2023 QCCQ 4290, 2023 QCCQ 4290

Autorité des marchés financiers c. Cortellazzi 2023 QCCQ 4290 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL “Criminal and Penal Division” No.: 500-61-406191-156 Date: January 18, 2023 ______________________________________________________________________ PRESIDING: THE HONOURABLE JOSÉE BÉLANGER, J.C.Q. ______________________________________________________________________ AUTORITÉ DES MARCHÉS FINANCIERS Prosecution v.

MICHAEL RASO CORTELLAZZI and ANTONIO SAVARIS Defendants ______________________________________________________________________ JUDGMENT ______________________________________________________________________ TABLE OF CONTENTS I. THE CHARGES ……………………………………………………………………………………………………………….5 1) Antonio Savaris ………………………………………………………………………………………………….5 2) Michael Raso Cortellazzi……………………………………………………………………………………..5 II. ISSUES ………………………………………..……………………................................................................5 III. THE PROSECUTION’S THEORY ………..………………………………………………………………………………6 IV.

THE DEFENCE’S THEORY ………………………………………………....................................................7 1) Michael Raso Cortellazzi……………………………………………………………………………………..7 2) Antonio Savaris………………………………………………………………......................................7 V. THE PROSECUTION’S EVIDENCE ………………………………………................................................8 1) Mtre Erin R.

Wilson…..…………………………………………………………………………………….8 2) “X”…………………………………………………………………………. ………………………………….....9 (a) 1212 Redpath Crescent, Montreal (“1212”)………………………………………………10 (b) 1411 Peel Street, Montreal (“1411”) (2009 and 2010)……….........................12 (c) 4020 Saint-Ambroise Street, Montreal

(“4020”) (2010-2011) ……………………………………………………………………………….13 (

d) The five steps of the “pump and dump” scheme for HE-5, UMining and Neuro Biotech……………………………………………………………………………………………………..13 i. Step 1: Issue shares ………………………………………………………………………..13 ii. Step 2: Economic activities…………………………………...............................15 iii. Step 3: Promotion…………………………………………………………………………….15 iv. Step 4: Sell- off………………………………………………………………………………….17 v. Step 5: Profits……………………………………………………................................18 (

e) HE-5 / HRRN……………………………………………………………………………………………..18 (

f) UMining / UMNG………………………………………………………………………………………20 (

g) Neuro Biotech / MRES……………………………………………………………………………….21 3) Michel de Montigny………………………………………………………………………………………22 (

a) The “pump and dump” scheme (HE-5, UMining and Neuro Biotech) …………………………………………………………………………………………23 i. QTTM/M-45 (Neuro Biotech) …………………………………………………………23 (

b) Hells Angels / Restructuring of A. Cortellazzi’s assets and change of control...........................................................................................................24 (

c) HE-5 / HRRN ……………………………………………………………………………………………..25 i. Issue shares …………………………………………………………………………..........25 ii. Economic activities………………………………………………………………………..26 iii. Promotion……………………………………………………………………………………..26 (

d) UMining ……………………………………………………………………………………………………28 i. Issue shares ………………………………………………………………………………….28 ii. Economic activities…………………………………………................................29 iii. Promotion……………………………………………………………………………………..29 (

e) Neuro Biotech…………………………………………………………………………………………..30 i. Issue shares…………………………………………………………………………………..31 ii. Promotion……………………………………………………………………………………..31 4) Allain Barrière………………………………………………………………..................................31 (

a) HE-5………………………………………………………………………………………………………….33 i. Issue shares…………………………………………………………………………………..33 (

b) UMining……………………………………………………………………………………………………33 (

c) Neuro Biotech…………………………………………………………………………………………..33

5) Testimony of certain prête-noms……………………………………………………………………33 (

a) Daniel Beauchamp (HE-5).............................................................................33 (

b) Réjean Morin…………………………………………………………....................................34 (

c) Abdelkrim Louze……………………………………………………………………………………….35 (

d) J.F. ……………………………………………………………………….......................................35 (

e) Veronica Rojas…………………………………………………………………………………………..36 VI. THE EVIDENCE IN DEFENCE ………………………………………………………………………………………….36 1) Michael Raso Cortellazzi …………………………………………………………………………………..36 (a) 1212……………………………………………………………………………………………………..37 (b) 1411……………………………………………………………………………………………………..38 (

