the allegations in the notice of hearing or to simply see what is there. . . .
“While Commission staff counsel’s exercise of discretion is always reviewable, the Commission hopes that such review will seldom be necessary as the Commission expects and relies upon Commission staff counsel to disclose according to the disclosure standard set by the Commission in this ruling.
“In our view, it is appropriate to restate the standard of disclosure that we expect Commission staff counsel to make to all respondents in section 161(1) enforcement hearings. The duty on Commission staff counsel requires disclosure of:
“1. the particulars of the case against the respondents; and
[para 13]
As this passage makes clear, Commission staff must determine what materials are relevant to the allegations in the notice of hearing. It bears repeating that the Commission expects and relies on Commission staff to make that determination in good faith.
[para 14]
When called upon to review staff’s discretion, as we are being asked to do in this application, the Commission’s task is not to sift through staff files and make judgments about the relevance of particular materials. Rather, our task is to determine whether staff has applied the correct standard in exercising its discretion.
[para 15]
Staff says it has applied the standard set forth in Cartaway, that is, it is disclosing all materials relevant to the allegations in the notice of hearing. In this case, staff’s task has been complicated somewhat by the existence of the parallel investigations, but it is noteworthy that staff does not seek to withhold relevant materials on the basis that there are special reasons to do so.
[para 16]
Based on the submissions of Commission staff, and from the disclosure examples provided, we are satisfied that staff is disclosing all the information it has that is relevant to the allegations in the notice of hearing, as required by Cartaway.
DECISION
[para 17]
Therefore, considering it to be in the public interest to do so, the application is denied.
[para 18]
October 5, 2001
FOR THE COMMISSION
Brent W. Aitken, Commissioner
Roy Wares, Commissioner
Diane K. Wolch, Commissioner