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Page 1: Cover Page for 2009 Internal Investigations · 3 Practical Advice on Conducting a Successful Internal Investigation 4 Internal Investigations: Public Company Continuous Disclosure

Internal Investigations

Thursday, January 29, 2009 — Calgary

Page 2: Cover Page for 2009 Internal Investigations · 3 Practical Advice on Conducting a Successful Internal Investigation 4 Internal Investigations: Public Company Continuous Disclosure

Internal Investigations

Table of Contents

1 Agenda

2 Biographies: Presenters

Michael Bennett

Mendy Chernos

Tina Giesbrecht

Donald Houston

Randal Hughes

Renee Reichelt

Richard Shaw

Sean Smyth

Doug Yoshida

3 Practical Advice on Conducting a Successful Internal Investigation

4 Internal Investigations: Public Company Continuous Disclosure Reviews And Regulatory Investigation Of Registrants

5 Internal Investigations in Competition/Antitrust Matters

6 Internal Investigations of Occupational Health and Safety Matters

7 The End Purpose: Prevent the Harm, End the Harm, Protect the Business

Page 3: Cover Page for 2009 Internal Investigations · 3 Practical Advice on Conducting a Successful Internal Investigation 4 Internal Investigations: Public Company Continuous Disclosure

Internal Investigations

Agenda

Introduction Richard Shaw

Practical Advice on Conducting a Successful Internal Investigation Richard Shaw

Mendy Chernos

Tina Giesbrecht

Internal Investigations: Public Company Continuous Disclosure Reviews And Regulatory Investigation Of Registrants

Michael Bennett

Renee Reichelt

Internal Investigations in Competition/Antitrust Matters Donald Houston Randal Hughes Doug Yoshida

Internal Investigations of Occupational Health and Safety Matters Tina Giesbrecht

The End Purpose: Prevent the Harm, End the Harm, Protect the Business

Sean Smyth

Questions and Answers Richard Shaw

Page 4: Cover Page for 2009 Internal Investigations · 3 Practical Advice on Conducting a Successful Internal Investigation 4 Internal Investigations: Public Company Continuous Disclosure

Lawyer Profile MICHAEL J. BENNETT

Biography

Michael Bennett is a partner in our Business Law Group in Calgary. His practice focuses primarily on corporate finance, corporate reorganizations, mergers and acquisitions and securities.

Mr. Bennett has acted for both issuers and underwriters on a broad range of matters, including financings, takeover bids and plans of arrangements, corporate governance and other securities matters.

In recent years, Mr. Bennett has acted in connection with the following transactions, among others:

• acted as counsel to TransAlta Corporation in connection with public offerings of Senior Notes under MJDS

aggregating $1.1 billion U.S.;

• acted as counsel to Petrobank Energy & Resources in connection with its $337 million acquisition of

Peerless Energy Inc. by way of plan of arrangement;

• acted as counsel to The Buffalo Oil Corporation in connection with its $70 million amalgamation with

Choice Resources Corp.;

• acted as underwriters’ counsel in connection with public offerings of debt and equity by First Calgary

Petroleums Ltd. in Canada and Europe aggregating over $600 million;

• acted as underwriters’ counsel in connection with $149 million public offering of subscription receipts by

Baytex Energy Trust;

• acted as counsel to Petrobank Energy & Resources Ltd. in connection with public offerings of common

shares aggregating over $160 million;

• acted as counsel to Petrominerales Ltd. in connection with $61 million public offering of common shares

and $69 million initial public offering;

TITLE Partner

OFFICE Calgary

LAW SCHOOL University of Victoria, LLB, 1996

DIRECT LINE 403-260-3532

BAR ADMISSIONS British Columbia, 1997 Alberta, 1999

E-MAIL [email protected]

McCarthy Tétrault LLP

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Lawyer Profile MICHAEL J. BENNETT

Page 2

Lawyer Profile

• acted as counsel to Oilexco Incorporated in connection with public offerings of common shares

aggregating over $250 million;

• acted as counsel to a Canadian Oil Sands Trust in connection with its acquisition by takeover bid Canada

Southern Petroleum Ltd.;

• acted as counsel to Enbridge Inc. in connection with a $265 million secondary offering of common shares

of AltaGas Income Trust;

• acted as counsel to a mid-sized energy trust in connection with the acquisition (by way of plan of

arrangement) of a mid-sized oil and gas company;

• acted as counsel to a mid-size oil and gas company in connection with the spin-out (by way of plan of

arrangement) of certain of its assets into a new public company;

• acted as counsel to a Enbridge Inc. in connection with its acquisitions of additional interests in a major

pipeline system in Canada and the United States for aggregate consideration of approximately $500

million;

• acted as counsel to a TransCanada Corporation in connection with the sale of its natural gas pipelines

and gas marketing business in Mexico (consideration not public); and

• acted as counsel to a TransCanada Corporation in connection with the sale of its interest in a Colombian

pipeline system for aggregate consideration of approximately $117 million U.S.

Mr. Bennett is a member of the Law Society of Alberta, Canadian Bar Association and Calgary Bar Association.

Mr. Bennett received a B.Sc. from the University of Calgary in 1992 and his LLB from the University of Victoria in 1996. He was called to the British Columbia bar in 1997 and to the Alberta bar in 1999.

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Lawyer Profile MENDY CHERNOS

Biography

Mendy Chernos is a partner in our Litigation Group in Calgary. He practises corporate and securities litigation; energy and resources litigation; commercial litigation; income tax litigation; landlord tenant and real property litigation; and commercial insurance litigation.

Transactions & Cases

• Corporate and Securities Litigation - Extensive experience in disputes involving corporate and securities

issues including takeovers, reorganizations, relationships between affiliated corporations, shareholder

disputes, director and officer duties, oppression remedies, accounting practices, share valuations and

public securities matters. Cases include Ashton Mining of Canada Inc. v. Stornoway Diamond Corporation

et al (defence of lock-up agreement between a bidder and controlling shareholder in an unsolicited

take-over), Harbert Distressed Investment Master Fund, Ltd. et al v. Calpine Canada Energy Finance II

ULC et al (defence of a several hundred million dollar oppression claim by bondholders), Big Bear

Exploration Ltd. v. Blue Range Resource Corporation et al (defence of unsolicited take-over bid), West

Central Capital Corporation v. Prize Energy Inc. et al (modification of terms of plan of arrangement as a

result of competing unsolicited takeover bid), Niederwieser v. Calgary Co-operative Association (defence

of the Association’s by-laws respecting director eligibility), Alberta Securities Commission Board Hearing

with respect to determining accounting qualifications for auditing financial statements of reporting

issuers, William S. Herron Charitable Foundation v. Herron (defence of the Foundation and its directors

respecting corporate governance), Okabe North America Inc. et al v. Delta Hotels Limited et al (defence

of corporate defendants and their common directors and officers respecting challenges to multiple cross-

directorships and offices), and in re TransCanada Pipelines Limited and TransCanada Corporation (court

approval of TransCanada 2003 Plan of Arrangement).

TITLE Partner

OFFICE Calgary

LAW SCHOOL University of Toronto, LLB, 1983

DIRECT LINE 403-260-3595

BAR ADMISSIONS Alberta, 1984

E-MAIL [email protected]

McCarthy Tétrault LLP

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Lawyer Profile MENDY CHERNOS

Page 2

Lawyer Profile

• Energy and Resources Litigation - Substantial experience in disputes concerning oil and gas and

electrical and wind power issues including the interpretation and enforcement of standard (including

CAPL Operating Procedure and PASC Accounting Procedure) and unique contracts, the rights and

obligations of operators and joint venture participants in domestic, international and offshore

exploration and development projects, the enforcement of accounting and payment requirements, the

acquisition and disposition of interests, and plant and equipment construction, operation, fires and

failures. Considerable experience working with domestic and international industry experts, including

accounting, economic, engineering, oilfield, power and regulatory experts. Cases include Two Forty

Engineering Ltd. and The Royal Bank of Canada v. Baton Rouge Holdings Ltd. et al (interpretation of

CAPL right of first refusal provisions), Highwood Explorers (Canada) Inc. v. Mohawk Oil Co. Ltd et al

(interpretation of earning provisions in farmout agreement), Joss Energy Ltd. v. Maughan Energy Limited

et al (application to enjoin an imminent transaction), Paramount Resources Ltd. et al v. Imperial Oil

Resources Ltd. et al (interpretation of natural gas rights agreements), Murphy Atlantic Offshore Oil

Company Ltd. and Canada Hibernia Holding Corporation v. Norsk Hydro Produksjon as. et al

(interpretation and enforcement of transportation and transhipment rights and obligations relating to the

development of the Hibernia field), PanCanadian Petroleum Limited v. Nova Scotia Resources (Ventures)

Limited (treatment of confidential information respecting oil and gas operations offshore Nova Scotia)

and Trident 88 Exploration Ltd. v. Odyssey Petroleum Corporation (defence of $50 million claim

respecting a joint venture for the redevelopment of a Ukrainian oilfield).