c) The notebooks ……………………………………………………………………………………..38 2) Antonio Savaris………………………………………………………………....................................39 (

a) Issue shares…………………………………………………………………………………………..40 (

b) Economic activities………………………………………………..................................40 (

c) Promotion…………………………………………………………………………………………….41 VII. LEGAL FRAMEWORK …………………………………………………………………………………………………..41 VIII. ANALYSIS ……………………………………………………………………………………………………………………..47 1) Analysis of the defendants’ credibility and the evidence in defence……………………….47 2) Michael Raso Cortellazzi…………………………………………………………………………………………47 (

a) Background…………………………………………………………………………………………………48 (

b) The different steps of the “pump and dump” scheme…………………………………52 i. Issue shares…………………………………………………………………………………………..52 ii. Economic activities………………………………………………..................................53 iii. Promotion……………………………………………………………………………………………..53 iv. Sell-off / Revenues…………………………………………………………………………………55 v. Profits……………………………………………………………………………………………………60 vi. Conclusion……………………………………………………………..................................60 3) Antonio Savaris……………………………………………………………………………………………………...61 i. Issue shares (HE-5) ………………………………………………………………………………..61 ii. Promotion……………………………………………………………………………………………..62 iii.

Sell-off / Profits……………………………………………………………………………………..64 iv. Brokerage account at Alpine Securities …………………………………………………64 v. Issue shares / Neuro Biotech ………………………………………………………………..65 vi. Sell-off .. ………………………………………………………………………………………………..66

vii. Conclusion……………………………………………………………..................................66 IX. THE PROSECUTION’S EVIDENCE …………………………………………………………………………………..67 1) Did the prosecution prove each defendants’ guilt beyond a reasonable doubt?………….………………………………………………………………………………………………....71

a) The actus reus of s. 195.2 S.A. ……………………………………………………………….71 i. “[U]nfair, improper or fraudulent practices”…………...............................71 ii. The influence of this act on the market price or the value of securities or the fact that it was likely to influence the market price or the value of securities………………………………………………….............................................74 iii. The market price or the value of securities………………………………………….74 1) The defendants…………………………………………………………………………………………………75 (

a) The mens rea………………………………………………………………………………………… 75 (

b) Raso Cortellazzi……………………………………………………………………………………..75 (

c) Savaris……………………………………………………………………………………………………77 X. CONCLUSION ……………………………………………………………………………………………………………….79 PUBLICATION BAN No person shall publish in any document, or broadcast or transmit in any way, any information that could identify the witnesses identified by the initials X and J.F. (s. 486.31 Cr. C. ). I.

THE CHARGES [ 1 ] The defendants are accused of influencing or attempting to influence the market price or the value of securities by means of unfair, improper or fraudulent practices, in violation of s. 195.2 of the Securities Act (the “ S.A .”) [1] . 1) Antonio Savaris [ 2 ] With respect to: - Shares of HE-5 Resources Corporation (between March 15 and August 15, 2010) (Count 6); - Shares of Neuro Biotech Corp. (between August 4 and December 29, 2010) (Count 7); 2) Michael Raso Cortellazzi [ 3 ] With respect to: - Shares of HE-5 Resources Corporation (between February 26, 2007, and May 18, 2010) (Count 8); - Shares of UMining Resources Inc. (between February 26, 2007, and July 20, 2010) (Count 9); - Shares of Neuro Biotech Corp. (between August 4 and November 5, 2010) (Count 10); [ 4 ] The facts on which the charges are based occurred in and around Montreal.

II. ISSUES [ 5 ] At issue here are the actions committed by the defendants – actions that, according to the prosecution, were committed as part of a “pump and dump” scheme – as well as the defendants’ intentions. [ 6 ] The Court must decide whether the prosecution has proved beyond a reasonable doubt that the actions committed by the defendants combined with their intentions constitute the essential elements of the offence set out at s. 195.2 S.A. [ 7 ] The Court must decide whether the prosecution has established the actus reus and the mens rea of the offence beyond a reasonable doubt.

