Mohawk sues Ontario Securities Commission after they break their own laws
An update on the most high-profile Indigenous finance case in Canada.
TYENDINAGA – Real People’s Media has previously reported on the case of David Sharpe and his battle with the Ontario Securities Commission (“OSC”). Sharpe, a proud Mohawk who lives in Tyendinaga, has faced considerable negative mainstream media coverage over the past three years. There have been significant developments since we last reported on this matter.
OSC Tribunal rules that OSC broke the law
The first one was on March 30, 2022 when the OSC’s own Tribunal decided that OSC employees broke the law by disclosing Sharpe’s compelled testimony to the public contrary to the OSC’s own statute. The Tribunal found that OSC employees should have provided notice to Sharpe and obtained an order specifically authorizing the disclosure of his compelled testimony to the public.
The Tribunal also found that OSC employees, astonishingly, failed to inform the court in its secret hearing (more on the secret hearing below) that the OSC was relying on Sharpe’s confidential compelled testimony in breach of its own legislation. Sharpe had his reputation thoroughly and robustly smeared in the mainstream media without any kind of due process.
While the Tribunal admonished the OSC for failing to follow the required law, the Tribunal illogically rejected Sharpe’s efforts to have the enforcement proceeding stayed on the basis of the illegal conduct by OSC employees. The Globe and Mail has had little reporting, if any, on this significant decision regarding the illegal conduct of OSC employees. Instead, the Globe has opted to continually personally attack Sharpe in what cannot be regarded as balanced reporting by any reasonable observer. In fact, the main Globe reporter on the Bridging case, Tim Kiladze, is very cozy with the OSC and has moderated “arm chair” discussions with the OSC CEO (Chair at the time), Grant Vingoe, at their events.
Sharpe sues the OSC for $35 million
The second major development is that Sharpe sued the OSC in December 2022 for $35 million in the Ontario Superior Court for a stay of the OSC hearing and eventual decision, abuse of process and for contravening his Constitutional rights. The OSC compelled Sharpe under their statute to attend three separate interviews for hours with OSC employees in front of a court reporter.
Under the Charter of Rights and Freedoms, Canadians have the right and protection to not incriminate themselves. This is similar to pleading the “fifth” in the United States where you are not obligated to answer questions in legal proceedings – for example in US Securities and Exchange investigations, the US equivalent of the OSC.
In Canada, you must answer OSC questions but the information can only be used for the purposes of the administrative proceeding. The OSC employees took Sharpe’s full transcripts of the three interviews and released them on the Internet for the whole world to see, contrary to the Charter and its protected right to not self-incriminate. Unbelievably, this was done without any formal allegations of wrongdoing against Sharpe.
Top OSC regulator Jeff Kehoe steps down
The third major development is more recent and occurred on January 22, 2024 when the Globe reported that the OSC is parting ways with its top enforcer, Jeff Kehoe. Kehoe was the Director of Enforcement at the OSC and presumably the person responsible for giving the orders to disregard the law in Sharpe’s case. This decision, along with another high profile blunder in the CannTrust case, likely cost Kehoe his lofty position at the OSC according to Bay Street sources who wish to remain anonymous due to fear of OSC retaliation.
Kehoe was known as a pitbull who would do anything for the “win” and played aggressive and fast and loose with the laws governing the OSC. There are many in the capital markets celebrating the departure of the heavy handed, unreasonable Kehoe.
In the CannTrust case, Kehoe and his team at the OSC pursued the cannabis grower criminally in 2022 when the case abruptly fell apart under Kehoe’s leadership. The OSC alleged that CannTrust was using fake walls to conceal cannabis plants that were growing in violation of the rules that existed at the time. Former CannTrust CEO Peter Aceto, former chairman Eric Paul and former director Mark Litwin were acquitted after the court heard from just two of 29 potential witnesses because of confusion over the use of the term “unlicensed.”
