A step too far

Law society’s zealous pursuit of two of its members did not properly serve justice The law society must aggressively probe behaviours it suspects violate its professional code of conduct, but not to the exclusion of its obligation to fairly examine and ev

Self-regulatory bodies don’t generally engender much confidence with the public or sometimes even within their own memberships, because the inherent conflict of overseeing their own industry has long raised doubts about their effectiveness. So when the Law Society of Upper Canada put two corporate lawyers from a mighty Establishment firm in its crosshairs, the move was widely dismissed as amusing grist for the gossip mill. But after seven years of tenacious pursuit, it has ceased to be entertaining. The unprecedented legal salvo launched against Torys LLP lawyers Beth DeMerchant and Darren Sukonick has set a troubling precedent in the legal community, especially for those who work in the heart of Canada’s financial centre. Moreover, it has created a chilling effect that could have far-reaching consequences for companies and the legal advice they receive.

The body that regulates Ontario’s legal profession alleged DeMerchant and Sukonick — the former a partner and renowned star lawyer at Torys; the latter still in the spring of his career — violated professional conduct rules during their involvement in the $3.2- billion sale of newspaper assets by U.S.- based Hollinger International Inc. to Canwest Global Communications Corp. in 2001. At the time, the Torys lawyers represented U.S.- based Hollinger International, and its chairman and CEO, Conrad Black, as well as a group of its directors and executives who received millions in controversial non-compete payments. Black and his former business associate David Radler pocketed an estimated $11.9 million between them from that transaction.

There has never been any doubt the late Izzy Asper, founder and former chairman of Canwest, agreed to pay the handsome sum when he and Black negotiated the deal. However, that didn’t stop U.S. prosecutors in Chicago from making it the focus of a criminal case against Black and three others in 2007. Nordid it seem to matter to Hollinger’s special committee investigating the non-competes. Fronted by U.S. Securities and Exchange Commission chairman Richard Breeden, the committee released a 500- page tome that famously accused Black and his cohorts of operating a “corporate kleptocracy.”

That report was the basis upon which the law society launched a probe into DeMerchant and Sukonick in January 2006, more than a year before Black and his co-defendants went on trial for fraud in Chicago. It took issue with the work of the two lawyers from 2000 to 2003. Torys collected millions in fees for its advice, but the firm also paid millions to settle a lawsuit with Hollinger’s special committee. However, because the law society has no jurisdiction over law firms and can only sanction individual lawyers, DeMerchant and Sukonick were vulnerable to its full fury.

The majority of cases handled by the law society are usually completed in 10 months on average, but this one took seven years, even though the so-called Breeden report has since been widely discredited. In all, it took four years to investigate and for the prosecution to begin, 130 days of hearings over three years, and then an additional nine months for a three-member disciplinary panel to dismiss the conflict charges, citing insufficient proof that any violations occurred. Disappointed, the law society is considering an appeal, but that would only be a face-saving measure.

To be sure, the body must aggressively probe behaviours it suspects violate its professional code of conduct — but not to the exclusion of its obligation to continually and fairly examine and evaluate evidence no matter how much time and resources have been invested in a case.

This ill-fated litigation has already shortened DeMerchant’s career and severely stalled Sukonick’s. Worse, corporate lawyers now fearing the wrath of a self-regulating body that has shown its zeal for prosecution no matter the costs are looking over their shoulders, adopting a check-box mentality that does little to benefit the profession, and even less for the companies they advise.