Trials and Tribulations of the B.C. Law Society

Bedevilled by internal scandals, the Law Society of B.C. looks to new leadership and new practices to turn itself around.


Bedevilled by internal scandals, the Law Society of B.C. looks to new leadership and new practices to turn itself around.

Is the Law Society of B.C. sacrificing public protection on the altar of due process? In the last two decades, the society’s record of disciplining errant lawyers has been marred by watered-down citations, lengthy delays and flaccid results. Two recent high-profile disciplinary matters, involving Vancouver securities lawyers Richard Coglon and Michael Seifert, took 10 years each to investigate and adjudicate. Although these respondents were ultimately found to have committed serious professional misconduct, the society suspended them for only one and two months, respectively.

“The litigious nature of society has come back to haunt lawyers when they discipline other lawyers,” says UBC law professor Wesley Pue, an expert in legal history. “To be disbarred has terrible consequences, which means everybody facing a disciplinary proceeding has every reason to fight it as hard as they can.” As a result, he says, “these cases are being aggressively defended, with appeals brought through the courts and an exponential growth in time required to deal with them. That’s where the difficulty is.”

The B.C. Law Society, like most professional self-regulatory bodies, is a product of the legislature – in this case, the B.C. Legal Professions Act. The act permits B.C.’s 10,000 lawyers to form a club, decide who gets to be members and determine how those members are to be regulated. In return, the 115-year-old society must “uphold and protect the public interest in the administration of justice.” The question is, How diligently is the law society discharging that mandate?

As a business reporter for the Vancouver Sun specializing in white-collar crime and professional regulation, I have been covering law society disciplinary actions for nearly 25 years. And from my vantage point, there seems to have been a decades-long disconnection between the society’s stated mandate to protect the public interest and its discharge of that mandate. During my first five years on the job (from 1985 to 1990), the B.C. Securities Commission (BCSC) suspended four B.C. lawyers from the local stock market for one to five years each for securities-related infractions, but not one missed a day of work on account of the law society.

In other cases, delay has been the problem. Until Seifert came along, the society’s longest-running disciplinary problem was Richmond personal injury lawyer Ted Ewachniuk. In September 1991, a B.C. Supreme Court judge found he used intimidation to deter two prospective U.S. witnesses from coming to Vancouver to testify against his clients. Forced to travel to Missouri to obtain their evidence, the judge took the rare step of assessing costs against Ewachniuk personally. The law society started an investigation, but due to delays it wasn’t until January 2001 – nearly 10 years after the judge’s finding – that a disciplinary panel found him guilty of professional misconduct and disbarred him. By that time, he had racked up 15 citations for professional misconduct and conduct unbecoming a lawyer.

Jim Matkin, who served as the society’s executive director from 1998 to 2004, attributed most of the delay to due process. “Because lawyers are involved, there are a lot of interim motions,” he said during an interview at the time. “They muster all the resources they can to ensure they get a fair hearing. As lawyers, they know how to do that very well.’’ He also noted that cases are adjudicated by volunteer lawyers, which exacerbates delays: “I think it is a factor for sure. People are busy. They have other lives.”

Pue agrees: “Lawyers do want to volunteer and provide service. That’s a wonderful thing about the legal profession that you don’t find in all areas of business. But when the system becomes overburdensome, there may be natural limits to what people are prepared to do.’’

The so-called Hydrogate scandal was one of the biggest tests of those “natural limits.” John Laxton, one of Vancouver’s highest-profile lawyers, was serving as chair of BC Hydro in 1995 when it formed a subsidiary, IPC International Power Corp., to invest in a Pakistani power project. Laxton hired his son-in-law Richard Coglon to prepare IPC’s offering memorandum and promoted the investment to friends and colleagues. When it became apparent the offering would not raise the required capital, Laxton and Coglon personally stepped in and bought shares. Laxton later claimed they did this to “salvage” the deal and rescue the province from embarrassment, which might very well be true.

Problem is, these investments violated Hydro’s conflict-of-interest rules, so they secretly bought their shares through companies domiciled in the British Virgin Islands. As Hydro insiders, they were legally required to disclose their beneficial ownership in IPC’s offering memorandum, but they didn’t.

