Angry in the Great White North

From Bloomberg:

Oct. 11 (Bloomberg) -- The Ontario Securities Commission may have to drop its probe of Nortel Networks Corp. and former Chief Executive Officer Frank Dunn if a ruling restricting questioning of him isn't overturned, the agency said in an appeal.

"To do so would disqualify all those who have been involved in the investigation to date from participating,'' OSC's lawyer Allan Rock said in a Sept. 15 filing requesting that the Ontario Court of Appeals hear the case. That "would effectively end an important investigation that has been under way for more than two years.''

This news was first reported on this blog in this post examining the Dunn case in detail, in the context of how the powers of the OSC are being seen by the courts.

Justice Colin Campbell ruled that the OSC had to interview Dunn with a team of investigators separate from the team working the SEC in the United States. That was because if, even inadvertently, the SEC team learned of details gleaned by the OSC during the interview, that evidence could be used in US litigation. Why? The Fifth Amendment to the US Constitution protects Dunn from self-incrimination when questioned by US authorities for a US investigation. That protection does not extend to questions asked by a non-US body.

Dunn's lawyers are arguing that the SEC is using the OSC to get around the Fifth Amendment hurdle. The judge was not ready to go that far, but he did agree that the possibility of accidently disclosure was serious enough to warrant a separate team that must never be in contact with the SEC.

The OSC appealed that, and that filling is part of this Bloomberg report. That filing and other court documents are part of my earlier post.

Clearly the OSC is trying to signal that an important case is being jeopardized by legal nickle-and-diming over theoretical Charter violations. I'm not sure why. Justice Campbell ought to be immune from pressure. Maybe he isn't. Maybe the OSC is hoping that the SEC can apply pressure to the Ontario government, and so to Justice Campbell, not to let this case get away. Or maybe the target is public opinion. Or maybe the OSC is looking for a way ought of pursuing this case. Maybe the case is not strong, and this ruling provides a face-saving way to bail out.

I still think, however, that the OSC is driven primarily by the bigger issues involved. Not mentioned in the Bloomberg report, but described in my earlier post, is what the OSC wants modified in the judge's ruling that required separate investigative teams, assuming the OSC could not get the ruling thrown out altogether. The OSC would have been satisfied to see two paragraphs removed, including paragraph 6. This paragraph does not make direct mention of the question of investigative teams and other minutia related to this particular case, but of the larger issue of the positive value of having court supervision of OSC procedures especially when Charter issues are involved.

I think the OSC is driving hard, including using media coverage, to get that take that sort of thinking off the table. The OSC is quite clear in the filing that it expects the full deference of the court when it comes to how the OSC handles its own business. The opinion of the court is not welcome, and supervision is not required, or so the OSC argues.

The Bloomberg report doesn't get into this aspect of the filing, and I think it's much more important than whether Dunn is a cheat or a scoundrel.