To the relief of the b.c. securities Commission, Vancouver lawyer Michael Seifert has failed at his attempt to weasel out of a settlement he reached with commission enforcement staff more than six years ago.

In December 1999, Seifert entered into a settlement with BCSC executive director Steve Wilson, admitting that while working as legal counsel for Vancouver junior Arakis Energy Corp. and in possession of insider information, Seifert had dumped about $800,000 worth of stock through offshore accounts. Seifert also admitted that while serving as an insider of several other companies, he had jettisoned shares of those companies through offshore accounts without telling anybody.

He agreed to a 12-year market suspension and a $450,000 penalty, of which $200,000 was attributed to the commission’s investigation costs. More critically for his law career, he agreed not to act as solicitor for any filings made by a public company to the BCSC or the TSX Venture Exchange. He signed the agreement with the advice of one of the most experienced lawyers in Vancouver, Marvin Storrow, “to avoid lengthy and costly litigation and let me get on with my life.”

Under the terms of the settlement, Seifert agreed to pay the $450,000 penalty in $75,000 instalments, but after three payments, totalling $225,000, he defaulted. The BCSC sued for the balance, and Seifert countersued on three points.

First, he alleged that the commission had used “persistent threats and ultimatums” to “extort” a settlement from him. This was a curious complaint, given that he had the benefit of Storrow’s counsel when he signed. Perhaps realizing this argument would not fly, he dropped it before the case went to trial.

His next argument was that the $450,000 penalty, which he had agreed to pay, exceeded the $100,000 maximum fine that the commission was permitted to impose under the Securities Act. (The maximum is now $250,000 per person and $500,000 per corporation.) As a result, he claimed, the commission had been “unjustly enriched.”

A corollary argument was that, by the BCSC executive director’s own admission, the $200,000 attributed to investigation costs was excessive. If the case had gone to a hearing, it is not certain that the commission could have recovered that amount.

Seifert’s last argument was even broader: the executive director does not have power to ratify a settlement agreement because that is the commission’s job. On that basis, the whole settlement had to be tossed out.

The implications for the BCSC were ominous. If Seifert won, it would jeopardize the dozens, if not hundreds, of settlements that the executive director had negotiated, including a $1.2-million settlement with Seifert’s co-conspirator, former Arakis president Terry Alexander.

With such high stakes, the commission called in Vancouver lawyer Len Doust to handle the case. Doust ranks with Storrow as among the city’s best lawyers and is perhaps best known as Todd Bertuzzi’s defence lawyer.

The case was heard in November before B.C. Supreme Court Judge Stephen Kelleher. The decision was released on Feb. 7 and, happily for commission enforcement staff, the judge ruled that the executive director is legally able to enter into these sorts of settlements without reference to the commission. He also ruled that because the settlement agreement was voluntary, the amount that Seifert agreed to pay is not a penalty imposed under the Securities Act; rather, it is in the nature of a settlement. Therefore, he concluded, the penalty limits prescribed by the act do not apply.

By the same token, he ruled that even if a commission hearing panel would not have ordered payment of $200,000 in costs, that doesn’t mean the executive director and Seifert couldn’t agree to such a payment as a compromise.

So, Seifert struck out on all counts. He not only has to pay the remaining $225,000 that he had refused to pay, he also has to pay additional legal fees. What’s more, he now has a date with the Law Society of B.C., which has alleged that he performed legal services for Arakis while he had a financial interest in the company, a situation that could reasonably have been expected to affect his professional judgment. IE