• Income Tax Litigation - Extensive experience in income tax related litigation including reassessments of

major transactions on GAAR, agency, non-partnership, non-loan and sham grounds. Cases include

Interprovincial Pipe Line Inc. and IPL Energy Inc. v. Minister of National Revenue (defence of privilege of

auditor’s records under the Income Tax Act) and TransCanada Pipelines Limited v. Minister of National

Revenue (ability of taxpayer to appeal reassessed issues separately).

• Landlord and Tenant and Real Property Litigation - Extensive experience in disputes involving the

interpretation, enforcement and termination of leases, agreements of purchase and sale and other real

property rights and related contracts of insurance, and the rights and obligations of property owners,

developers, landlords and tenants in complex commercial ownership and leasehold scenarios such as

office towers, industrial facilities and shopping centres (including with respect to permitted uses,

environmental contamination, continuous occupation and marketing strategies). Represented landlords,

tenants, developers, retailers, franchisers and franchisees. Cases include Oxford Development Group Inc.

et al v. The Saskatchewan Drug and Stationery Company Limited et al (lease misrepresentation) and

Elbow Valley Development Corporation v. WRD Borger Construction Ltd. (builders’ lien period).

• Commercial Litigation - Extensive experience in various facets of commercial and contract litigation,

including with respect to real estate disputes, employment matters, debtor creditor and priority

contests, franchise disputes, banking (including constitutional banking related) issues, bankruptcy

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Lawyer Profile MENDY CHERNOS

Page 3

Lawyer Profile

matters, estate litigation and commercial arbitration. Cases include Alberta Treasury Branches v. West

Edmonton Mall Property Inc. et al (determination of issues pertaining to financing and operation of

major commercial mall), Bank of Montreal v. Peddle (rights and obligations under credit card

agreements), and various defences of the Province of Alberta respecting the constitutionality of the

Alberta Treasury Branches.

• Insurance - Considerable insurance defence experience in various tort, contract and related claims, for

various property, economic and business interruption losses, including in the context of industrial and oil

and gas related catastrophes, facilities failures and shutdowns. Extensive representation of insurers and

insureds in coverage claims under various types of policies, including significant claims involving multiple

layers of insurance and reinsurance. Cases include Tonko Development Corp. v. Allianz Insurance

Company of Canada (coverage dispute for losses arising from catastrophic fire) and Kingsway General

Insurance Company v. Her Majesty The Queen In Right of Alberta (defence of challenge to the Province

of Alberta’s automobile insurance premium freeze).

• Court and Administrative Tribunal Experience – Appearances/applications before all levels of courts in

Alberta, the Supreme Court of Nova Scotia, the British Columbia Court of Appeal, the Federal Court of

Canada, the Tax Court of Canada, the Federal Court of Appeal, the Supreme Court of Canada and

administrative bodies including the Alberta and British Columbia Securities Commissions and various

professional discipline tribunals.

• Arbitration/ADR Experience – Extensive domestic and international arbitration, mediation and

“med-arb” experience, including representation of parties before arbitral panels and sole arbitrators,

including as appointed by recognized arbitral bodies, such as the International Court of Commerce,

advising arbitrators in the conduct of arbitrations, and acting as arbitrator. Subject matter of major

arbitrations includes domestic, international and offshore energy and power exploration, development,

processing, marketing, pricing, delivery and transportation issues; construction, commissioning and

operational issues at resource processing fields and facilities; contractual interpretation issues; real

estate development and servicing issues; and banking issues. Additional experience in cases respecting

whether matters should proceed in court or arbitration proceedings, including Olymel S.E.C. v. Premium

Brands Inc. et al.

Presentations & Publications

1990 Speaker to the Canadian Bar Association, Civil Litigation South Alberta Section in April 1990 regarding “Third Party Proceedings in Alberta”

1991 Presentation to clients on “Landlord Remedies”

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Lawyer Profile MENDY CHERNOS

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Lawyer Profile

1992 Speaker to the Canadian Bar Association, Corporate Counsel, South Alberta Section in November, 1992 regarding “How Exposed is your Corporate Veil? Some Comments about Safe Corporate Relations for the 90’s”

1994 Speaker to the Canadian Bar Association, Corporate Counsel South Alberta Section in October 1994 regarding “Corporate Counsel and Solicitor-Client Privilege: How to Guard your Privileged Status”

1995 “Corporate Counsel and Solicitor-Client Privilege”, April 1995 edition of The National

1995 “Corporate Counsel and Solicitor-Client Privilege: How to Guard Your Privileged Status”, June 1995 edition of Inside Counsel

1996-1997 Presentations to clients on “Record Retention Policies”

1997 Speaker to the Tax Executives Institute on “Solicitor-Client Privilege Pertaining to Income Tax Issues”

1994-1999 Presentations to clients on “Solicitor-Client Privilege Pertaining to Income Tax Issues”

2000 Speaker to the Canadian Bar Association, Insurance, South Alberta Section in March, 2000 regarding “Recent Issues Pertaining to Privilege”

2000 Presentation to clients in November, 2000 on “Settlement in the Tax Court Process”

2001 “Pre-Trial Strategies – Requests to Admit”, May 2001 edition, No. 2, McCarthy Tétrault on Tax Disputes

2001 “Responding to Audit Inquiries”, November 2001 edition of The National

2001-2003 Presentations to clients on “Arbitration Matters”

2003 “Protecting Confidentiality in Oil and Gas Arbitrations”, May 2003, paper presented at the Canadian Bar Association / International Court of Arbitration of the International Chamber of Commerce Third Annual International Commercial Arbitration Conference

2003 “Solicitor-Client Privilege and the Response to Audit Enquiries in the New Millennium: The Joint Policy Statement Revisited”, Annual Review of Civil Litigation, 2002

2004 “Confidentiality in an ADR Oil and Gas Context”, 2005 Oil and Gas Report (Chartered Institute of Arbitrators World Petroleum Congress)

2005 “Recent Developments in Cross-Border Corporate Litigation”, LEXPERT, October 2005

2005

Presentations to clients on “Civil Liability for Securities Matters” and on “Secondary Market Liability”

2006 “Recent Watershed Developments in Oppression Remedies and Shareholder Activism”, Annual Review of Civil Litigation, 2006

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Lawyer Profile MENDY CHERNOS

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Lawyer Profile

2007 Presentation to Canadian Corporate Counsel Association on “Maintaining and Maximizing Privilege”, May 2007

2007 “Common Interest Privilege in Canadian Commercial Transactions – Is it a “Done Deal”?”, Canadian Corporate Counsel Association 19th Annual Meeting Papers, August 2007

2007 Presentation to Canadian Corporate Counsel Association 19th Annual Meeting on “Matters of Privilege for Corporate Counsel”, August 2007

2008 Presentations to clients on “Privilege Issues in the Commercial Context”, January 2008

2008 “Common Interest Privilege Applied Again in the Context of Commercial Transactions: The BC Court of Appeal Endorses the Growing Recognition of Privilege for Commercial Counterparties”, January 2008 edition, McCarthy Tétrault Business Law Quarterly

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Lawyer Profile TINA GIESBRECHT

Biography

Tina Giesbrecht has extensive experience in the practice of labour and employment law.