That sin of omission became an outright lie when I asked them who was behind the island companies. They both said they didn’t know. Skeptical of this response, I wrote a series of stories probing the ownership of the island shares in early 1996, and in March that year Laxton delivered a written statement to the Sun confessing that he and his son-in-law had set up the offshore accounts and had used those accounts to secretly buy IPC stock.

Then-B.C. premier Glen Clark, furious with Laxton’s conduct, forced him to resign as Hydro’s chair. The law society later cited Laxton, not for any of his illicit share dealings or disclosure lapses, but for lying to a reporter. He was suspended for six weeks, in the lazy, hazy days of summer.[pagebreak]BC Law SocietyFour years later, in May 2000, the law society cited his son-in-law for setting up the secret investment accounts while acting as IPC’s filing solicitor, thereby placing himself in a conflict of interest. In January 2003, a hearing panel found that Coglon’s conflicts were “serious, flagrant, obvious and indefensible. . . . Mr. Coglon did not fail to spot a deer in difficult camouflage; this was a failure to spot an elephant in a living room.”

But if the case was a no-brainer, it certainly took a long time to adjudicate. Submissions on an appropriate penalty weren’t heard until November 2005, and it wasn’t until April 2006 that a penalty was assessed: a one-month suspension. It had taken the law society just over a decade (from the date of Laxton’s written confession) to deal with misconduct that, by its own account, was as obvious as “an elephant in a living room” and to impose a relative wrist-slap for conduct it deemed “serious, flagrant, obvious and indefensible.”

The Seifert case, another big test, was also a no-brainer. It came gift-wrapped from the BCSC. Sadly for the public, it took the law society 10 years to unwrap it.

The commission had caught Seifert, a securities lawyer at Maitland & Co., in a major insider-trading scandal after sending investigators to Jersey, a tax and secrecy haven off the coast of England. In December 1999, he admitted he had secretly traded shares of his client, Arakis Energy Corp., through his Jersey accounts while in possession of material information that had not been disclosed to the public. He agreed to a $450,000 fine and a 12-year stock market suspension. What made the settlement novel was that he also agreed to refrain from acting as filing solicitor for any public companies in their dealings with the commission or the TSX Venture Exchange. Effectively, the commission – albeit with Seifert’s consent – had intruded into the law society’s exclusive domain.

When it came time for the society to deal with Seifert’s misconduct, however, the case became hopelessly bogged down. Despite his serious and unequivocal admissions to the securities commission, Seifert threw up every possible defence, including an allegation that the commission had browbeaten him into a confession (despite having voluntarily signed the settlement with the advice of Marvin Storrow, one of Vancouver’s most experienced, hard-nosed and capable lawyers). Although he eventually abandoned this argument, he raised an even bigger question: whether the law society could use the admissions he had made to the securities commission in its proceeding against him. These sorts of defences, we are supposed to accept, are all part of “due process.” Most members of the public would view them as delay and obfuscation. By whatever name, it had the desired result.

In May 2005, more than five years after he had settled with the commission, the law society cited Seifert. Not for illegal insider trading, but for conflict of interest – specifically that he had performed legal services for Arakis when he had a financial interest in the company, which could reasonably have been expected to affect his professional judgment. There was no allegation of illegal insider trading, which was the substantive offence that he had admitted to the commission. Even with this watered-down allegation, it would take another four years to resolve the matter. It wasn’t until May of this year that he conceded that he had placed himself in a conflict and agreed to a two-month suspension from practicing law, starting June 1 – again coincident with the summer holiday season.

BCSC officials, meanwhile, were becoming increasingly concerned about securities lawyers whom they had caught misbehaving continuing to ply their trade in the public markets. In 2002 the commission proposed an amendment to the Securities Act that would have given them the statutory right to restrict a lawyer’s ability to act for clients on commission-related matters, such as preparing and filing securities documents. Society officials, worried that their status as the exclusive arbiters of lawyer conduct would be compromised, howled like a pack of basset hounds, and the commission backed off.

“We have the exclusive authority to discipline lawyers. It’s given to us by statute,” argues Tim McGee, the society’s current executive director. “The courts don’t even have authority to discipline lawyers. If the courts can’t do that, it doesn’t make sense that an administrative body [such as the BCSC] should do that.”