The result prompted industry experts to call for the OSC to change how the regulator handles enforcement issues. The OSC bungled the high profile case with an overzealous prosecution based on loose facts and lack of thoroughness. The case should have never proceeded but Kehoe, who was with the OSC since 2016, was blinded by his desire to cement his reputation as a “law and order” tough guy. In reality, the case was likely the final nail in his coffin with the OSC, an Ontario Crown Corporation.
Bay Street sources who wish to remain anonymous out of fear of retaliation stated that OSC CEO Grant Vingoe, Kehoe’s boss, had started to make inquiries in the capital markets to find a replacement for Kehoe. It appears that Vingoe could not wait any longer and pulled the trigger on Kehoe’s job even before the OSC civil case against Sharpe and Bridging Finance concluded. This is a highly unusual move in such a high profile case as Bridging Finance and Sharpe.
Vingoe, for his part, will be under intense scrutiny as the Bridging case continues as it was Vingoe who did not properly manage Kehoe. In addition, Bay Street sources have noted that Vingoe as OSC head was the only person at the OSC that could have ordered the Bridging receivership and to proceed in a secretive, ex-parte fashion. These sources speculated that Vingoe got rid of Kehoe to conveniently save his own job. Kehoe appears to be Vingoe’s fall guy. In fact, on February 6, 2024, the Globe reported that Vingoe is about to sign a five year extension to his contract now that Kehoe is gone.
Why it matters to Indigenous people
Canada has had a long history of utilizing administrative bodies like the OSC to trample on Indigenous treaty rights and civil liberties. There are hundreds of cases where Indigenous harvesting and economic interests have been eliminated or harmed by these administrative tribunals of so-called experts beholden to the government for pay and prestige.
These administrative law adjudicators don’t want to upset the apple cart and disagree with the unreasonable or illegal government action out of fear of losing salaries and high-profile positions. After all, it is the OSC who hires these adjudicators for a regulatory hearing process many consider to be a kangaroo court.
To provide some context around the case and what it is all about, we will briefly summarize the facts. Sharpe was the CEO of Bridging Finance, an international investment management firm with a private debt mandate. Sharpe was quite likely the only Indigenous CEO of a registered investment management firm in Canada. Bridging Finance, with the assets under management exceeding $2 billion, was privately owned and specialized in making loans typically between $3 million to $50 million to small and medium size businesses across Canada, including Indigenous businesses.
Part of the Bridging Finance business was its Indigenous Impact Fund, which invested over $500 million in First Nation businesses and $100 million in Inuit business. These loans had a significant positive impact on the Indigenous economy. On the Friday evening of April 30, 2021, Sharpe was informed that the OSC was taking complete control of his business through a secretive court hearing that was held that evening. Sharpe, Bridging Finance and its executives were not provided with notice of the secret hearing nor with an opportunity to be heard or provide evidence.
PricewaterhouseCoopers (“PwC”) was appointed as the receiver of Bridging Finance on the evening of April 30, 2021. Sharpe and the owners of Bridging Finance had their company stolen from them without having a chance to be heard. All the while Bridging Finance and its funds received clean audits from independent auditor KPMG, including for the period ending December 31, 2020. Throughout the process of the receivership, PwC and the OSC extensively published Sharpe’s compelled testimony in violation of sections 16, 17 and 18 of the OSC’s legislation. The day after this secretive court hearing, the Globe received leaks of all materials from the OSC and/or PwC and Sharpe was front page news on May 1 contrary to his Charter protected rights against self-incrimination. The OSC and PwC have continually ignored Sharpe’s legal team requests to remove his transcripts of compelled testimony from the web.
This was very irresponsible conduct by the OSC and the Ontario government towards a Mohawk doing Indigenous business and raised very serious questions about the state of Mohawks treaty relationship with the Crown. Sharpe’s life will never be the same and the OSC completely ruined his reputation without formal allegations or a hearing at the time. As well, First Nations and Indigenous businesses have lost an important source of money for business, infrastructure and economic reconciliation.