Ms. Giesbrecht advises a wide spectrum of both federally and provincially regulated clients on labour and employment matters including union organizing campaigns, collective bargaining, interpretation of collective agreements, grievance arbitration, human rights complaints, labour board hearings, strikes, employment related immigration matters, executive compensation employment contracts, personnel policies, fiduciary obligations, non-competition and non-solicitation agreements. She also advises clients on employment issues arising from the purchase and sale of businesses including group terminations and successorship rights. In addition, Ms. Giesbrecht advises employers on privacy, workers’ compensation, occupational health and safety matters and termination of employment.

Prior to joining McCarthy Tétrault, Ms. Giesbrecht practised in Winnipeg and taught employment law at the University of Manitoba. She regularly writes articles and presents seminars on a variety of labour and employment law issues.

Ms. Giesbrecht is currently the Chair of the CBA Labour and Employment Subsection, Alberta Bar Association and a member of the Canadian Bar Association, the Law Society of Alberta, the Law Society of Manitoba, the Manitoba Bar Association, the Canadian Association of Counsel to Employers and the Human Resource Association of Calgary.

She received her BA in 1990 and her LLB in 1993 from the University of Manitoba. Ms. Giesbrecht was called to the Manitoba bar in 1994 and to the Alberta bar in 2001.

TITLE Partner

OFFICE Calgary

LAW SCHOOL University of Manitoba, LLB, 1993

DIRECT LINE 403-260-3582

BAR ADMISSIONS Manitoba, 1994 Alberta, 2001

E-MAIL [email protected]

McCarthy Tétrault LLP

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Lawyer Profile DONALD B. HOUSTON

Biography

Donald B. Houston is a partner in our Competition Law Group in Toronto. His practice focuses on competition law. He is widely recognized as one of Canada’s leading practitioners in competition law and litigation, with over 20 years’ experience in effectively representing clients on a variety of matters.

Mr. Houston’s competition practice includes defending criminal prosecutions, civil cases before the Competition Tribunal and private actions (including class actions) in the Courts. He has frequently represented the Commissioner of Competition in the Tribunal and before the Courts. He also assists clients by counselling on the competition aspects of business transactions and by making representations to the Bureau in mergers and other matters.

Mr. Houston is recognized in several respected publications for his high level of expertise. These include the World’s Leading Competition and Anti-Trust Lawyers, Chambers Global: Guide to the World’s Leading Lawyers, Canadian Legal Lexpert Directory, Best Lawyers in Canada and the Leading 500 Lawyers in Canada.

Mr. Houston has acted as counsel on numerous significant competition matters, including: ICI acquisition by Akzo Nobel (2007 - mergers); Commissioner v. Agricore United (2006 – mergers); Vitapharm v. Hoffman-La Roche (2005 – competition class actions); Cargill Limited Acquisition of the Better Beef Group (2005 – mergers); Commissioner v. Canadian Waste Services (2004 - mergers); Commissioner v. Air Canada (2003 - abuse of dominance, predation); Boehringer Ingelheim v. Bristol-Myers (1999 - private actions, predation); Law Society of Upper Canada v. Canada (1996 - regulated conduct); ICN Pharmaceuticals v. Canada (1996 - jurisdiction of Patented Medicines Prices Review Board); Director v. D&B Companies (1996 – abuse of dominance); Director v. Southam Inc. (1995 - mergers); and Director v. Air Canada (1993 - mergers, variation orders). Mr. Houston has appeared in the Supreme Court of Canada, the Federal Court of Canada and all levels of Courts in Ontario. His experience litigating cases before the Competition Tribunal is unsurpassed in Canada.

Mr. Houston has written and lectured extensively. His publications include: Canadian Competition Law and Policy – The Year in Review, with R. Hughes and J. Pratt, Euromoney, 2008; The Role of Intent in Abuse of Dominance

TITLE Partner

OFFICE Toronto

LAW SCHOOL University of Manitoba, LLB, 1979

DIRECT LINE 416-601-7506

BAR ADMISSIONS Ontario, 1981

E-MAIL [email protected]

McCarthy Tétrault LLP

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Lawyer Profile DONALD B. HOUSTON

Page 2

Lawyer Profile

Cases in Canada, with J. Pratt, Insight, 2006; Jurisdictional Issues in International Cartel Cases: A Canadian Perspective, Irwin Law 2006; Canadian Predation Laws and Their Application to the Airline Industry, with J. Pratt, ABA, 2004; Price Maintenance, Price Discrimination and Predatory Pricing: Overview and Practical Issues, with P. Sirkis, Osgoode Hall, 2004; Expert Reports: Practice & Procedure in Commercial Litigation & Forensic Accounting, with J. Pratt, Butterworths, 2003; Competition Law, Intellectual Property Disputes, Carswell 2002; Anti-Trust Class Actions: A Canadian Growth Business, American Lawyer Media 2002; The Trial of an Action (2nd ed.), 1998, with the late Honourable Justice John Sopinka and Melanie Sopinka; and Private Remedies for Anti-Competitive Conduct, CBA, 1998, with R. Bell and S. Bhattacharjee.

In August, 2007, Mr. Houston was named Secretary-Treasurer of the Canadian Bar Association National Competition Law Section.

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Lawyer Profile RANDAL T. HUGHES

Biography

Randy Hughes is one of the leaders of our National Competition Law Group. He has successfully handled the competition law and Investment Canada aspects of numerous mergers and acquisitions and represented clients before the courts in criminal proceedings under the Competition Act and before the Competition Tribunal in respect of reviewable matters. In particular, Mr. Hughes has acted as counsel for the Commissioner of Competition and for private sector clients in leading merger cases and other proceedings before the Competition Tribunal.

Mr. Hughes represents clients in international conspiracy investigations and prosecutions involving competition authorities in the United States and Europe, as well as the Competition Bureau in Canada. He has also acted for clients in substantial civil actions, including leading class actions, by those claiming damages as a result of anti-competitive conduct.

Mr. Hughes is recognized nationally and internationally as a leading practitioner in the competition law area. In particular, he is recognized in: Chambers Global: The World’s Leading Lawyers; the International Who’s Who of Competition Lawyers, published by Global Competition Review; the LEXPERT/The American Lawyer Guide to the Leading 500 Lawyers in Canada in the area of competition/antitrust; the Canadian Legal Lexpert Directory, a guide to the leading law firms and practitioners in Canada, in the area of competition law; the Competition Cross-border Handbook, published by Practical Law Company; the International Who’s Who of Business Lawyers, published by Law Business Research Ltd.; Guide to the World’s Leading Competition and Antitrust Lawyers, published by International Financial Law Review; and the Best of the Best (Competition and Antitrust Lawyers), published by Euromoney Legal Media Group.

Mr. Hughes served as Canadian non-governmental advisor (NGA) at the International Competition Network (ICN) Cartel Leniency Workshop of enforcement agencies from around the world in Sydney, Australia in November 2004, the ICN Cartel Workshop in The Hague, Netherlands in November 2006 and the ICN Annual Conferences in Bonn, Germany in June 2005 and Kyoto, Japan in April 2008. He also participated on the faculty of the ABA/IBA International Cartel Workshop in London, England in February 2006 and in San Francisco, California in January/ February 2008.

TITLE Partner

OFFICE Toronto

LAW SCHOOL University of Toronto, LLB, 1980

DIRECT LINE 416-601-7505

BAR ADMISSIONS Ontario, 1982

E-MAIL [email protected]

McCarthy Tétrault LLP

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Lawyer Profile RANDAL T. HUGHES

Page 2

Lawyer Profile

Mr. Hughes also represents clients in other regulatory matters before a variety of courts and tribunals. In particular, he acted as counsel in the Commission of Inquiry into the Use of Drugs and Banned Products Intended to Increase Athletic Performance (the Dubin Inquiry) and the Commission of Inquiry on the Blood System in Canada (the Krever Inquiry), where he appeared before the Supreme Court of Canada.

