Judge denies request for financial documents in Sakto probe

THE GLOBE AND MAIL
PUBLISHED FEBRUARY 5, 2018
UPDATED FEBRUARY 6, 2018
DAVE CHAN/THE GLOBE AND MAIL
JAMES BRADSHAW/BANKING REPORTER

An Ontario judge swiftly dismissed an unusual request to obtain sensitive financial records made by a group pursuing allegations of money laundering involving an Ottawa real estate firm with family ties to Malaysian officials.
The Bruno Manser Fund (BMF), a Swiss-based advocacy group, went to court with a novel approach that sought the equivalent of a search warrant. If successful, it would have forced some of Canada's largest banks to turn over financial records relating to business dealings by Sakto Corp., an influential force in Ottawa real estate.

Yet at a hearing scheduled to last two days, Justice Sean Dunphy of the Ontario Superior Court dismissed the application by lunchtime on the first day.

The group's approach was unprecedented, with far-reaching implications for the privacy of firms' financial information. Lawyers for BMF have argued the banking and accounting records may hold the key to pursuing a private prosecution – a procedure that allows an individual or private organization to launch criminal proceedings, if it can show sufficient grounds. The records about Sakto and related entities are held by Royal Bank of Canada, Manulife Financial Corp., Toronto-Dominion Bank and Deloitte & Touche LLP.
But that argument stalled after lawyers admitted they don't yet have the evidence to establish "reasonable grounds" for such a prosecution – the same test any police force would need to meet to get a search warrant. Instead, the group's lawyers asked the court – unsuccessfully – to apply a more lenient standard.

After years spent investigating deforestation and corruption in Malaysia, BMF has assembled a catalogue of alleged wrongdoing. The central figure in the allegations is Abdul Taib Mahmud, an influential Malaysian political official. He currently serves as Governor of Sarawak, in a state in Borneo that has been heavily deforested.

Mr. Taib Mahmud's daughter, Jamilah Taib Murray, founded Sakto in 1983 and, with her husband Sean Murray, built it into a prominent firm that manages and invests in commercial real estate. BMF alleges that the Taib family channelled more than $29-million into Sakto during its first decade, when the company was regularly posting losses.

The family and Sakto deny the allegations, which have not been proven in court. In a statement on Monday, a lawyer for Sakto said the firm "is a Canadian family business that has always operated to the highest ethical standards and in full compliance with Canadian laws. With this decision, we consider the matter closed."

Lawyers for BMF argued in court that "the government has failed" to take up the matter, even after BMF raised red flags with the RCMP, the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) and government departments. BMF's application sought access to financial records using what's known as a Norwich Pharmacal order – which requires a respondent to disclose certain documents or information.

Lincoln Caylor, a lawyer at Bennett Jones LLP, the firm representing BMF, told the court his client lacks the same investigative resources as law enforcement. "We're asking for some lesser standard to be applied to the private prosecutor," he said. "Because we are private citizens doing what we can."

But at Monday's hearing, Justice Dunphy repeatedly suggested that granting a private group the power to seize banking records with less thorough evidence than would be required of law enforcement was akin to asking him to create a "parallel universe" that could become a legal "workaround."

"How on Earth am I to conclude that the law allows a private individual more powers than the police have?" Justice Dunphy said, calling the idea "counter-intuitive on every level."

"What you're asking me to do is say, without reasonable grounds, let's do it anyway," he added.

RBC, TD, Manulife and Deloitte opposed the application. In a joint filing, RBC and TD argued "it would provide an unprecedented path for virtually anyone, from anywhere, to knock at the doors of Canadian financial institutions … seeking broad, ill-defined production of confidential financial information on the mere and speculative suspicion of criminal wrongdoing."

BMF could still choose to pursue its claims through a private prosecution. "We're considering what to do next. This is not the end of the road," executive director Lukas Straumann said.

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