Lawyers for YBM Magnex resign
KAREN HOWLETT
The Globe and Mail
Friday August 21 1998
The two Toronto law firms representing YBM Magnex International Inc. are resigning, miring the company deeper in controversy and casting further doubt on when its shares will resume trading.
Joseph Groia, a securities lawyer at Heenan Blaikie hired by YBM to represent it before the Ontario Securities Commission, confirmed yesterday that he is leaving, effective today. He declined to say why.
Lawyers at Cassels Brock & Blackwell, the company's corporate counsel, are also resigning. Lawrence Wilder, one of the Cassels Brock lawyers who worked for YBM, also declined comment.
Mr. Groia and Mr. Wilder referred all questions to Guy Scala, YBM's vice-president of sales and marketing and designated spokesman. Mr. Scala did not return phone messages.
The lawyers' departure is the latest blow for YBM. The company is already trying to find new auditors and get its shares trading again. The task will be all the more difficult now that YBM has to find new lawyers as well.
YBM's shares have been suspended from trading on the Toronto Stock Exchange since mid-May, when the FBI and other law enforcement agencies searched its headquarters in Newtown, Penn., in connection with a criminal probe. No charges have been laid.
The lawyers are the second group of professionals to sever their relationship with the industrial magnet maker. The company's auditors, Deloitte & Touche, quit in June. It is virtually impossible for public companies to run their affairs without legal counsel and auditors. In YBM's case, its shares cannot resume trading until it submits audited financial statements for 1997 to the OSC.
Mr. Groia was hired by YBM to help the company get the shares trading again. A hearing before the OSC into the matter, scheduled to begin this week, has been adjourned indefinitely until the company submits audited statements for 1997 to the regulator. The OSC also extended a temporary cease-trading order on the shares.
The lawyers' resignations follow on the heels of former Ontario premier David Peterson's departure from YBM's board last week. Mr. Peterson, who is also a lawyer and partner at Cassels Brock, declined to comment.
But sources close to the situation said his resignation had little to do with him having too many things on his plate -- an explanation offered last week by another YBM director.
Rather, the sources said, the resignation of the lawyers and Mr. Peterson raises questions about whether YBM is doing enough to grapple with its problems.
Rules set out by the Law Society of Upper Canada prevent lawyers from publicly disclosing their reasons for stepping down, but they cannot leave unless they have a good reason.
"Although the client has the right to terminate the lawyer-client relationship at will, the lawyer does not enjoy the same freedom of action," the rules say.
A lawyer must have "justifiable cause" for leaving, including such things as a client's refusal to accept a lawyer's advice and a serious loss of confidence between a lawyer and the client.
The sources said Mr. Peterson and the lawyers left after becoming increasingly frustrated at what they felt was the company's lack of progress in dealing with its problems.
Harry Antes, chairman of YBM, declined to comment yesterday when reached at his office in Pennsylvania.
YBM was formed by a company that has links to Semion Mogilevitch, an alleged Russian mob boss.
At one time, Mr. Mogilevitch and his associates owned just under one-third of YBM's shares. But these days, they are mostly held by thousands of ordinary Canadians through their mutual fund investments.
YBM has denied any wrongdoing and has said that Mr. Mogilevitch and his associates are not involved with the company. |
