A former director with the National Research Council of Canada who pleaded guilty to not properly disclosing his role in a fibre-optics startup that was using NRC technology is scheduled to be sentenced Monday in an Ottawa courtroom.
The sentencing of Arvind Chhatbar, who ran the NRC’s Ottawa innovation office nearly a decade ago, marks the culmination of a nine-year investigation by the RCMP, and the final chapter of Mr. Chhatbar’s tumultuous journey with the company he founded, Enablence Technologies Inc.
Once a darling of the TSX Venture Exchange and the Ottawa high tech community, Enablence – which held patents for fibre-optic technology to be used in homes – was frequently profiled in the business press and at its peak had a market capitalization of more than $500-million.
But what wasn’t mentioned in any of the media profiles of Mr. Chhatbar, Enablence’s chief executive until 2010, was the company’s controversial origins at the NRC.
In 2004, scientists representing Enablence came to the NRC – the federal organization that supports scientific research and development – and sought approval to use NRC-licensed optical technology.
What was not made clear to the agency was that Mr. Chhatbar, who was still an NRC director at the time, was the person who had incorporated Enablence several months earlier, according to a 53-page affidavit filed by the RCMP in support of a search warrant that it executed in 2011.
After the licence was granted, Enablence made monthly “consulting and management” payments of $10,000 to a different company, CI Inc., which was controlled by Mr. Chhatbar, the affidavit, sworn by Sergeant Charles Robineau, states. By July 2005, CI Inc. had received more than $200,000, the affidavit states. In addition to Mr. Chhatbar’s plea of guilt on the charge of defrauding the government, CI Inc. has also pleaded guilty to possession of the proceeds of crime.
Mr. Chhatbar parted ways with the NRC in 2005 after the agency learned about his role with Enablence. As the share price of Enablence began climbing and publicity around the company escalated, Mr. Chhatbar was frequently identified as a former NRC official, but the circumstances of his departure were never publicly explained.
In a statement, the NRC said it “identified the issue when it occurred and proactively notified the RCMP, who then investigated and laid charges. The employee was removed from his job, and a forensic audit was undertaken to determine the extent of the impact.” The agency called the matter an “isolated case.”
Mr. Chhatbar was originally charged with 17 fraud and corruption-related offences in 2012, 16 of which were withdrawn as part of his plea agreement.
Paul Lewandowski, Mr. Chhatbar’s lawyer, pointed out that Mr. Chhatbar pleaded guilty to a very specific subsection of the Criminal Code and said that his client’s admission to fraud on the government acknowledges that Mr. Chhatbar didn’t use his government position to try and influence anyone.
“Hence, it ended up as a very technical violation,” said Mr. Lewandowski, explaining that Mr. Chhatbar’s plea is an admission that he should have disclosed his role with Enablence and sought permission from NRC executives.
Mr. Lewandowski criticized the RCMP for taking so many years to complete the investigation and said that, as a result, some records that would have otherwise been available had been destroyed because of retention periods.
Enablence, which is under new management and now has a market capitalization of about $4-million, still trades on the TSX Venture.
“Enablence was unaware of these allegations and we have no comment in respect thereof,” said Virginia Schweitzer, a lawyer for Enablence.
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