Catalyst hints it may call sting 'evidence'
Private equity firm in $1.5B lawsuit
TORONTO • Lawyers for Catalyst Capital Group Inc., the private equity firm tied to an unprecedented undercover “sting” against a retired Ontario Superior Court judge, are still suggesting they may use some of that “information and evidence” in court proceedings.
The prospect was mentioned briefly in a hearing Monday before Ontario Superior Court Judge Glenn Hainey in Catalyst’s $1.5-billion lawsuit against West Face Capital, Vimpelcom Ltd. and nine other companies Catalyst says misused its confidential information and conspired to foil its unsuccessful bid for WIND Mobile.
A consortium headed by West Face acquired WIND in a deal valued at about $300 million, and later sold the wireless carrier for $1.6 billion.
The Monday hearing was an unusual one, brought by Catalyst to argue that a recent Court of Appeal decision in its earlier lawsuit against West Face and former employee Brandon Moyse helps its case in the second action.
Last fall, as the National Post reported, Catalyst acknowledged that a subcontractor working for a security firm it hired had carried out the sting on Frank Newbould, who was the trial judge in the original Catalyst lawsuit against West Face.
The subcontracting firm was the Israeli intelligence firm Black Cube, but a spokesman authorized to speak for Catalyst said at the time that Catalyst neither ordered nor knew about it until after it happened.
Newbould was surreptitiously audiotaped and photographed as he was wooed by an agent posing as a potential client in his thennew arbitration business.
The fruits of that undercover operation — photographs of Newbould at dinner, an audio tape and edited transcripts — were then shopped, unsolicited, to the Post by third parties who attempted to discredit the former judge.
Just last month, the appeal court dismissed Catalyst’s appeal in the Moyse case, where Newbould found so strongly in favour of West Face — exceptionally, the appeal court did it from the bench, without even requiring lawyers representing Moyse or West Face to argue the matter.
West Face and the other defendants are asking Hainey to stay — or dismiss — the Vimpelcom case.
But Catalyst asked for an extra opportunity to make further arguments about the impact of the appeal court’s decision in the Moyse case on the Vimpelcom lawsuit, saying that it means the stay shouldn’t be granted.
The two lawsuits are similar, in that in the Moyse lawsuit, Catalyst argued that it was Moyse, a junior analyst who worked first for Catalyst and then for a few weeks for West Face, who gave West Face the confidential information it then used to win control of WIND, and that in the Vimpelcom lawsuit, Catalyst says it was some of the nine defendants who leaked secret information and worked with West Face to win the bid.
It’s precisely because the two claims arise from the same set of circumstances that West Face lawyers Kent Thompson and Matthew Milne-Smith say Catalyst’s actions constitute “litigation by instalments,” a classic sort of abuse of process.
And they called Catalyst’s suggestion of fresh evidence a “threat,” and noted that lawyers David Moore and Brian Greenspan had the alleged new information since September last year and yet abandoned the effort to bring it before the appeal court.
But Moore told Hainey that all he was doing was flagging the court to the possibility such a motion could be brought.
It is rare that courts grant such motions, made under a rule that gives a last chance to parties who have uncovered fresh evidence only after the first trial and appeal are complete.
Hainey has promised a decision this week.
Meanwhile, Catalyst and West Face will be back before him in June for argument on West Face’s counterclaim to another Catalyst lawsuit.
Last year, Catalyst filed a suit against West Face and a number of other companies
HAINEY HAS PROMISED A DECISION THIS WEEK.
and individuals, some of whom, Catalyst alleges, formed a “wolfpack” to short-sell and drive down the share price of Callidus Capital Corp., the publicly traded lender controlled by Catalyst.
In response, West Face and the other defendants counter-sued Catalyst and Black Cube, alleging that a number of its employees were targeted by Black Cube operatives seeking information about Moyse and the WIND deal.
Black Cube lawyers John Adair and Gordon McGuire said in an April 13 court filing that Black Cube is but an “arm’s length” defendant and that if Catalyst’s motion to strike the entire counterclaim fails, the court should dismiss some of the allegations about Black Cube, including those detailing the sting on Newbould.
These allegations, the Black Cube lawyers say, “expand the scope of this proceeding into matters that are irrelevant and scandalous, and will embarrass all concerned.”