‘Where’s the body?’ 10 years sought for fraud
Knowledge House software stock scheme
HALIFAX • Federal Crown prosecutors argued on Tuesday that two of Nova Scotia’s most notorious white-collar criminals should be sentenced to 10 to 12 years in prison, prompting a judge to ask: “Where’s the body?”
Nearly 17 years after the dramatic collapse of Halifax educational software company Knowledge House, lawyers put forward sentencing recommendations for two architects of the sophisticated multimillion-dollar stock market scheme.
Mark Covan, one of three Crown attorneys handling the criminal trial, admitted that up to a dozen years in prison is a “harsh and significant” sentence. But he said it’s justified given the gravity of the offence.
“A sentence that doesn’t recognize that someone has used their office, their education and their training to commit crime is an affront to the administration of justice,” Covan told the court.
“This type of crime could not have been conceived of by the average person, let alone carried out.”
Former Knowledge House president and CEO Daniel Potter and lawyer Blois Colpitts were found guilty in March of carrying out fraudulent activities in a regulated securities market.
The high-flying technology company traded on the Toronto Stock Exchange before a 2001 collapse that cost investors millions of dollars.
In a 207-page ruling in March convicting the pair, Nova Scotia Supreme Court Justice Kevin Coady said they artificially maintained the company’s stock price while securing new investors, who would make investment decisions based on a misleading impression of the stock demand.
On Tuesday, Coady questioned the lengthy sentence sought by the Crown, saying “denunciation and deterrence doesn’t necessarily mean throwing away the key.”
“When I read your brief, and the position you took ... you came down to a 10- to 12-year range that you’re going to be advancing to the court,” he told the court. “To be frank, my thought was ‘Where’s the body?’ ”
However, Covan said there is precedent for the sentence. He cited similar cases in which hefty sentences were imposed.
Meanwhile, defence lawyer Brian Greenspan recommended a sentence for Potter of three to four years, arguing that there have been significant delays since the Halifax e-learning firm shut down.
He said his client has lived “under the cloud of a criminal charge” for several years and that the considerable toll it has taken on his life must be considered when imposing a sentence.
“The demise of (Knowledge House) occurred when Potter was 49 years of age. He’s now 66,” Greenspan told the court.
He said his client has faced a stigma in the community as a result of the drawn-out regulatory, civil and criminal proceedings.
Greenspan added that letters written in support of Potter offer insight into “agony sustained by Potter and his family over this very, very long period.” Potter and Colpitts are expected to be sentenced July 25.
The trial began in November 2015 and heard from 75 witnesses over more than 160 court days.
Knowledge House was founded in 1984, and was reinvented under Potter in the late 1990s to become a learning and information technology company.
Shares began trading publicly for a few cents, then skyrocketed to more than $9.
But in 2001, a series of events led the stock price to plummet, from which it never recovered.