Tim Moseley, the Chief Adjudicator for the OSC’s Tribunal, questioned OSC employees prior to the secretive Bridging receivership hearing about its legality. In an email exchange between Moseley and OSC employees, Moseley questioned the OSC employees about whether they were properly following the law. The OSC employees brushed Moseley’s concerns aside. Instead, the OSC employees pushed forward with the secret hearing and then proceeded to illegally disclose Sharpe’s compelled evidence to the public. This was all contrary to the position of OSC Chief Adjudicator Moseley. It is significant to note that Moseley was initially the Chair of the OSC Tribunal that heard the case against Sharpe.
Economic Reconciliation or Retaliation?
Sharpe was so high profile in Indigenous financing that his efforts inspired the film, Economic Reconciliation. The film was written by Indigenous scholar Maurice Switzer and produced by Gemini nominated filmmaker Andre Cazabon.
In September 2020, Sharpe sent an email to Kehoe where he detailed his experiences with racism in the world of finance. Kehoe, acknowledged receipt of Sharpe’s email and undertook to respond to the substance of his allegations. Kehoe never did respond to Sharpe. Instead, Kehoe proceeded with the secret hearing and leaked Sharpe’s confidential, compelled testimony and destroyed a multi-billion dollar Indigenous-run company. The OSC, without due process and procedural fairness, killed a company that was important to Indigenous businesses and hurt the 26,000 investors in the Bridging Finance funds. The destruction of Sharpe and Bridging Finance also meant the elimination of Sharpe’s efforts to develop Indigenous economies and institutions free from colonial domination.
The manner in which the OSC and the receiver PwC have conducted themselves in this case suggest that fairness, due process and constitutionally protected rights have taken a backseat. The OSC’s need for a “win” and press headlines and PwC’s thirst for unreasonable, hefty fees for as long as possible has completely driven them to act in bad faith. It was recently reported in the Globe that PwC and its lawyers have charged fees of $43 million for two years of work that is directly taken from Bridging investors. Also, PwC promised two years ago to make a distribution of money to Bridging investors. To date, PwC has not distributed a penny to investors while lining their own pockets with investor money.
Furthermore, many investors have called into question how PwC is managing the investment portfolio as they have limited private debt experience. Investors have also queried why PwC did not sell Bridging to one of its many suitors who have deep private debt knowledge. The answer likely has a lot to do with the incredibly high fees that PwC is pocketing and will continue to pocket for the unforeseeable future on the backs of Bridging investors.
PwC for its part, has had the underhanded strategy of preventing Sharpe from accessing funds to defend himself and to challenge the OSC. Even accused murderers in this country are permitted access to their funds to mount a defence.
When Kehoe joined the OSC in 2016, he told the Globe in his first interview after taking the top OSC enforcement job, that “we have to be strong and we have to be courageous. We have to take cases that are not surefire wins; we have to take cases that are designed to send strong regulatory messages that are aligned with our strategic priorities.” Kehoe’s unwise bravado, winning at any cost attitude with no regard to the human factor and taking such destructive risks, was ultimately his undoing.
Sharpe has not participated in the OSC Tribunal’s civil proceeding against him. Sharpe’s lawyers stated that he would not be participating in the OSC process due to concerns about fairness and his desire to tackle the OSC in an unbiased, neutral court process free from the Tribunal’s irreconcilable conflict of interest. The OSC civil case will likely conclude in May 2024 and will undoubtedly result in findings against Sharpe. Sharpe’s lawyers said in a letter to the OSC Tribunal that the OSC process “raises serious issues regarding the constitutionality of the OSC’s power to compel and disclose this (Sharpe’s) evidence.”
The OSC amended its legislation after the fact to specifically allow the OSC to disclose compelled testimony in court filings without first obtaining any authorization. The OSC unilaterally changed its legislation without comments from the public or industry participants. Sharpe will undoubtedly appeal a negative ruling by the OSC Tribunal to the courts and the ruling by the Tribunal which rejected his motion for a stay of the proceedings against him.