Mr. Hughes received his Bachelor of Commerce from the University of Toronto in 1977, and his LLB from the University of Toronto Law School in 1980. He was called to the Ontario bar in 1982.

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Lawyer Profile RENEE REICHELT

Biography

Renee Reichelt is an associate in our Litigation Group in Calgary. She has extensive experience in litigating and advising clients in the financial services industry, including major banks and brokerage firms. She practises in a number of civil litigation areas including securities litigation, class action litigation, corporate/commercial disputes, shareholders disputes and oppression actions, negligence and contract disputes, creditor-debtor disputes, oil and gas litigation, land development disputes and environmental litigation.

Ms. Reichelt has trial experience in the Alberta Court of Queen’s Bench and the Provincial Court of British Columbia. She has chambers experience in the Alberta Court of Queen’s Bench, the British Columbia Supreme Court, the Court of Appeal of British Columbia and the Court of Appeal of Alberta. She has represented parties before administrative, regulatory and disciplinary tribunals and at both mediations and arbitrations.

Ms. Reichelt received a Bachelor of Arts (Criminology) from Simon Fraser University in 1999. She then obtained her LLB from the University of British Columbia in 2002. Ms. Reichelt was called to the British Columbia bar in 2003 and the Alberta bar in 2006.

Ms. Reichelt is a member of the Canadian Bar Association, the Law Society of British Columbia and the Law Society of Alberta and the Trial Lawyers of British Columbia.

TITLE Associate

OFFICE Calgary

LAW SCHOOL University British Columbia, LLB, 2002

DIRECT LINE 403-260-3630

BAR ADMISSIONS British Columbia, 2003 Alberta, 2006

E-MAIL [email protected]

McCarthy Tétrault LLP

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Lawyer Profile RICHARD A. SHAW, Q.C.

Biography

Richard A. Shaw, Q.C. is a senior partner in the Business Law Group of McCarthy Tétrault in Calgary, and former Chair of the Calgary Chapter of the Institute of Corporate Directors as well as a former member of its national board of directors.

Mr. Shaw’s practice focuses on corporate governance, corporate finance, securities, mergers and acquisitions, takeover bids and defences, project financing, directors’ and officers’ liabilities, indemnification and insurance.

• Director, Institute of Corporate Directors, 2003–2007; Secretary, 2003–2005, Chair, 2005-2007, and past

Chair, 2007-present, Calgary Chapter, Institute of Corporate Directors.

• Lecturer, ICD Corporate Governance College, Directors Education Program, Haskayne School of Business,

2004-2008.

• Member, Board of Directors, McCarthy Tétrault LLP, 2003–2005.

• Lecturer, Executive MBA Program, Haskayne School of Business, 2005-2008.

• Institute of Corporate Directors, Institute-certified Director, ICD.D (May, 2005).

• ICD Corporate Governance College, Directors Education Program (May, 2005).

• Director, Buffalo Resources Corp., 2004-present; Chair, 2007-present; Chair, Governance and

Compensation Committee, 2004-present; Member, Audit Committee, 2004–present.

• Director, Mancal Trust Company, 2001-present.

• Governor, Mount Royal College, August, 2006–present; Chair, External Affairs Committee, 2006-present;

Member, Audit and Finance Committee, 2006-present; Member, Corporate Governance Committee, 2006-

present.

TITLE Partner

OFFICE Calgary

LAW SCHOOL University of Toronto, LLB, 1971

DIRECT LINE 403-260-3636

BAR ADMISSIONS Ontario, 1973 Alberta, 1981

E-MAIL [email protected]

McCarthy Tétrault LLP

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Lawyer Profile RICHARD A. SHAW, Q.C.

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Lawyer Profile

• Governor, Glenbow Museum, September, 2006-present; Member, Corporate Governance Committee,

2006-present.

• Recognized in The Best Lawyers in Canada, in the specialty of Natural Resources Law, 2009.

• Ranked by Chambers Global World's Leading Lawyers 2003-2008 in Corporate M&A and Energy

Transactions.

• Recognized in The Legal Media Group’s Guide to the World’s Leading Capital Market Lawyers, 2006.

• Recognized as “Leading Capital Markets Lawyer” in Who’s Who Legal – The International Who’s Who of

Capital Markets Lawyers, 2006-2007.

• Recognized as “Capital Markets Leading Lawyer”, Guide to the World’s Leading Financial Law Firms (IFLR

1000, 2006 Edition).

• Recognized in Guide to the World's Leading Corporate Governance Lawyers, Legal Media Group, 2005-

2007.

• Recognized as a “Highly Recommended Capital Markets Practitioner” and “Recommended Energy

Practitioner” in Canada, 2003-2005 (Practical Law Company).

• Ranked “Top 30 Dealmakers in Canada”, 2002 (Lexpert).

• Ranked in Leading 500 Lawyers in Canada (Lexpert) 2000-2007 in corporate commercial, corporate

finance (to 2005) and mergers and acquisitions law.

• Ranked in Lexpert/America Lawyer Media Guide, Leading 500 Lawyers in Canada, 2000-2007.

• Recommended as a leading lawyer in US Guide to the Top 100 Corporate Cross-Border Lawyers (Lexpert),

2007.

Presentations & Publications

Mr. Shaw is a frequent speaker on governance, directors’ and officers’ liabilities and insurance and corporate

and securities law matters. His recent presentations include:

• Moderator/Panel Member, Canadian Corporate Counsel Association 19th Annual Meeting: “Corporate

Governance Round-Up II: Subsidiaries and Private Companies”, Calgary, Alberta, August 13, 2007;

• Panel Member, KPMG Audit Committee Institute Roundtable, “Audit Committee Communication with the

Board and Other Committees”, Calgary, June 6, 2007;

• Lecturer, “Board Duties, Responsibilities and Liabilities,” Institute of Corporate Directors, Corporate

Governance College, Haskayne School of Business, Calgary, November 6, 2004, January 15, 2005, October

15, 2005, January 21, 2006, October 14, 2006, September 15, 2007 and September 20, 2008;

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Lawyer Profile RICHARD A. SHAW, Q.C.

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Lawyer Profile

• Lecturer, Executive MBA Program, Haskayne School of Business, 2005-2008;

• Speaker, “Governance and Liability Insurance – Protecting Directors and Officers from Liability – Is Your

Company Doing its Best?”, Financial Executives International Canada, Calgary Chapter, April 10, 2007;

and

• Panel Member, “Ontario’s Secondary Market Liability Regime: The Key Provisions,” inSight, Secondary

Market Liability, Calgary, March 6, 2006.

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Lawyer Profile SEAN S. SMYTH

Biography

Sean Smyth is a partner in our Litigation Group in Calgary. He practises corporate/commercial litigation.

Mr. Smyth has appeared before all levels of courts in Alberta, the superior courts of Ontario, British Columbia, and Saskatchewan, the Supreme Court of Canada, in commercial arbitrations, and before a variety of regulatory and disciplinary tribunals. He has represented clients in disputes concerning oil and gas matters, commercial contracts, shareholders’ rights, directors’ liabilities, securities, real estate transactions, estate matters, employment issues, intellectual property rights, class actions, and a wide range of other contentions matters related to corporate and commercial transactions.

He received a B.B.A. in Finance in 1989 from Wilfrid Laurier University, his Bachelor of Laws from the University of Calgary in 1994 and his Master of Laws from Osgoode Hall Law School in 2004. He was called to the Alberta bar in 1994 and was appointed a Solicitor of England and Wales in 1997.

