The Supreme Court of Nevada has handed Canadian securities regulators a powerful tool for recovering money from offenders who head south of the border.
In what is believed to be a precedent-setting decision, a panel of seven judges found it was lawful for police officers in Nevada to enforce a disgorgement order issued by the British Columbia Securities Commission against Michael Lathigee.
Mr. Lathigee was ordered to pay $21.7-million to investors in 2015 after a BCSC panel found that, among other things, he misused money that was supposed to be sunk into a real estate fund his company ran. The panel said his conduct constituted a fraud.
The ruling is a significant win for securities regulators across Canada and will enable them to pry assets from fraudsters who, rather than pay back investors, decamp for the United States, said Peter Brady, the executive director of the BCSC.
“There could have been a perception, if we didn’t take this action, that you could just move to the United States to avoid paying your sanction. And this decision shows that you can’t,” Mr. Brady said in an interview.
The unanimous decision by the state’s supreme court – the highest level of court to rule on the matter – is applicable to 23 U.S. states, Mr. Brady said.
Mr. Lathigee said he intends to fight the decision. “This is not over,” he said. “I lost yesterday, but this is by no means is over.”
The case dates back to Aug. 19, 2019, when three Clark County law enforcement officers and 10 employees of a moving company arrived at the suburban home of Mr. Lathigee on the outskirts of Las Vegas. Armed with a writ of seizure obtained by the BCSC, they emptied the house of Mr. Lathigee’s personal property and the possessions of his wife, including jewelry, artwork and electronic equipment.
Mr. Lathigee challenged the seizure, arguing in court that the $21.7-million disgorgement order was an “unenforceable penalty.” U.S. courts do not impose criminal sanctions ordered by judges from other jurisdictions.
But lawyers for the BCSC argued that the order was not an effort by the state to punish Mr. Lathigee. Rather, they said, it was an effort to bring relief to the 698 investors who had been injured by his actions and should be recognized by the courts. The panel of judges agreed, highlighting the importance of law enforcement in Canada and the United States working together. The panel said the policy of promoting co-operation between both countries had a “special strength,” particularly because “proximity and relations of the two countries make it easy for fraud to move between them.”
It’s unclear what will happen next to Mr. Lathigee’s property, especially because he has said he is pursuing other avenues of appeal. The items are in storage.
Selling them at auction would likely not raise enough to recover the full $21.7-million, Mr. Brady said.
“That’s unfortunate, because we’d like to see the victims get full repayment. But it doesn’t mean we stop trying,” he said.