Sharpe intends to challenge in court the constitutionality of the OSC change to its legislation to permit disclosing compelled testimony. The OSC Tribunal has failed to hold the OSC employees to account for their misdeeds, and instead have caused further harm to Sharpe by permitting further publication of his compelled testimony. It should also be reiterated that Sharpe has objected to his compelled testimony being admitted as evidence against him in the OSC civil proceeding.
Canadian investors have been unduly patient with the OSC and PwC. In the United States, a class action lawsuit by investors would surely have been launched by now against the OSC and PwC. Confidential sources who wish to remain anonymous have reported that there is indeed serious consideration being given to a class action lawsuit against the OSC and/or PwC for bad faith and grossly mishandling the Bridging case and harming investors.
Musk and Cuban challenge SEC’s in-house tribunal
Ironically, in the United States, the enforcement powers of the Securities and Exchange Commission are currently being challenged as unconstitutional before the United States Supreme Court. Elon Musk and Dallas Mavericks owner Mark Cuban, amongst other high profile individuals, are challenging the power the SEC has to enforce securities laws through its own in-house tribunal.
The SEC, like the OSC, uses in-house proceedings presided over by administrative law judges hired by them. Those subject to the in-house SEC proceedings have bristled, saying they violate their rights and give the SEC too much power by essentially creating a home-court, kangaroo court advantage. We can expect a decision by the US Supreme Court some time in 2024.
If Musk and the other backers are successful, the decision will surely curb the power of the SEC and other federal agencies to enforce securities laws in favour of leaving issues to independent courts. The U.S. Supreme Court’s judges seemed highly skeptical during the trial about the way the Securities and Exchange Commission conducts in-house enforcement proceedings to ensure the integrity of securities markets across the country.
An Elon Musk win will surely have major repercussions for the OSC and the constitutionality of their in-house hearing process that has a strong perception of bias against the accused and of being a “homer” process.
Chief Del Riley calls for an inquiry
Former National Chief and constitutional expert Del Riley has called on the Ontario government to launch an inquiry into the OSC’s handling of its investigation into Bridging Finance and Sharpe. Riley served as President of the National Indian Brotherhood (today known as the Assembly of First Nations). He was responsible for entrenching sections 25 and 35 of Canada’s Constitution Act, which address how rights protected under the Charter will intersect with existing rights held by Canada’s Indigenous peoples.
Riley stated about the Sharpe case, “The manner in which the OSC and receiver PricewaterhouseCoopers have conducted themselves throughout this case suggests that fairness, due process and Sharpe’s constitutional rights have taken a back seat to the OSC’s wish for publicity around this case and PwC’s wish to collect fees for as long as possible. It’s a simple fact that institutional bias and systemic racism persist in Canada. Ontario’s government should investigate to ensure that these toxic forces are not interfering in this case, especially given David Sharpe’s status as an Indigenous person and his and Bridging Finance’s numerous contributions to Indigenous economic sovereignty in Canada.”
Riley continued, “from the secretive, Friday night hearing in which the OSC obtained the initial court order to put Bridging in receivership, to the fear and uncertainty the receiver has spread among Bridging’s unitholders, Indigenous people across the country are watching the case with great interest and anxiety. Many agree that more needs to be done to ensure that this case is treated with full fairness as it winds through the process.”
It is clear in the Sharpe case that allowing the use of his illegally disclosed, compelled evidence “would bring the administration of justice into disrepute.” The actions by the OSC and PwC were a serious trampling of a Mohawk’s constitutionally protected rights. Canada has a long history of using its administrative bodies against Indigenous people with little or no regard to these rights. Let’s hope that Sharpe creates a precedent that ensures that Charter rights are strengthened and protected in the courts and in the administrative tribunal processes across Canada.