CEO, lawyer guilty of fraud
Sentencing in Knowledge House case set for May
Two key architects behind a sophisticated multi-milliondollar stock market scheme have been found guilty of manipulating the share price of Knowledge House Inc., nearly 17 years after the Halifax e-learning company’s dramatic collapse.
Nova Scotia Supreme Court Justice Kevin Coady handed down the verdict Friday on former Knowledge House president and CEO Daniel Potter and lawyer Blois Colpitts.
In his 207-page ruling, Coady said the pair knowingly carried out fraudulent activities in a regulated securities market.
“Their goal was to artificially maintain the (Knowledge House) stock price while they secured new investors, who, as a result of the defendants’ conduct, would be making investment decisions based on a misleading impression of the level of demand for the stock,’’ he wrote.
“The defendants acted with an intent to defraud.’’
Knowledge House was once a high-flying developer of educational software, trading on the Toronto Stock Exchange before its breathtaking collapse in 2001.
The former chief executive of the disgraced tech firm said he wasn’t surprised by the decision.
“I can’t say I’m surprised, given the whole history of the thing,’’ Potter told reporters outside the courtroom.
“There is a very long and almost convoluted history and one can’t be surprised about anything in this process.’’
He added: “Today is not my day to respond, it’s just to take in the message of the court and we’ll take it from there. It’s been a long process.’’
The trial began in November 2015 and heard from 75 witnesses over more than 160 court days, and 184 exhibits were received — including thousands of documents.
A sentencing hearing has been scheduled for May 22.
Mark Covan, one of three federal Crown attorneys handling the criminal trial, said the case is one of the largest fraud prosecutions in the province’s history.
“It’s been a significant case to prosecute,’’ he said. “Commercial crime cases take significant resources to investigate and significant resources to prosecute, because they tend to be complex and challenging cases.’’
In his decision, Coady said the pair’s actions spanned an 18month period, which included the dot-com crash.
The conspirators spent millions buying up half the company’s shares that crossed the exchange, he said, noting that they “succeeded in artificially maintaining the share price.’’
While the judge found Potter and Colpitts guilty on all five counts of the indictment, he entered convictions only on the first two counts.
Meanwhile, Coady also released a 54-page decision dismissing the pair’s charter application on the grounds of delays before and after they were charged, finding that their rights had not been infringed during the lengthy proceeding.