Bridging faces $40M bill from receiver, counsel

Bridging was ordered into receivership at the request of the Ontario Securities Commission (OSC) in April 2021, amid concerns about suspected misconduct. It’s expected that investors will ultimately face losses of more than $1 billion in the firm’s collapse.

In the meantime, the court is being asked to approve professional fees, which cover the period from April 2021 to April of this year, including $28.5 million in fees and disbursements to PwC, $11.4 million to the receiver’s independent counsel, Thornton Grout Finnigan LLP, and $3.2 million to its other independent counsel, Voorheis & Co LLP.

Alongside the fees, the receiver is also seeking the court’s approval to allow units of Bridging funds that are held in RRSPs to be transferred to RRIFs for investors who are required to make those conversions, and approval for the methodology used to calculate the net asset value of the funds to facilitate those transfers.

The OSC’s enforcement hearing into alleged misconduct by top officials at BFI is also set to resume next week, with the testimony of the regulator’s final witness in the case. The OSC has alleged that witness, Rishi Gautam, former CEO of cannabis company GrowForce, helped facilitate some of the Bridging executives’ allegedly fraudulent transactions.

None of the regulator’s allegations have been proven.

Gautam’s testimony has been delayed by a motion he brought seeking to quash a subpoena requiring him to testify that was issued by a U.S. court in response to a request for assistance from the OSC.

In that motion, Gautam sought to invoke his Fifth Amendment protections against self-incrimination under U.S. law.

In its ruling, the court noted that, while there are protections against self-incrimination in both the U.S. and Canada, those protections work differently.

In the U.S., a witness invokes their Fifth Amendment rights by refusing to answer questions. In Canada, witnesses are required to give evidence but then can invoke the protections against self-incrimination if and when the government seeks to use that evidence against them.

These different approaches create the risk that a U.S. witness, who is compelled to give evidence under Canadian law, could then be charged in the U.S.

However, the U.S. district court in Massachusetts denied the motion. It held that “testimony compelled by a foreign sovereign cannot be used against a defendant in a U.S. court if it is given involuntarily.”

Given that Gautam’s testimony in the OSC’s case would be provided involuntarily, “Any use of that testimony by a U.S. court, state or federal, would therefore be unconstitutional,” the court said. “The subpoena therefore poses no threat to Mr. Gautam’s Fifth Amendment rights.”

As a result of this ruling, Gautam is scheduled to testify in the OSC case next week. The defence cases are slated to start in January, and the hearing is expected to wrap up in February.