McGee, a Victoria native, is just 52 years old, relatively young for an organization that still has a conspicuous old boys contingent, but he looks even younger. He is also very smart. He obtained his undergraduate degree from Harvard University, where he competed on the rowing team, and his law degree from the University of Ottawa. He practiced at Torys LLP in Toronto and then worked in executive positions at Bell Canada and AT&T Canada. Most recently, he was president of Bell ExpressVu, Canada’s largest provider of digital television. [pagebreak]He joined the law society in the spring of 2005 as it prepared itself for a professional makeover. His predecessor, Jim Matkin, had been caught up in his own securities scandal. In late 2004, Matkin was found to be moonlighting with a junior company run by two stock promoters with serious disciplinary records. Alarmed, the law society benchers held an emergency meeting and forced him out, replacing him with McGee.

The new executive director wasted little time in shaking things up. In November 2005, just five months after his arrival, McGee dismissed five staff lawyers – one in the prosecution section and four in the investigations side. He indicated at the time that the dismissals were part of an internal reorganization designed to deal more effectively and efficiently with client complaints. “We’re bringing in processes that I’ve done before, and I’ve seen them work,” he said. This didn’t impress the 35 remaining staff lawyers, who applied to the B.C. Labour Relations Board for union certification, creating considerable tension within the office. The lawyers were eventually certified, however, and peace seems to have been restored.

McGee has brought a distinctly corporate approach to the law society. In recent months, he has developed performance standards, as measured by outcomes, for the society’s various functions. For example, he wants 90 per cent of serious complaints resolved within two years and the remaining 10 per cent within three years. Any cases that extend beyond two years must now be reviewed at the society’s executive level.

Dealing with complaints is a mammoth job. According to its annual report, the society received 1,180 complaints against members in 2007. While this seems like a lot, we’re talking about a business that is inherently adversarial and therefore bound to attract complaints. The vast majority arise from “communications and service issues,” such as lawyers not responding to queries in a timely way or lawyers who, in the view of their clients, fail to provide optimal service.

Only about 10 per cent of complaints are referred to the society’s discipline committee, and, even then, most are diverted through conduct reviews or referrals to the society’s practice standards committee. Only a handful of cases result in formal allegations of wrongdoing. In 2008 the society issued 37 citations, and eight members were disbarred; another eight were suspended and 10 were fined.

Without doing a comprehensive audit, it’s impossible to determine whether this synopsis represents satisfactory adjudication of these complaints. McGee insists that the extraordinary length of time it took to deal with the Laxton and Seifert cases is unusual. “The vast majority of lawyers just want to get on with business. They know if they get into the system, they are likely to be sanctioned,” he says, noting that 95 per cent of cases that go to hearings result in fines, reprimands or suspensions. He also argues that although some might see one- and two-month suspensions as mild punishments, any suspension represents a serious blow to a lawyer’s reputation and, by extension, their career.

Enforcement proceedings, of course, are initiated when misconduct has already reared its ugly head. McGee notes that the society has many “front-end” programs to identify and deal with problems before they evolve into disciplinary matters. For example, the society conducts practice reviews to ensure members are competent; provides advice on office-management and ethical issues; audits lawyers’ trust accounts to ensure client funds are handled properly; and takes custody of law practices when lawyers suddenly vacate their practice due to retirement, health issues or regulatory problems.

The society also provides financial reimbursement for clients who lose money on account of lawyer negligence or fraud. When Vancouver lawyer Martin Wirick was caught in a massive real-estate-related fraud in 2005, the society provided 100 per cent compensation – an amount totalling $38.4 million – to Wirick’s victims. This was far more than it was required to pay by law, and it forced the society to impose special assessments on its members to finance the payouts. “We knew it was the right thing to do, to restore public confidence [in the profession],” McGee says.

The point here is that the society does a great amount of behind-the-scenes work to ensure its members deal with the public in a competent and ethical manner. But those disciplinary cases remain the most visible and tangible aspect of its regulatory activities, and in the higher-profile cases the results appear to be mixed. The society did a commendable job in the case of Martin Wirick, but he readily admitted his misconduct and resigned quickly and quietly. Many other members have chosen to fight, and in some instances it looks like they have won – not stunning victories but grinding wars of attrition.

What remains to be seen is whether McGee’s new performance standards, as applied to disciplinary cases, will trump the society’s historic preoccupation with due process and short-circuit the circular and unseemly business of lawyers fighting lawyers.