“Rot At Its Core”

The Nova Scotia Barristers Society Hearing Panel has resolved disciplinary charges against an attorney by imposing an agreed disbarment that precludes a petition for reinstatement for five years after the attorney’s release from prison. 

The Nova Scotia Court of Appeal decision affirming the underlying conviction is linked here. 

The trial was long and demanding. It spanned more than 160 days, spread over two years. The record before the trial judge was massive. Fifty-seven Crown witnesses testified followed by Mr. Colpitts’ 17 witnesses and Mr. Colpitts himself. Mr. Potter called no evidence. Tens of thousands of documents were contained in 184 exhibits. Exhibit 1 alone contained 5,672 electronic documents consisting of financial documents, reports, market analysis, and over 800 communications between the parties. As we will outline later, there were numerous pre-trial and mid-trial applications that produced a multitude of decisions on a broad range of issues. The trial judge’s reasons giving rise to the convictions are contained in 715 paragraphs.

Appellate review

This is an appeal. Not a retrial. Mr. Potter and Mr. Colpitts must establish the trial judge erred. However, despite stridently proclaiming they were at the mercy of a biased judge and denied a fair trial, Mr. Potter and Mr. Colpitts have not substantiated their claims.

Conclusion

Despite the legitimate business activity being undertaken by [Knowledge House Incorporated] , according to the trial judge, there was rot at its core. He accepted the Crown’s allegations that, during the period of January 2000 to August 2001, Mr. Potter, KHI’s CEO, and Mr. Colpitts, KHI’s lawyer, conspired with Bruce Clarke,  the company’s stockbroker, and others, including a number of KHI principal shareholders, to fraudulently maintain the share price of KHI stock at artificially high levels. The unindicted conspirators were a group that included Calvin Wadden, Raymond Courtney, Ken MacLeod, Bernard Schelew, Eric Richards, and Stephen Wilsack, amongst others. The Crown’s witnesses included Steven Clarke, Bruce Clarke’s son, who worked in his father’s brokerage business, and Gerard McInnis, KHI’s Senior Vice-President Finance and Accounting, who each were found to have played instrumental roles in the conspiracy.

The Crown alleged the conspirators used a variety of manipulative techniques that included: buy-side domination of the market; sales suppression of stock; high closing the stock; the use of incentives to induce the purchase or suppress the sale of stock; parking stock; the use of an account owned by Mr. Clarke—the 540 account—to buy stock; and the non-disclosure of material information. The trial judge noted the Crown’s allegation that the techniques were employed “to maintain access to credit sources, to entice new investments and to protect the defendants’ personal net worth”.

During the indictment period a core group of conspirators did the heavy lifting, including purchasing significant amounts of KHI stock using various techniques and suspect accounts. According to the trial judge, Mr. Potter, Raymond Courtney, Calvin Wadden, Ken MacLeod, and Bernard Schelew schemed and maneuvered to keep up the appearance of a company performing strongly in the market. (The trial judge’s references to “suspect accounts” related to accounts “connected to the alleged conspiracy”.) Mr. Colpitts was instrumental in assisting these efforts and Bruce Clarke ensured the conspirators’ instructions were carried out.

Atlantic Business  has a lengthy account of the criminal case in August 2018

During Blois Colpitts’ best business days (between 1999 and 2001), he had been a larger-than-life corporate lawyer with Stewart McKelvey Stirling Scales. He billed close to 3,000 hours a year, juggled 300 to 500 emails a day, invested and sat on corporate boards, serving as the go-to-guy for 85 per cent of out-of-province companies needing to file prospectuses with the Nova Scotia Securities Commission. His client base was “too big,” he admitted in court; he “couldn’t keep up.”

That is no longer an issue. He is still physically larger than life, but the swagger is long gone. In 2003, in the early stages of the investigation, he parted company with Stewart McKelvey after having been charged with trying to buy sex from an undercover officer. “My priority is to understand and address with counselling the underlying issues which cause this type of unacceptable behaviour,” he said in a public mea culpa at the time. Later, he launched his own one-man law firm (RBC Law Inc.) but later “voluntarily” stopped practising to focus on his legal woes. After blowing through more than $1.7-million in legal fees, he has served as his own lawyer for much of the trial.

Now 55 years old and a caretaker to his aging mother, Blois Colpitts sits stoically in the courtroom beside his lawyer, staring straight ahead. He is dressed in a dark blue sports jacket, dressy blue jeans and an incongruous pair of pale grey, loafer-like slip-ons. Potter, dressed as usual in a crisp dark business suit, is more animated. As he waits, he texts on his phone, sips water from a paper cup, runs his fingers along his beard, pushes his glasses up and down along the bridge of his nose.

Both Potter and Colpitts know that—whatever successes have gone before in their lives and careers, whatever might still be ahead in appeals and life—this is their bring-your-toothbrush-to- court day. They won’t be going home when court adjourns.

Atlantic News reported on the appeal

Two executives once referred to by a judge as the mastermind and enforcer of a multimillion-dollar stock market scheme were jailed this week as Nova Scotia’s highest court upheld their convictions.

Daniel Potter, the former chief executive of technology firm Knowledge House, and former lawyer Blois Colpitts were found guilty in March 2018 of conspiracy to manipulate the firm’s share price and carrying out fraud in the securities market.

They were sentenced in July of that year but have been out on bail since shortly after their sentencing, awaiting the appeal result of one the longest and most complex prosecutions of white-collar crime in the province’s history.

(Mike Frisch)