Transactions & Cases

Representative Work Trial and Appellate Advocacy

• a real estate company against a dissenting shareholder in a fair value determination;

• an oil and gas company in a dispute with a shareholder concerning share value;

• the owner of lands seeking to remove a railway spur;

• an operator in claims of over-charging for gas processing fees under JP-90/JP–95;

• an oil and gas company in a dispute with option holders concerning the value of the company;

TITLE Partner

OFFICE Calgary

LAW SCHOOL University of Calgary, LLB, 1994 Osgoode Hall, LLM, 2004

DIRECT LINE 403-260-3698

BAR ADMISSIONS Alberta, 1994 England/Wales, 1997

E-MAIL [email protected]

McCarthy Tétrault LLP

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Lawyer Profile SEAN S. SMYTH

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Lawyer Profile

• an oil and gas company at trial and on appeal to the Supreme Court of Canada in a dispute concerning

the value of certain oil and gas reserves;

• an individual defendant at trial and on appeal in a dispute involving allegations of fraud, duress and

unconscionable bargain involving the valuation of the shares of an oil and gas company with interest in

reserves in the former Soviet Union;

• a rail company at trial and on appeal in Alberta’s first case concerning the Layoff and Recall provisions of

the Employment Standards Code;

• a helicopter manufacturer in the Court of Queen’s Bench of Alberta involving the determination of the

appropriate jurisdiction for a dispute;

• an oil and gas company in a claim of securities misrepresentation brought by certain former

shareholders;

• several franchisors in claims by and against franchisees;

• several companies in claims brought by distributors;

• a director of a failed bank at trial through to appeal to the Supreme Court of Canada; and

• a pharmaceutical company in a dispute with the Alberta provincial government concerning the

equivalency of generic drugs.

Class Actions

• an international agro-sciences company in the defence of a multi-million dollar class action brought in

multiple jurisdictions, concerning alleged product defects; resulting in a very favourable settlement to

the client;

• a group of multi-national retailers with respect to the Alberta aspects of a multi-jurisdictional class

action, involving alleged defects in pet foods;

• a group of preferred shareholders in a representative action against a major grocery company at trial and

on appeal;

• a major integrated oil and gas company in a $20 million representative action concerning an amendment

to the company pension plan in the Court of Queen’s Bench, the Alberta Court of Appeal and the

Supreme Court of Canada;

• a large insurer in a class action concerning the right to apply a deductible to a payment in respect of a

total loss of a vehicle; and

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Lawyer Profile

• a group of defendants in a $200 million class action commenced on behalf of participants in a lottery

scheme.

International and Domestic Arbitrations

• a UK technology company obtaining an injunction in aid of an arbitration commended in England; and

• a CFL football club in an arbitration commenced by a former marquee player.

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Lawyer Profile DOUGLAS T. YOSHIDA

Biography

Douglas T. Yoshida is a partner in our Litigation Group in Calgary. He practises in a number of litigation areas, including corporate/commercial disputes, energy and resource conflicts, commercial landlord/tenant disputes, professional negligence claims, employment litigation, personal injury claims and construction related conflicts. Some examples include:

• Share and asset purchase transaction disputes;

• Share valuation disputes;

• Finder’s fee conflicts;

• Commercial lease disputes, including the interpretation and enforcement of rights and obligations of owners,

developers, landlords, tenants, franchisors and franchisees, with extensive experience in restaurant related

conflicts;

• Oil and gas related construction disputes;

• Enforcement and interpretation of pricing contracts;

• Equipment failures, including design failures and fires;

• Unconventional oil and gas disputes such as coal bed methane issues;

• Wrongful dismissal claims, including the enforcement of non-competition and confidentiality agreements;

• Insurance coverage disputes, including business interruption losses;

• Oil field service contract disputes;

• Oil and gas royalty conflicts;

TITLE Partner

OFFICE Calgary

LAW SCHOOL Dalhousie University, LLB, 1999

DIRECT LINE 403-260-3737

BAR ADMISSIONS Alberta, 2000

E-MAIL [email protected]

McCarthy Tétrault LLP

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Lawyer Profile

• Stockbroker negligence claims;

• Enforcement of accounting and payment requirements;

• Hearings on behalf of the Canadian Football League; and

• Fraud and conspiracy claims.

Mr. Yoshida has Provincial Court, Queen’s Bench Court and Court of Appeal chambers, trial and appeal experience and has represented parties before administrative, mediation and arbitration hearings.

Mr. Yoshida attended the University of Lethbridge and University of Calgary and obtained his BA in philosophy in 1995. He won the Maritime Book Award in Legal Ethics and Professional Responsibility prior to receiving his LLB from Dalhousie University in 1999. Mr. Yoshida articled with the Calgary office of McCarthy Tétrault, including three months at the criminal defence firm of O’Brien Devlin, and was admitted to the Alberta bar in 2000.

Mr. Yoshida provides pro bono legal services with Calgary Legal Guidance and the University of Calgary Student Legal Assistance. He also created a pro bono legal aid service that he volunteers at with the Mustard Seed Street Ministry.

Mr. Yoshida has spoken at seminars for the Canadian Securities Institute, Insight Information Co., University of Lethbridge and University of Calgary.

Mr. Yoshida has co-authored the following articles:

• “Public Policy in Canadian Contract Law”, Annual Review of Civil Litigation (2007); and

• “Who Can Be Examined For Discovery: The Evolution of Rule 200(1) and its Application Under the Proposed

Rules of Court”, Alberta Law Review (2008).

He is also involved and affiliated with:

• Alberta Civil Trial Lawyers Association;

• Bankers Hall Club Members Advisory Group (2002 to present);

• University of Calgary Law School Mentor Program (2000 to present);

• Legal Education Society of Alberta bar admission course instructor;

• McCarthy Tétrault National Pro Bono Committee; one of two Calgary office representatives with respect to

the implementation of the firm’s national Pro Bono Policy;

• McCarthy Tétrault Student Committee; including both as a mentor and principal;

• McCarthy Tétrault Recruiting Committee; focussing on the University of Calgary and Dalhousie University;

• McCarthy Tétrault United Way Committee; and

• University of Calgary Student Union Tribunal (2000 to present).

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Practical Advice on Conducting a Successful Internal Investigation

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1Keys To Conducting a Successful Internal Investigation

1. Have a Plan2. Ensure the Investigation is Independent3. Preserve Evidence4. Maintain Confidentiality5. Protect Privilege6. Consider Your Employees7. Consider Insurance Issues8. Consider Disclosure Obligations

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1. Have a Plan

When is an investigation needed?

Possibilities include:

• an adverse external event • when litigation or prosecution is being contemplated • when regulatory investigation is expected or underway • a whistleblower allegation or media report • human rights complaints • when internal policies require investigation to be

initiated

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1. Have a PlanWhat are the goals of the investigation?

Possibilities include:

• to establish the facts and report them to the relevant body • to assess likely risks to the company • to permit the company to take appropriate action (redress,

future prevention) • to meet disclosure obligations and comply with internal control

policies • to establish exculpatory facts and other defences (to claims or

regulatory proceedings (e.g., due diligence)) • to satisfy requirements of insurance policy • to satisfy internal and external audiences (e.g. demonstrating

that the company has a compliance culture)

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1. Have a Plan

Scope of the investigation

• What are the potential sources of information –internal and external?

• What documents need to be gathered?

• What is the timing, format and scope of interviews?

• Are independent consultants required? (forensic accountants? electronic document recovery?)

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1. Have a Plan

Set a Timetable

Factors to consider include:

• the time estimated to be required to complete proper investigation

• when results are needed (e.g. deadlines imposed by regulators or civil proceedings)

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1. Have a Plan

Memorializing the Results

Consider:

• whether the report should be in writing

• to whom it should be presented

• whether there should be interim reports

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1. Have a Plan

Consequences of a Poor Plan

A poorly-planned investigation may:

• lead to a failure in understanding the problem or appropriate solutions (see Re: YBM Magnex)

• create an impression of a cover-up or lack of serious response

• expose participants to liability (See Correia v. CanacKitchens)

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2. Ensure Independence

Who will oversee the investigation?

An investigation should be overseen by the board of directors (generally via a special committee) when allegations:

• relate to conduct of senior management • call into question the integrity of the company’s financial

reporting • pose a significant threat to company or its reputation

Otherwise, an investigation should normally be overseen by in-house counsel.

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2. Ensure IndependenceWho will conduct the investigation?

Depends on the nature of the allegations and degree of risk to the company. Most investigations should be conducted by legal counsel.

• Choice of legal counsel (in-house, regular external, or special) will depend on:

• importance of maintaining privilege • prior involvement with underlying issues • nature (closeness) of relationship to management

or persons potentially implicated • need for special expertise • availability of time and resources • likelihood of securing witness cooperation

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• Less serious matters may be investigated by HR department, security department, privacy office, etc.

