The Nevada Supreme Court has upheld an order by the British Columbia Securities Commission (BCSC) to collect $21.7-million from fraudster Michael Lathigee, giving the BCSC the right to pursue his assets there.

The unanimous decision affirmed a Nevada state judge's May 2019 recognition of the BCSC order – and could be the first time that a monetary sanction by a Canadian securities regulator has been deemed enforceable in the U.S.

Money would be returned to investors

"Any money we collect from Michael Lathigee will be returned to his many victims, so this is a victory for them," said Peter Brady, the BCSC's executive director. "It's also a warning to others that they can't avoid the consequences of market wrongdoing simply by moving to the U.S."

In July 2014, the BCSC found that Lathigee and co-accused Earle Douglas Pasquill fraudulently raised $21.7 million through the sale of securities to almost 700 investors without telling the investors important facts about the financial condition of corporate respondents FIC Group and FIC Foreclosure.

The panel found that the two knew when they were distributing the securities that FIC Group had severe cash flow problems, including an unfunded $8-million cost overrun on the company’s biggest project. The panel also found that Lathigee and Pasquill used most of the $9.9 million raised from investors in FIC Foreclosure to make loans to related companies, instead of investing the funds in foreclosures of residential properties in the United States -- the purpose for which the funds were raised.

In addition to a $15-million administrative penalty and a permanent ban from trading in securities in B.C., the BCSC panel ordered Lathigee to pay $21.7 million, representing the amount of money he and Pasquill obtained from their misconduct.

BCSC order enforcement under Nevada law

All seven justices of the Nevada Supreme Court said the BCSC order was an enforceable judgment under the state's Uniform Foreign-Country Money Judgments Recognition Act. Many other U.S. states have the same law.

The full court also cited the principle of comity, which holds that courts in one jurisdiction should generally recognize the decisions of another "out of deference and respect." The justices noted that the BCSC often works with the U.S. Securities and Exchange Commission (SEC) and that both regulators are signatories to a mutual assistance pact. They also noted that Canadian courts have repeatedly upheld SEC judgments to repay ill-gotten gains.

"The policy of promoting co-operation among nations has special strength as between Canada and the United States," wrote Chief Justice Kristina Pickering.