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March 14, 2011

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Vote for the top full-service Ontario regional law firms. $4.00 • Vol. 22, No. 9 Untitled-2 1 3/10/11 11:55:01 AM Inside This Issue 3 Settlement Ruling 7 Shared Assets 9 Focus On Litigation Quote of the week "Gone are the days when clients come to you with a $100-mil- lion or even a $1-billion lawsuit and your instructions are 'Do what you have to do.'" — Gerald Ranking, Fasken Martineau DuMoulin LLP, See Litigation, page 12 Covering Ontario's Legal Scene earlug.indd 1 March 14, 2011 11/10/09 11:20:32 AM with fraud this month, solicitor-client privi- lege prevents the regulator from sharing infor- mation from its investigations, candidates in the upcoming bencher elections say. In the meantime, the law society has paid LSUC paid $2M to lawyer's victims D Mariano Mazzucco now facing charges of fraud, breach of trust BY MICHAEL McKIERNAN Law Times espite concerns over the Law Society of Upper Canada's actions as police charged a disbarred Toronto lawyer out more than $2 million to the clients of the lawyer, Mariano Mazzucco, who was disbarred late last year for his role in a mortgage scheme. Victims have received $2.2 million since the law society's compensation fund began ac- cepting claims in June 2008. Th e fi nal tally could be even higher with further claims awaiting completion and the potential for even more people to come forward, according to law society spokesman Roy Th omas. Mazzucco, 61, was arrested on March 2 fol- lowing a two-year investigation by Peel Region- al Police. Th ey allege he defrauded 40 individ- ual victims and 10 fi nancial institutions out of more than $12 million. He appeared in court in Brampton, Ont., on March 9 on charges of fraud over $5,000, laundering the proceeds of crime, and criminal breach of trust. Police say they expect more victims to come forward. Th e LSUC disbarred Mazzucco in No- vember after he admitted to his role in a mortgage fraud scheme between November 2007 and March 2008. During that time, he obtained funds in 20 fraudulent mortgage deals worth a total of $7 million. His trust account was still under supervision Mariano Mazzucco, left, is facing charges over $12 million in alleged fraudulent deals. by the law society at the time following an earlier 30-month suspension in July 2000 for misappropriating more than $300,000. He returned to practice in 2003 under a plan of supervision that ended in September 2005. Trust account supervision and co-signing by the law society continued until March 2008, when the LSUC took over his prac- tice in the wake of a wave of complaints. But Mazzucco got around the restriction by sim- ply opening another trust account at the same bank that he used for the mortgage deals. Th e LSUC maintains it couldn't prevent Mazzucco's action. "Th e law society cannot prevent unlawful behaviour by someone who is absolutely determined to engage in such behaviour, notwithstanding the stringent con- trols that have been placed on their activities," Th omas said in an e-mailed statement. According to an agreed statement of facts fi led with Mazzucco's hearing at the law so- ciety on Nov. 5, 2010, a former client ap- proached him in early 2006 to participate in a mortgage fraud scheme. Mazzucco said he didn't immediately See $43K, page 2 Magna deal example of 'despotic behaviour': prof T BY MICHAEL McKIERNAN Law Times he Ontario Securities Commission encouraged "despotic behaviour" in the markets by allowing the $1-billion deal that saw Frank Stronach cede his tight grip on Magna Interna- tional Inc., according to a Univer- sity of Toronto law professor. Anita Anand, who also chairs the OSC's investor advisory pan- el, believes the deal was abusive to shareholders whom she said were forced to choose between the lesser of two evils. "What shareholders were pre- Ben Zarnett wonders whether the court played a meaningful role in simply scrutinizing the Magna vote. sented with was an incredibly constrained choice: purchase the control block at an exorbitant and unprecedented premium or allow more of the same [with] a controlling shareholder extract- ing signifi cant private benefi ts of control," Anand said during a roundtable discussion on the deal at the University of Toronto Fac- ulty of Law on March 3. "After Magna, the greater the private benefi ts of control, the higher the premium that will be paid to ex- tricate the fi rm from the control- ling shareholder. Th is is what I call the power of the despot." Stronach was able to control the company despite holding just 0.6 per cent of its 113 million shares because of Magna's dual-class share structure. Stronach's 720,000 Class B shares each carried 300 votes, while the remaining 112 million Class A shares got one vote each. In July last year, 75 per cent of Class A shareholders voted to pay Stronach and the Stronach Trust $300 million in cash to eliminate the Class B shares and end his stranglehold on the company. He also received nine million Class A shares, plus a four-year consulting contract that paid him between two and three per cent of pre-tax profi ts. Finally, Stronach got a 27-per-cent controlling stake in Magna's electric car business. Th e deal's $1-billion value represented an 1,800-per-cent premium on the value of his shares. Th e OSC found the process fol- lowed by a special committee estab- lished by Magna's board of directors to assess the deal was "fundamen- tally fl awed" but declined to inter- vene in June. Instead, it ordered See Directors, page 2 LT Digital version.indd 1 6/25/10 12:59:47 PM Click here to subscribe today to LAW TIMES Subscribe to Law Times And receive: • Unlimited access to the Law Times digital editions and to our digital edition archives...FREE • Canadian Legal Newswire, a weekly e-newsletter from the editors of Law Times and Canadian Lawyer...FREE Childview_LT_Jan24_11.indd 1 1/19/11 11:04:05 AM Includes a FREE digital edition! Go to: Photo: Mississauga News

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