• Key role of in-house counsel in all scenarios:• ensuring legal issues are considered • familiarity with business • obtaining cooperation of employees

• liaison with board or senior management

2. Ensure Independence

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3. Preserve Evidence

• Suspend routine corporate document destruction policies for potentially relevant documents

• Notify employees to preserve potentially relevant electronic and paper records, or other evidence

• Consider denying or limiting access of specific employees to particular items

• Gather paper records, emails and electronic records from relevant employees and from their servers/hard drives

• Obtain professional advice on data preservation and recovery, as necessary

• Document what was done to preserve evidence

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4. Maintain Confidentiality

Maintaining confidentiality is critical:

• to ensure effectiveness of investigation and especially interviews • to avoid compromising investigation’s independence • to assist in maintaining privilege claim

Ensure initial plan deals with relationship between oversight, instruction and access to information.Consider what public statements will be made about existence of investigation, intended process and eventual results.

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5. Protect Privilege

Maintaining privilege over the results of an investigation is desirable because it minimizes the risk that those results will be used against the company, and at the same time:

• encourages full and frank disclosure of relevant facts • allows an accurate understanding of what happened so that

corrective action can be taken • permits a judgement to be made about appropriate

disclosure (and associated waiver of privilege) when full facts are known

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5. Protect Privilege

Privilege protects against the compelled disclosure of communications with counsel for the purpose of obtaining legal advice (solicitor/client privilege) or information obtained for pending or anticipated litigation (litigation privilege).

Protecting privilege is consistent with the objective of getting all the relevant facts and advising management so that appropriate action can be taken.

Use of external counsel will enhance the company’s ability to protect privilege because it avoids doubt about whether in-house counsel was acting in a legal or business capacity (see Silver v. Imax Corp.). Also some jurisdictions may not extend privilege to in-house counsel.

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5. Protect Privilege

To protect privilege:

• the investigation must be conducted by a lawyer, and all parties assisting should report to legal counsel

• where outside counsel is engaged, retainer letter must state purpose for investigation which gives rise to privilege

• confidentiality must be maintained – employees and investigators should be instructed accordingly

• documents should be marked “Privileged and Confidential”

• third party consultants should be retained by counsel with suitable written retainers

• all reporting should be done by counsel

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5. Protect PrivilegeImplied waiver of privilege may occur when:

• report is disclosed to regulator • confidentiality is not maintained • company relies on legal advice as defence to

proceeding • results are disclosed to parties with related interest

without a joint defence agreement

Waiver may be necessary:• to obtain favourable outcome from regulator or

merely to persuade regulator that company is being cooperative

• to restore public confidence • to demonstrate due diligence or reasonable conduct

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6. Consider Your Employees

• Certain employees are likely to be key witnesses or the subject of allegations under investigation.

• An interview is appropriate whenever an employer reasonably believes that it may yield relevant and necessary information.

• Prior to arranging a meeting with the employee, gather and review all relevant documents so the interviewer enters the meeting with an understanding of the incident in question.

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6. Consider Your Employees

• Be aware of relevant provisions of policies, collective agreements, directives from Human Rights Commission and Privacy Commission, etc. regarding company’s ability to:

• search employee’s work space • monitor email and computer use by employee • monitor telephone use by employee • use video surveillance • monitor security pass use • interview employees

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6. Consider Your Employees

• If any of the potential witnesses may be involved in a criminal prosecution, interviewers should ensure that witness meetings or statements do not undermine criminal charges.

• Advise employee being interviewed that outside counsel acts for company and not employee.

• Consider suggesting and/or paying for independent counsel where employee’s interests conflict with company’s.

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6. Consider Your Employees

• Interviewer should explain:• their role • the purpose of interview • any relevant company policies

• Discuss confidentiality requirements (e.g., employee is not to discuss with others what is discussed in interview).

• Warn that while confidentiality will be respected, it is not guaranteed.

• Don’t tell interviewee what other employees have said.

• Consider privacy rights.

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6. Consider Your Employees

During the interview, be sure to: • Use pre-planned, open-ended questions to allow a full

understanding of the facts. Use follow-up questions if needed

• Make sure to get complete information, including details relating to the incident, date, time, place, location, similar occurrences, witnesses, etc

• Record all statements and answers• Repeat back facts to ensure accuracy and clarify any

discrepancies • Advise the employee to keep records of any relevant

events and to advise the company accordingly

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6. Consider Your Employees

At the end of the interview:

• Ask the employee a “scoop” question, such as,

“Is there anything we haven’t talked about that we should know about?”

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7. Consider Insurance Issues

• Consider policies to determine:

• whether the insured has an obligation to notify the insurer • whether coverage exists for legal or other costs of the

investigation (may depend on whether a claim has been asserted)

• whether disclosure is required upon renewal

• Report to insurer on a basis that maintains

confidentiality and privilege.

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8. Consider Disclosure Obligations

• The company may be required to report findings to regulatory authority.

• It may be in the company’s interest to proactively report to regulator.

• If a reporting issuer, the company may have an obligation to issue press releases, or make disclosure in routine public filing or in public offerings.

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Internal Investigations: Public Company Continuous Disclosure Reviews and Regulatory Investigations

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2Events Leading to Public Company Internal Investigations

Regulatory Enquiries:• Securities commissions routinely ask for information

about public company obligations to make continuous disclosure filings

• TSX also makes enquiries about press releases and compliance with other listed company obligations

Enquiries initiated by Company:• Whistle blowing complaints • Investigation prompted by effective operation of

internal controls

Both processes give rise to internal investigations that entail issues and considerations already canvassed.

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Principles Behind Continuous Disclosure Reviews

• Risk Based Analysis:• CSA ongoing continuous disclosure reviews 1

• review each active reporting issuer at least once every 4 years

• reviews can be full (entire disclosure record for past twelve months + 2 years financial statements) or limited (concerned with specific disclosure document)

• issue-oriented reviews (across issuers)• revenue recognition• executive compensation• hedge accounting

1 See for example, OSC Staff Notice 11-719 A Risk Based Approach for More Effective Regulations; CSA Staff Notice 51-326 Continuous Disclosure Review Program Activities for Fiscal 2008; CSA Staff Notice 51-328 Continuous Disclosure Considerations Related to Current Market Conditions, and; OSC Staff Notice 51-703 Implementation of Reporting Issuer Continuous Disclosure Review Program.

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What the Regulators are Interested In

Select Problem Areas – Financial Statements2

• Revenue Recognition• Stock-Based Compensation• Goodwill Impairment Losses• Interim Financial Statements• Restructuring Costs• Enterprises in the Development Stage• Related Party Transactions

2 See Ian Palm, “CSA-Continuous Disclosure Reviews – Select Problem Areas,” McCarthy Tétrault LLP client seminar (revised to April 02, 2007).

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What the Regulators are Interested In

Select Problem Areas – MD&A3

• Operational Analysis• Liquidity and Capital Resources• Trends and Risks• Off Balance Sheet Arrangements• Projects Under Development• Related Party Transactions• Restructuring Costs

3 Ibid.

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6What the Regulators are Interested In

Select Problem Areas – Others4

• Insider Reporting Requirements• Executive Compensation Disclosure• Timely Disclosure• Corporate Disclosure Policies• Material Contract Disclosure• Non-GAAP Measurements• Audit Committee Governance and Deliberations• CEO and CFO Certification• Industry Specific Disclosure Requirements e.g. oil and

gas, mining

4 Ibid.

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7Principles Behind Continuous Disclosure ReviewsRed flags that may lead to Continuous Disclosure Review:

• unusual trading by insiders before press releases • manipulative trading by insiders • use of unusual accounting policies • disagreements with auditors • complaints from public • referral from another section of ASC• media reports

Potential stages of Investigation after a review is started:• case assessment/surveillance • investigations • handling by Litigation

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8Statutory Sources of Power to Conduct Continuous Disclosure Reviews in Alberta• ss. 58, 60(1), 60.1, 63(5), 93.4:5

• order to produce records of market participants (books, records and documents)

• power to enter premises

• s. 60.2:6

• power to review disclosures that have been made by a reporting issuer

• includes power to review disclosures that ought to have been made• no power to enter premises • power to get all “information and documents” relevant to a

disclosure

• These powers are different from formal investigation power whichgives investigators a power to summons persons.

