Former officials of Knowledge House jailed for stock fraud

Two of Nova Scotia’s most notorious white-collar criminals were sentenced to prison Wednesday after the longest criminal trial in the province’s history, a complex fraud and conspiracy case involving a blockbuster multimilliondollar stock market manipulation scheme.

Daniel Potter, the 66-year-old former CEO of defunct tech firm Knowledge House, was sentenced to five years in prison, while the company’s 55-year-old former lawyer, Blois Colpitts, was sentenced to 4 1/2 years.

The jail terms come nearly 17 years after the e-learning company’s dramatic collapse, but the legal saga isn’t over yet.

A bail hearing will be held Thursday for Potter and Colpitts, who were taken into custody following the sentencing. The disgraced executives, found guilty in March of conspiracy to manipulate the firm’s share price and carrying out fraudulent activities in a regulated securities market, have appealed their conviction. Knowledge House, the once highflying Halifax technology darling, developed software the company promised would revolutionize the elementary, high school and postsecondary education systems. “So confident were they in the inevitability of (Knowledge House’s) success that they decided to artificially maintain the share price until the company could secure the capital it needed to get its software into schools across the country and beyond,” Nova Scotia Supreme Court Justice Kevin Coady said in his 54-page decision.

The co-conspirators used multiple manipulative techniques to prop up the firm’s share price, including using margin accounts to dominate the buy-side of the market, suppressing sales and “high closing ” the stock, or entering orders late in the trading day to boost the closing share price.

The company traded on the Toronto Stock Exchange before “the house of cards” they had spent 18 months meticulously building collapsed in August 2001, Coady said.