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When the Royal Canadian Mounted Police concluded their massive 14-month income trust investigation by charging a federal Finance Department bureaucrat two weeks ago, they resorted to an obscure section of the Criminal Code more commonly associated with small-town real estate flips and fudged fender-bender reports.

In fact, legal experts say that if the breach-of-trust allegations against Serge Nadeau are proven, it would be the first instance of a government official being criminally convicted of playing the stock market with confidential government information.

But they also say it won't be the last. The charges against Mr. Nadeau have not been proven, but the very existence of such a high-profile case could spur future investigations into the largely unpoliced field of potential white-collar crime, one that might be called political insider trading. In contrast to corporate insider trading, its perpetrators aren't business insiders but rather government bureaucrats with access to advance information about public-policy changes that can move the capital markets just as surely as news within specific companies.

"I think you're going to see more of it," said Norm Boxall of criminal law firm Bayne Sellar Boxall in Ottawa, who has defended several breach-of-trust cases. "I think it's a spillover from the securities world, and I think it's a sense that, at one time in society, persons had an awe of senior officials . . . and we were very deferential to them and intimidated by them, and I think that's no longer completely true."

The surprise indictment of Mr. Nadeau, a director-general of tax policy analysis, capped a probe into allegations that the former federal Liberal government's policy plans were leaked to the markets in late 2005.

The investigation failed to uncover an explanation for the conspicuous surge in trading in major income trust stocks ahead of the government announcement. The potential legacy of the RCMP's charges, however, may be to heighten the awareness of securities regulators to questionable market trading by government officials ahead of major policy announcements, such as changes in energy programs, taxation, or even news of federal drug approvals.

"If you think about all of those circumstances where government officials are in a position to trade with an informational advantage, I mean, there's millions of them," said Joe Groia, a securities litigator with Toronto firm Groia & Co. and a former director of enforcement at the Ontario Securities Commission. It would be long overdue, added Mr. Groia, who noted that the OSC has the power to ban anyone, including political insiders, from trading if it can be shown they acted contrary to the public interest -- although the commission almost never targets government employees.

Mr. Nadeau has been charged with breaching the public trust under an obscure section of the criminal code aimed exclusively at public officials. Specifically, it's alleged Mr. Nadeau used "confidential federal government information for the purchase of securities which gave him a personal benefit."

Long established in common-law countries, the crime of breach of trust has confounded courts for centuries, both in Canada and abroad. Coincidentally, it was only last year that the Supreme Court of Canada weighed in with a decision that more clearly defined the crime.

In that case, the high court overturned a Quebec Court of Appeal ruling against Denis Boulanger, a former police chief of Varennes, Que. Mr. Boulanger's troubles began when he intervened in a police investigation into a minor auto accident involving his daughter. Convinced she was not at fault and thus should be spared the $250 insurance deductible, Mr. Boulanger asked the attending officer -- a subordinate -- to prepare a second, more detailed report.

A police station worker cried foul, and Mr. Boulanger was eventually convicted of breach of trust, a decision upheld by the Court of Appeal.

The Supreme Court, however, reversed those findings, ruling that the accused did not set out to defraud the municipality or the insurer simply by asking for more complete report. Nor, it concluded, did Mr. Boulanger's intervention on his daughter's behalf, while questionable, rise to the level that would warrant a criminal punishment.

"You need at least a small level of intent, which was not the case," said François Beauvais, Mr. Boulanger's lawyer and a partner at Rochefort & Associés in Montreal. "It wasn't a false report."

Mr. Beauvais said the Supreme Court drew the all-important distinction -- frequently confused by trial judges over the years -- between actual breach of trust involving a serious criminal intent and the mere neglect of duty.

He said the key for the prosecution in the Nadeau case will be to establish criminal intent showing Mr. Nadeau consciously sought to profit from his insider knowledge. If it can do that, he said, the case "will be a little bit more difficult to defend" than the Boulanger case.

Mr. Nadeau will also be held up to a high ethical standard, given that the federal government explicitly forbids cashing in on insider knowledge. According its Values and Ethics Code, public servants "should not knowingly take advantage of, or benefit from, information that is obtained in the course of their official duties and that is not generally available to the public."

Nowhere, lawyers say, is that obligation more entrenched and conspicuous than in the hallowed corridors of Finance. "The one thing you always know about the Finance Department of the federal government is that it's always shrouded in secrecy," said Chris Paliare of Paliare Roland Rosenberg Rothstein LLP of Toronto, who has acted for numerous white-collar crime defendants. "Millions of dollars can be made or lost as a result of what the government's position is going to be, and they're the gatekeepers of that information."

Mr. Groia, the former OSC director of enforcement, says, however, that the burden of proof in breach-of-trust cases is more onerous than in securities-law cases involving insider trading because the former are bound by the "makes use of" provision. In essence, the Crown must prove beyond a reasonable doubt the accused made use of privileged information -- and was not motivated by something else -- in deciding to make the trades.

"It's more difficult to prove this charge than to prove insider trading," he said.

Regardless of whether the charges stick to Mr. Nadeau, the 50-year-old could face a battle in upholding his reputation -- if Mr. Boulanger's seven-year ordeal is anything to go by. The expelled Varennes police chief never did get his job back. And while he managed to win a settlement from the municipality two weeks ago, Mr. Boulanger never returned to public life. He now works for a trucking company.

bcrosariol@globeandmail.com