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Quebec’s stock market regulator can go after Canada’s Panama Papers kingpin, Supreme Court rules

A 7-1 majority of the Supreme Court of Canada has ruled that Quebec’s Autorité des marchés financiers can proceed with trying to have Fred Sharp, Canada’s kingpin in the Panama Papers, banned for five years from the province’s stock market.

Province's AMF sought 5-year ban and $2M fine on Fred Sharp over alleged role in pump-and-dump scheme

Image shows Fred Sharp, a former lawyer from West Vancouver, was the 'mastermind' behind a 'shadow bank' that brought in hundreds of millions of dollars from offshore accounts into Canada for wealthy clients to use, according to a draft internal CRA report dated December 2018. The image is a screengrab from the short film Look Both Ways by Sharp's son. Sharp acted in it.

Everyone seems to want a piece of Fred Sharp, the self-styled private banker from West Vancouver who built a huge network of offshore companies that facilitated, according to U.S. court findings, a billion-dollar series of pump-and-dump stock frauds.

The Canada Revenue Agency has been looking into him since 2013, the U.S. Securities and Exchange Commission obtained a $68-million civil-fraud judgment last year, he's wanted on U.S. criminal charges in Massachusetts, and the B.C. Securities Commission had him barred from the province's stock market in February.

Now, after six years of legal squabbling over jurisdiction, Quebec's stock market regulator can have its crack at Sharp, too, the Supreme Court of Canada ruled this morning.

A 7-1 majority of the judges declared that Canada's Constitution gives the province's Financial Markets Administrative Tribunal (FMAT) the power to punish people even when they don't live in Quebec, the company in question isn't based there, and the company's stock doesn't trade on a market there.

"The allegations that the appellants used Quebec as the 'face' of their securities manipulation and injured Quebec investors establish such a connection to give the FMAT jurisdiction over the appellants," says the ruling, written by Chief Justice Richard Wagner and Justice Mahmud Jamal.

The decision means the provincial regulator, the Autorité des marchés financiers (AMF), can pursue its allegations — originally brought to the tribunal in 2017 — against Sharp and three others from outside Quebec. The AMF alleged the men funnelled money into a company called Solo International so that its Quebec subsidiary could buy mining claims, and then engaged in a kind of stock market manipulation called a pump-and-dump scheme to inflate the value of the company's shares.

Solo was incorporated in Nevada and traded on the U.S. over-the-counter stock market, but its then-CEO lived in Quebec and some of its other investors lived there.

Supreme Court of Canada Chief Justice Richard Wagner gestures as he responds to a reporters question.

The tribunal originally ruled in 2017 that it did have jurisdiction. That was upheld on review by Quebec's Superior Court and Court of Appeal.

At stake in the case was the ability of Canada's provincial stock market regulators to go after alleged breaches committed beyond their province's borders, but still having some connection.

In its argument, the AMF asked the Supreme Court to uphold a "flexible approach" to determining jurisdiction, given that modern technology can allow perpetrators like Sharp to "incorporate a company in Bahamas, open a bank account in Switzerland and a trading account in Hong Kong" and then trade in the shares of a Canadian company on U.S. markets, all from a smartphone while sitting on an airplane.

Supreme Court of Canada Justice Suzanne Côté in her ceremonial robes.

Sharp and the other defendants had challenged FMAT's jurisdiction to hear the case against them, saying the Quebec Civil Code's rules around private property and civil rights preclude it.Sharp and his lawyers did not reply to questions sent by email earlier this week. Other than a short, written rant about privacy and journalists in 2016, Sharp has not responded to requests for comment over the years for CBC's reporting on him.

In a statement in French, the AMF's executive director of enforcement welcomed Friday's decision. "The Supreme Court has upheld an important part of FMAT's powers," Éric Jacob said. "It's a big victory."

The AMF's initial 2017 complaint had been seeking to fine Sharp $2 million, ban him for life from securities trading in the province and ban him for five years from serving as an officer or director of a public company or as a broker or fund manager.

'Shadow bank' for wealthy Canadians

The AMF is just the latest regulatory agency to have proceedings against Sharp, 71, a former lawyer who became the Canadian agent in the mid-1990s for Panamanian lawyers at Mossack Fonseca — the now-disbanded firm whose documents were leaked and formed the Panama Papers.

Records in the leak showed Sharp helped register more than 1,100 offshore entities for clients. A CBC investigation found his business, Corporate House, was known as the "go to" investment firm for wealthy Canadians wanting privacy, and minimal tax, for their assets.

In 2013, Sharp came onto the CRA's radar when it was auditing one of his clients. An internal CRA report at the time said "the Corporate House group of companies … have facilitated financial arrangements and deceptions."

Another internal, confidential CRA draft report from 2018 said an analysis of bank records showed that more than $338 million flowed through the Corporate House group's bank accounts between 2010 and 2016 alone, much of it coming from accounts in the Caribbean and Switzerland, as part of a Vancouver-based "shadow bank" that let wealthy clients buy homes, vacation properties, cars and airplane tickets with funds stashed in tax havens.

"Corporate House is structured in such a way to disguise true ownership, mask its activities and confuse those attempting to understand the relationships," the CRA draft report said.

The tax agency has been trying to audit Sharp and a number of his associates since at least 2016, but they launched more than 80 legal challenges to stymie the CRA's attempts to collect financial records. After theFederal Court of Appeal finally ruled against Sharp and the other parties last year, he withdrew his action against the CRA.

U.S. criminal charges

But the most devastating allegations against the onetime film actor and producer have come from south of the border.

In 2021, following a yearslong investigation, the U.S. Securities and Exchange Commission charged Sharp with civil stock fraud for being the "mastermind" behind a network of shell companies and stock-trading accounts that he rented out to clients to use in a series of pump-and-dump scams.

The SEC said the scams grossed more than $1 billion US and operated from 2010 to 2019. It said Sharp's clients were able to hide their ownership and manipulation of penny stocks via the anonymity of the offshore corporations he set up and managed, and through the use of encrypted communication devices and code names. Sharp's purported code name was "Bond," after the British spy.

Simultaneously, the U.S. Department of Justice charged him criminally with securities fraud and conspiracy to commit securities fraud. Those charges are still pending and there appears to have been no attempt to extradite Sharp from B.C.

A U.S. judge said in September that his "whereabouts seem to be unknown."

Sharp did not contest the SEC charges (he has since said he wasn't properly notified of them) and the court entered judgment against him last year, accepting all the factual allegations against him. He was ordered to pay the equivalent of $68 million Cdn in penalties, disgorgement and interest, and the SEC is fighting him in B.C. court to seize his assets.

The SEC has gone on to level civil stock fraud accusations against a dozenother Canadianslinked to Sharp and his network, and separate criminal counts are pending against six of those people.

In February, the B.C. Securities Commission banned him for life from the province's investment markets, based on the findings in the SEC case.

Credit belongs to : www.cbc.ca

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