Investors pitching a class action lawsuit against a group of purported consultants and stock promoters known as the Bridgemark Group scored two favourable verdicts in court this month.
The verdicts should allow the investors access to investigative records they would have normally been allowed if not for the legal procedures of the promoters who face a B.C. Securities Commission (BCSC) notice of hearing.
First, the B.C. Court of Appeal tossed out an attempt by Bridgemark Group members to block the BCSC from releasing investigative affidavits to law firm Camp Fiorante Matthews Mogerman LLP (CFMM), representing investors Michael Tietz and Duane Loewen, who launched the class action that has yet to proceed.
Those affidavits, containing consulting contracts, had already been released to Glacier Media in April 2019, and the law firm had requested their own copies in July, 2019.
The affidavits form part of the evidence presented by BCSC at interim hearings for the case and will be used at a full hearing that has yet to be scheduled after temporary orders were issued November 26, 2018 by the BCSC to the Bridgemark Group and 11 Canadian Securities Exchange-listed companies (two of which have since admitted conduct abusive to the capital markets).
The group and the companies are alleged to have partaken in an illegal cash swap and securities distribution scheme considered by the BCSC to be “conduct abusive to the capital markets.”
The scheme, as alleged, sees the consultants buying shares from the companies, who in turn grant millions of dollars worth of contracts, despite little or no work being performed. The consultants then quickly sold their shares to retail investors on the secondary market at a discount.
The class action lawsuit seeks damages for unlawful conspiracy, secondary market misrepresentations and fraud, or disgorgement of the benefit the defendants obtained as a result of the scheme.
In June, the commission narrowed down two “primary architects” of the scheme: West Vancouver residents Anthony Jackson and Justin Liu, both of whom led the appeal.
Liu and Jackson argued the commission failed to uphold its confidentiality obligations by releasing the affidavits, which reveal details of the significant consulting contracts, some of which have been subsequently shown in filings by the companies.
Justice Peter Willcock, Justice Patrice Abrioux and Justice Joyce DeWitt-Van Oosten of the B.C. Court of Appeal sided with the commission’s initial decision and dismissed their appeal on November 2.
“In my view, the Commission was correct to say that, once it decided to hold a hearing, the statutory provisions imposed upon it a duty to hold the hearing in public, to maintain a record of the hearing, and, consistent with the open court principle, to permit the public to have access to the record unless doing so would be unduly prejudicial to a party or a witness and withholding access would not be prejudicial to the public interest,” stated Willcock.
The group could apply for an appeal to the Supreme Court of Canada.
Following that ruling, Bridgemark Group members were handed another loss in court on November 10 when Justice Veronica Jackson denied an application to seal similar documents from the public in relation to a constitutional challenge the group is putting forth.
Liu and his company Lukor Capital Corp. applied to seal investigative memos, making them accessible only to counsel of record, parties of record, or by further order of the court — effectively shutting out the investors launching the class action claim. Jackson and his companies BridgeMark Financial Corp. and Jackson & Company Professional Corp. supported the application.
At issue for Justice Jackson was whether there was a commercial interest at risk for the Bridgemark Group members if the documents were filed and became public record.
“I conclude the applicants have failed to discharge their burden …to establish there is an important commercial interest at risk,” ruled the judge.
Many members of the Bridgemark Group are challenging freeze orders against them put there by the commission in 2019 (some have been lifted). The court is being asked if the Securities Act is consistent with the Canadian Charter of Rights and Freedoms by allowing the commission to freeze assets before a hearing. And if it is not, does the action constitute a reasonable and demonstrably justified limit under section one of the Charter.
The documents obtained by Glacier Media show the extent of consulting contracts.
For example, investigative records show how over the course of two years a Vancouver woman named Danilen Villanueva seemingly went from working at McDonald’s to working as Jackson’s corporate receptionist in 2016. Villanueva went on to buy and sell at least $5.9 million worth of stock and signing, over a five-month span, lucrative six-figure consulting contracts.
On November 10, 2017, Villanueva, as sole director and beneficiary, incorporated Detona Capital Corp. with the same mailing address as Jackson’s companies, according to the BCSC.
Polish-Canadian wood pellet company Green 2 Blue Energy Corp. (a hearing respondent) provided Detona a $220,500 contract to provide “general administrative assistance and services” and “initiate and prepare draft agreements” while reporting net sales of $71,586 in 2018.
Based on the BCSC allegations and various related court claims, Bennett Montour LLP lawyer Paul Bennett’s class action filing (working with CFMM) states Jackson conceived the scheme along with fellow West Vancouver residents and respondents including Liu, who operated illegal marijuana dispensaries, former professional hockey player Cameron Paddock and Aly Babu Mawji, who spent time behind bars in 2013 for securities fraud in Germany before finally being expelled by the commission from B.C.’s markets last February.