5 Also seen ss. 19, 20 of the Ontario Securities Act, R.S.O. 1990, C.S.5., as amended, ss. 151.1 and 158 of the Quebec Securities Act R.S.Q., c. V-1.1 and s.27 of the British Columbia Securities Rules, B.C. Reg. 194/97.

6 Also see ss. 20.1 of the Ontario Securities Act. Neither the British Columbia Securities Act, R.S.B.C. 1996, c. 418, nor the Quebec Securities Act contain a section pertaining to ‘continuous disclosure review’.

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Process of Investigations

• Regulatory investigation usually commenced by letter simply asking for information – sometimes accompanied by requests under s.58, 60.1 of ASA.

• Can involve document production and formulation of chronology identifying events and persons with knowledge of events.

• Can involve reconstruction of who was involved in or knew about particular disclosure.

• Can extend to background papers, board presentations, minutes, internal memos and emails.

• Important issues:• How are facts verified?• Can the investigation be conducted by the public company with active

involvement of all affected parties?• Can or should the public company determine whether there has been a

violation of law?• Can the public company impose discipline itself?• How much influence can the public company exert over timing and outcomes?• Application of “credit for co-operation” policies.

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Process of Investigations

• Responses should be put together with care and shown to people with knowledge of facts to ensure accuracy.

• Depending on how it develops, may have to refile or change disclosure practices (18% of cases in 2007-2008).7

• Can lead to enforcement proceedings (4%).8

• Can sometimes lead to disclosure of investigation if continuous disclosure review leads to commencement of a formal investigation.

7 2008 OSC Annual Report.

8 D. Wilson, “Securities Enforcement in Canada: Strengthening the System”, Address to Economic Club of Toronto (April 16, 2008), Slide presentation.

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Voluntary and Involuntary Disclosure

• Frequently requests from regulators are made on an informal basis.

• Requests for voluntary production of documents may involve private third party information.

• Testimony given voluntarily may be used in subsequent proceedings.

• What precautions should be considered before responding voluntarily?

• When to insist that production/interview take place under compulsion pursuant to a s.41 order?

• What issues are raised if order is under s.41(1)(a) vs. s.41(1)(b)?

• What protection does a s.41 order provide in subsequent proceedings?

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Recurring Issues in Internal Investigations

• Meeting deadlines imposed in information requests• do requests for more time bespeak a poor compliance capacity or

absence of “compliance culture” ?• how flexible are regulators if there are repeated requests for

extension over time ?• How is the accuracy of a “letter of response” verified

• what is extent of consultation and how many senior people shouldknow about and sign off on queries ?

• how much independent verification should compliance people do oftheir own people’s answers ?

• how carefully do records have to be reviewed when the productions are extremely voluminous ?

• Dealing with inappropriate language in tapes and instant messagetraffic• determine the scope of inappropriate language: profanity, disrespect

for regulators, ambiguous exchanges between parties • is the inappropriate language relevant?• impact of inappropriate language on tapes

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Recurring Issues in Internal Investigations

• Using letters from regulators as a basis for pro-actively taking corrective action or changing compliance procedures:• if regulatory correspondence shows a specific regulatory concern

about a registrant practice, conduct or a particular employee, what are the pros and cons of changing practice or conduct or disciplining employees before an investigation is over?

• Is it possible to ask regulators precisely what would fix their concerns or what specifically they are looking for when an investigation has been going on for a long time?

• Is there a point when the duration, cost or invasiveness of an investigation justifies discussions with regulators about over-reaching by investigators?

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Recurring Issues in Internal Investigations

• Investigations that appear to ignore industry practices and industry standards implicitly impose a higher standard than what the industry follows.

• Handling conflicting interests (e.g. the firm interest versus the interests of the employee respondents) in a situation where alleged misconduct by employees is the basis of “failure to supervise” proceedings against the firm.

• If an internal investigation report concludes there has been wrongdoing, should the whole report be forwarded to regulators?

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Internal Investigations in Competition/Antitrust Matters

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Competition Act Risks

• Price fixing, bid-rigging, market or customer allocation, supply restrictions or other coordination with competitors.

• Criminal offence – up to $10 million fine per count and/or imprisonment.

• Civil Actions – Plaintiffs can sue to recover loss or damage suffered as a result of conduct contrary to criminal provisions of the Competition Act. These actions are increasingly brought as class actions.

• Unilateral conduct may also raise issues.

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How Was the Conduct Detected?

• Company compliance program/internal audit• An employee report (Whistleblowers protected –

s. 66.1 Competition Act)• Contact from the Competition Bureau• Search Warrant• Subpoenas (s. 11 Orders)• Enforcement activity in another jurisdiction

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4Internal Investigations in the Context of Leniency Programs

• Need to evaluate/act quickly – Get the facts first. • Immunity Program - May seek Immunity if “first-in” in

one or more jurisdictions. • Leniency Program – early cooperation may result in

more favourable resolution.• “Immunity Plus” – disclose offence related to a second

product – immunity for second product, leniency for first product.

• Information provided to Competition Bureau is kept confidential, but there are limits.

• Potential disclosure obligations under securities laws –tension with requirement of confidentiality under Bureau’s Immunity Program.

• Civil/class action exposure remains.

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Get the Facts – Without Creating Evidence

• Use counsel to conduct internal investigations.

• Benefits of using outside counsel –• Specialized competition expertise• Experience interviewing witnesses and document

review in competition investigations

• Investigations with international implications: In-house counsel communications may not be protected by privilege outside North America.

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Get the Facts – Without Creating Evidence

• Don’t record or videotape interviews (counsel notes only).

• Tell employees that the investigation is highly confidential internally and externally.

• DO tell employees that counsel represents the company’s interests – not the employee’s.

• If a government investigation is likely or ongoing -• inform employees that phones may be tapped (office, cell and

home) or that people they meet may be wearing a wire• instruct employees not to remove/delete/destroy electronic or

paper documents.• DO NOT tell employees that they cannot speak to the

authorities but DO advise that they have the right to remain silent and to request the assistance of counsel.

• DO tell employees that you want to know if they have been/are contacted by the authorities.

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Individual vs. Company Interests

• If senior management is implicated in investigation or if obstruction activity is detected, implicated individuals cannot be involved in decision-making with respect to investigation.

• Set up a special committee immune from influence and shield information about conduct of investigation from implicated individuals.

• Individual counsel may be required if interests diverge from company (e.g. employee obstructs investigation, continues conduct, or does not cooperate fully, “rogue employee”).

• Employee may also require individual counsel if “target” of inquiry.

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International Cases

• Conduct has implications outside Canada. (e.g. allegations of “global conspiracy”)• Products sold in/from Canada• Foreign directives to Canadian management

• Authorities do coordinate their investigations. • Must have an early coordinated approach among

counsel in all jurisdictions for multi-jurisdictional investigation.

• Decision to cooperate (or not) in one jurisdiction will have implications in others.

• Immunity may not be available in all jurisdictions.• Implications of sharing fruits of the investigation in

different jurisdictions … different discovery and privilege rules may apply. (e.g. U.S. vs. Canada)

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Internal Investigations of Occupational Health and Safety Matters

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2What makes Occupational Health and Safety Incidents Unique?

• Arise without advance warning• Events cause harm and require immediate correction

and/or mitigation• Events give rise to potential regulatory, civil and

criminal liability

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Disclosing the Incident: Mandatory Requirements

• Be familiar with applicable statutory requirements and regulatory policies

• May relate to need to undertake or to disclose internal investigation in particular circumstances

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Statutory Requirements

• When a fatality or a “serious injury” occurs to a worker, the Alberta Occupation Health and Safety Act requires that the nearest Workplace Health and Safetyoffice be notified immediately.

