More than four years after the Ontario Securities Commission first accused a trio of cannabis executives of fraud, an adjudication panel has suspended the case, saying the regulator’s secrecy surrounding the hearing has made it impossible to mount a proper defence.
In a decision Monday, the Capital Markets Tribunal (CMT), an independent division of the OSC, said it was forced to stay proceedings against Silvio Serrano, who was accused in 2019 of inappropriately diverting more than $3-million in investor funds alongside co-defendants Ben Ward and Peter Strang.
The circumstances surrounding the proceedings included two high-profile murders, with one of the victims being a known Mafia figure.
Mr. Serrano, Mr. Ward and Mr. Strang had previously co-founded Canadian Cannabis Corp. in 2014, raising $3.2-million in Canada and US$8.8-million in the United States, and investing in an equipment provider called Growlite Canada. The company subsequently ceased all operations, and the three co-founders all resigned in 2016.
Part of the OSC case against Mr. Serrano was based on testimony provided by Mr. Ward during three days of interrogation in 2018. During one of those interviews, he told investigators his work history included a period from 1999 to 2005 when his employer was the U.S. Central Intelligence Agency.
The OSC subsequently issued a confidential order requiring significant portions of Mr. Ward’s testimony to be redacted before it could be shared with lawyers representing Mr. Serrano. When those lawyers demanded more information about the redactions, they were told the order also prohibited the OSC from saying anything else about the matter, including details about the order itself, who issued it and when.
Because the order is “unambiguous” in that “it clearly and definitively prohibits disclosure of the redacted information,” but that not disclosing the redactions would “significantly impair” Mr. Serrano’s ability to defend himself, the CMT said it had no other choice but to order the proceeding against him be stayed.
“We appreciate that a stay of a proceeding is a most drastic remedy of last resort,” the panel said in its decision this week, but “requiring Serrano to proceed without disclosure of the redacted material would cause him actual prejudice.”
The CMT concluded that “the ongoing unfairness to Serrano justifies a stay of the proceeding against him.”
The OSC declined to comment on the outcome of the case. The decision was “an important affirmation of disclosure rights,” according to Robert Stellick, a partner at Adair Goldblatt Bieber LLP who represented Mr. Serrano.
“We’re pleased with the result and that Mr. Serrano can move forward with his life without this proceeding looming over him.”
In May, 2021, OSC adjudicator Raymond Kindiak ruled that the “unique circumstances” of the case required him to have a portion of the regulator’s submissions made in secret, without any of the defendants or their lawyers being present.
Toronto litigator Nader Hasan and white collar defence lawyer Stephen Aylward were both appointed as amicus curiae – or friend of the tribunal – in order to observe the confidential proceedings held in mid-June and mid-August and to “represent the interests of justice.”
It was the first time the OSC took the extraordinary step of making an amicus curiae appointment.
Mr. Ward agreed to a settlement with the OSC in November, 2022, that banned him from running public companies in Ontario for six years and required him to pay $10,000 to help cover the costs of the investigation. After leaving Canadian Cannabis Corp. in 2016, Mr. Ward joined publicly traded cannabis seller Wayland Group Corp. later that year as chief executive officer.
He left Wayland in August, 2019, just weeks before the OSC allegations were released. Three months later, Wayland filed for creditor protection, and in early 2020 the company’s flagship cultivation division – Maricann Inc. – was sold off for $12.4-million.
While Mr. Ward never received any of the allegedly misdirected money, he acknowledged that he “acquiesced” when the company lent $3-million to Growlite, which was owned by Mr. Serrano. He also failed to take appropriate action in 2015 when, according to the OSC, about $800,000 worth of Growlite equipment stored at a Canadian Cannabis facility “disappeared under suspicious circumstances.”
In 2017, there were two high-profile murders in Toronto involving people who had ties to Canadian Cannabis Corp. In March, Mr. Serrano’s brother, Saverio, was shot and wounded, and his brother’s girlfriend – 28-year-old Mila Barberi – was killed while the pair were sitting in a BMW parked outside a lighting store owned by Mr. Serrano. Saverio Serrano is among those the OSC alleged received some of the misdirected funds.
Weeks later, known Mafia figure and cannabis grower Tony Sergi – who had been in talks with Canadian Cannabis to sell a cultivation facility in Brampton after being introduced to the company by Mr. Serrano – was shot and killed outside his home in the Toronto suburb of Etobicoke.
While the OSC could technically still pursue its case against Mr. Strang, the regulator noted the only reason its Nov. 13 decision applied solely to Mr. Serrano was because Mr. Strang did not file his own motion for a stay of proceedings. Instead, Mr. Strang said in a preliminary hearing held in October, 2022, that he was seeking the same relief as Mr. Serrano, but did not put that request in writing.
“While our reasoning on this motion may well apply to both parties,” the CMT said, “our order is limited to Serrano as his is the only motion before us.”
Jameson Berkow