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Private equity firm Catalyst Capital Group Inc. is pressing ahead with its effort to wring money out of its failed bid for Wind Mobile – and claims to have evidence against a rival fund manager that may have been gathered in a sting operation run by former Israeli spies.

In a letter sent to investors in its funds, Catalyst says it has interviews with former employees of Toronto-based West Face Capital Inc. that show “inside information about the Wind negotiations was improperly leaked to West Face.” The letter, marked “privileged and confidential update”, was sent to Catalyst unitholders in March and obtained by The Globe and Mail.

Catalyst has filed two separate lawsuits over the Wind case. In 2014, Catalyst was negotiating with the owners of the wireless company to buy it, but the deal fell apart. A group led by West Face bought Wind for $300-million and flipped it to Shaw Communications Inc. for $1.6-billion a year and a half later. The business is now called Freedom Mobile and was recently valued by one Bay Street analyst at $5.7-billion.

Catalyst lost the first lawsuit, with Ontario Superior Court Justice Frank Newbould ruling that he “had considerable difficulty accepting as reliable” much of the evidence supplied by Catalyst founder Newton Glassman. Catalyst lost its appeal of that decision in February.

Now before the courts is a second lawsuit in which Catalyst is suing a number of parties, including West Face and VimpelCom Ltd., a Netherlands-based telecom firm that used to be the major shareholder in Wind. The suit, which claims $1.3-billion, alleges that vital information was leaked during negotiations that allowed the West Face consortium to win the deal.

West Face has consistently denied it acted improperly. In a court filing on Monday, lawyers for the firm said: “This so-called ‘evidence’ consists of transcripts and recordings obtained illicitly by Catalyst from ‘stings’ conducted against Justice Newbould, and current and former employees of West Face, by former agents of the Israeli Mossad operating unlawfully in Ontario and elsewhere under the name ‘Black Cube.’ ”

West Face, VimpelCom, Globalive Capital Inc. and UBS Securities Canada Inc. were in court on Monday asking Ontario Superior Court Justice Glenn Hainey to throw out the case. A ruling is expected by the end of the week.

In its letter to fund investors, Catalyst does not detail how it went about getting the interviews or when and where they were conducted. Nor does it describe who conducted the questioning.

Black Cube, a private investigation firm founded by veterans of Israel’s intelligence service, allegedly had operatives pose as recruiters for a global private equity firm who approached West Face employees with potential job offers to get them talking. Black Cube has also done work for disgraced movie producer Harvey Weinstein, an assignment that executives in the firm subsequently apologized for taking on. West Face filed a suit against Catalyst and Mr. Glassman in December alleging the use of the firm against its employees.

The Catalyst investor document purports to contain short excerpts from interviews with a former West Face portfolio manager and a second ex-staffer – both unnamed – that Catalyst says show that West Face received leaked details about Catalyst’s Wind discussions, allowing it to structure a bid for the wireless carrier with fewer conditions.

“Accordingly Catalyst will use its best efforts to ensure that all of the relevant facts and documents come to light, and to pursue all available remedies to obtain redress for the benefit of the investors in the funds,” the document said.

Catalyst spokesman Dan Gagnier declined to answer specific questions about the information in the document and whether it came from Black Cube. He said: “The confidential communication to our LPs reflects our strong belief that Catalyst’s rights were violated on the Wind transaction. This confidential letter outlined some of the reasons for this belief and Catalyst’s intention to explore and pursue all appropriate legal remedies in order to protect our investor’s rights.”

The push to introduce new evidence to second Wind lawsuit, which Catalyst first filed in May, 2016, comes as questions mount about the value of several businesses owned by Catalyst and its ability to cash out at attractive prices.

Litigation may be part of Catalyst’s strategy to try to boost its investment returns. In fact, the Wind lawsuit was given a value of US$447-million in Catalyst’s 2016 presentation to investors of two of its largest funds, though the company says doesn’t include that in its official financial statements and it presents the information only as additional disclosure for unitholders.

Some other Catalyst investments are performing poorly. The firm sold a minority stake in distressed lender Callidus Capital Corp. for $14 a share in 2014, and the stock closed Tuesday at $4.91. Catalyst and its funds own more 70 per cent of Callidus and has loaned the firm more than $300-million.

Catalyst has said it aims to take public two of its funds’ major holdings – Gateway Casinos & Entertainment Ltd. and a unit of biotech company Therapure Biopharma Inc. – in hopes of realizing value for the assets. It also disclosed that it is exploring sales of Advantage Rent A Car and Sonar Entertainment in documents that it sent to financial backers.

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