• This notification is separate from any notice which is required to be given to the Workers’ Compensation Board or other local authorities, like the police.

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• Employers are responsible for investigating theincident, and must prepare a report outlining the circumstances of the incident and the corrective action,if any, undertaken to prevent recurrence.

• Care must be taken so as to avoid disturbing the sceneof an accident.

Statutory Requirements

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Statutory Requirements

• The OHSA provides that if an accident occurs at a work site, an occupational health and safety officer may attend at the scene of the accident and may make any inquiries that the officer considers necessary to determine the cause and the circumstances relating to the accident.

• A peace officer may also assist an officer in carrying out the officer’s duties if the officer so requests

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Statutory Requirements

• Investigation report must be factual and care should betaken not speculate or guess as to any fact or the cause of the accident

• Consider undertaking the investigation at the directionof legal counsel

• Consider the issue of representation of the employer and others who may be prosecuted

• For fatal, critical or other serious accidents, legal counsel should interview and prepare any management witnesses before an occupational health and safety officer conducts interviews

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Establishing “Due Diligence”

Civil, regulatory or criminal liability can be reduced or eliminated by a showing of “due diligence”.

An internal investigation is often required to demonstrate due diligence.

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9What to look at in an Internal Investigation to Establish Due Diligence Defence

• The defendant will need to look at more than just the basic facts of who did what, where, when, and how.

• The defendant must also gather evidence to address the following:• did the defendant have appropriate policies in place and were

they complied with?

• were the relevant employees properly trained and supervised?

• were there prior incidents involving these employees? If so, were they appropriately disciplined and/or re-trained?

• industry standards are relevant but not determinative

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Investigation Report

• The investigation should include references to anything that would assist in the defence that the incident was not foreseeable.

• Officers have a great deal of discretion in recommending that charges be laid. Cooperation and communication with officers may benefit the employer.

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11Keeping the Results of the Investigation Confidential: Key Recent Developments

• December 2008, BCSC Judgment re CN Rail:• internal investigation of train explosion initiated by counsel

• part of investigation to determine evidence of due diligence defence

• successful claim of privilege over materials

• July 2008, Ont. C.A. leave to appeal decision re Bruce Power:• internal investigation of workplace accident

• employee provided privileged report to prosecutor

• Court of Appeal to decide: when the Crown obtains a privileged defence document, does the accused have to prove actual prejudice if thedocument is disclosed, or will prejudice be presumed?

• Additionally, must the charges be stayed or is a lesser remedy appropriate?

• The answer: stay tuned!

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Media Relations

• often, a paramount concern

• control the information flow

• identify one company spokesperson

• outside consultants’ perspective can assist

• coordinate communications with counsel.

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Conclusion

• The key to ensuring that OHSA investigations are conducted properly is ensuring that they are, and are perceived to be, organized,complete and fair.

• This means being prepared, following predetermined plans and policy, collectingadequate and accurate information, allowingemployees to respond to any allegations against them,and making decision that are supported by the resultsof the investigation.

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THE END PURPOSE: PREVENT THE HARM, END THE HARM, PROTECT THE BUSINESS

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A Pro-Active Investigation Model

• It is impossible and impractical to plan for every possible investigation-context

• It is important to plan for the probable

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Advance Consideration of Contexts

• The circumstances of your enterprise will make some investigations probable, even inevitable• industry competitiveness • enterprise size• public market participant • regulated• dangerous activities

• Some specific contexts examined today:• Public Company Disclosure• Competition• Workplace Accidents

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Advance Consideration of Contexts

• Wide-variety of circumstances where internal investigations can arise:• employment relations• environmental matters• tax compliance• commercial crime• misappropriation / departing fiduciary cases• product liability and other civil claims

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Advance Consideration of the Purpose

• Whatever the context, the main purpose of all investigations is to gain accurate and complete knowledge:• to prevent harmful incidents from arising• to end the harm from incidents that do arise• to protect the business enterprise from legal and

other potential consequences

• Considering the probable contexts and purpose of an investigation in that context, an advance investigation plan begins to take shape

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Investigations to Prevent Harm

• Investigations can be grouped in terms of their timing (periodic or episodic) and purpose

• Not always based on incidents; may be periodic• main purpose of periodic investigations is to

prevent potentially harmful incidents, or detect them sooner, by testing compliance with established policies or procedures

• eg, public company continuous disclosure reviews, mechanical inspections, environmental testing, internal audits, annual reports, employee drug testing

• regular or irregular periods • can be mandated or voluntary

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7Investigations to End Harm/Prevent Recurrence

• Other investigations are episodic - prompted by particular incidents• incident may have been detected by periodic

investigation, or arisen despite (or in absence) of periodic investigation

• intended to:• determine if a harmful incident has occurred• end or minimize the harm arising from the incident• document and understand the incident, its causes and its

results• examine the causes to prevent a recurrence

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Investigation Cycle

• Using both can create a cycle of constant monitoring and diligent improvement:

Periodic Investigation Incident Uncovered

Incident InvestigatedPreventative Changes Implemented

Compliance with Changes Monitored by Periodic Investigation

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Protect the Business: Due Diligence

Legal benefit of investigative cycle:Many legal proceedings that could be commenced against an enterprise can be successfully defended by showing “due diligence” or similar legal concepts such as “reasonable care”.

What does this mean in practical terms?

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What is “Due Diligence”?

“Due diligence” means that:

• the company “reasonably believed in a mistaken set of facts which, if true, would render the act or omission innocent”; OR

• the company “took all reasonable steps to avoid the particular event”.

The company need only prove one or the other. It does not need to prove both.

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Investigation Cycle Can Show Diligence

• Due diligence involves issues such as:• whether the belief was reasonable, or the product

of turning a blind-eye• whether appropriate policies were in place• whether the policies monitored and enforced• whether the policies followed• whether there was training• whether there were prior similar incidents and, if

so, whether policies and procedures changed• whether external, independent advice was sought

or standards accepted by the industry were adopted

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Collateral Business Purpose

Apart from assisting to establish diligence as a legal defence, properly conducted and implemented investigations also can be a useful business tool

• periodic investigations can ensure compliance with policies or procedures and prevent or detect potentially harmful incidents

• when incidents do occur, information derived from investigations can be used to improve practices to prevent future incidents

• improved practices can be monitored

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Distinguish the Legal Purpose

• However, it is critical to keep the collateral business use that can be made of investigations separate from their main legal use

• In some circumstances, whether a document created during an investigation will be privileged will depend on the dominant purpose for its creation and whether it was created in reasonable anticipation of litigation

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14Protect the Business: Details, Details, Details and Proof of the Details

• An investigation is essentially an exercise in gathering evidence that might be introduced in court

• The information must be collected, documented, and preserved with that singular object in mind

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Sources of Background Details

• A regular or periodic internal investigation process resulting in business records may be a source of information for later reference in the event of a legal proceeding and form a foundation for due diligence

• The results are unlikely to be privileged as, most likely, they will not have been created predominating for litigation or for another purpose attracting privilege

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The Particular Details

• Documents created or assembled during an investigation prompted by a particular incident are a primary source of the details that your witnesses and your counsel will rely

• Time is the enemy, and not just because evidence and memories erode

• The vast majority of cases are won or lost at the initial stages of litigation (pleadings and discoveries), not at trial. Or they are settled because a party lacks the details necessary to know the strength of their case. It is from the outset that the details are needed. It is sometimes too late to wait until litigation commences to investigate

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Advance Planning

• Consider probable contexts and incidents that are most likely for your enterprise

• Consider forms of periodic investigation that could prevent incidents, or give early warning

• Institute forms of periodic investigation• Consider what an investigation of the most

probable incidents would like like• Plan how to apply the practical advice in your

contexts in advance of the need to investigate a discovered incident

• Consider who will investigate

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Advance Planning

• Consider types of outside expertise might be needed

• Develop and implement document retention policy, including separate files and retention documents created in the course of investigation and privileged matters

• Develop a document creation policy• Include counsel in the development of the

foregoing; ensure that she is available and has access to the outside expertise that you will need

• When an incident arises, involve your counsel