The actus reus consists of the following two elements: - A dishonest act, namely, “unfair, improper or fraudulent practices”; and,

- The influence of this act on the market price or the value of securities or the fact that it was capable of influencing the market price or the value of securities. The mens rea consists of: - The defendant’s subjective knowledge of the elements of actus reus . [2] III. THE PROSECUTION’S THEORY [ 8 ] According to the prosecution, the defendants, who are members of the organization of Andrea Cortellazzi (“A.

Cortellazzi”), committed actions that constitute one or more “unfair, improper or fraudulent practices” in the context of an illegal “pump and dump” scheme to influence or attempt to influence the market price or the value of the securities of HE-5 Resources Corporation (“HE-5”), UMining Resources Inc. (“UMining”), and Neuro Biotech Corp. (“Neuro Biotech”). [ 9 ] These companies are listed with the following ticker symbols: HE-5 (HRRN), UMining (UMNG), and Neuro Biotech (MRES). They are micro-cap companies listed on the U.S. Over-the-Counter markets (“OTC markets”) and known as “Pink Sheets”.

Their securities have a very low value and are called “penny stocks”. [ 10 ] According to the prosecution, the defendants were involved in one or more steps of a “pump and dump” scheme. [ 11 ] The steps, which will be more fully described in this judgment, are the following: • Step 1: Issue shares of the companies (“Issue shares”); • Step 2: Create economic activities that appear legitimate for each of the three companies whose securities are to be manipulated (“Economic activities”); • Step 3: Promote the companies and their economic activities (“Promotion”); • Step 4: Sell-off the securities (“Sell-off”); • Step 5: Collect the profits resulting from the sales (“Profits”). [ 12 ] According to the prosecution, the defendants actively participated in, inter alia , the planning, drafting, and distribution of press releases that were transmitted to the markets and to investors.

Next, the promoters further distributed them on their promotional platforms and to their contacts. [ 13 ] These press releases were false, misleading, or exaggerated. They concerned the companies referred to in the charges and their economic activities. As will be discussed, other promotional methods were also used. [ 14 ] According to the prosecution, the promotional activities of A.

Cortellazzi’s organization, of which the defendants are members, constituted “unfair, improper or fraudulent practices”. [ 15 ] In addition, the defendants frequently engaged in the trading of HRRN, UMNG and MRES securities during the critical period of promotion. [ 16 ] Like other members of the organization, the profits they made were used for personal purposes, but also to finance the “pump and dump” scheme. IV. THE DEFENCE’S THEORY 1) Michael Raso Cortellazzi [ 17 ] Raso Cortellazzi argues that he was merely a secretary or gofer for his father, A.

Cortellazzi, and that he was unaware of his father’s illegal or fraudulent activities. [ 18 ] He argues that he sincerely believed that he was helping his father with his businesses, which he thought were legitimate, and that he did not make any of the decisions. 2) Antonio Savaris [ 19 ] Savaris argues that he was never involved in the creation or drafting of the press releases issued by A. Cortellazzi’s organization. His tasks were limited to reviewing the language, syntax, and grammar of some of the press releases. [ 20 ] Savaris was not involved at any stage of the decision-making process of A.

Cortellazzi’s organization. [ 21 ] The defendants argue that the prosecution’s main witnesses (X, de Montigny, and Barrière) are not credible and that, as accomplice witnesses, their testimony is untrustworthy. V. THE PROSECUTION’S EVIDENCE

[ 22 ] The prosecution called several witnesses and filed numerous documents in support of its theory. [ 23 ] During the prosecution’s evidence, which lasted several weeks, witnesses described A. Cortellazzi’s organization, how it operated, the strategy it employed, the profits it made, as well as the involvement of certain collaborators. 1) Mtre Erin R. Wilson [ 24 ] The Court declared Mtre Erin R. Wilson (“Mtre Wilson”) an expert witness on the Securities Act (U.

S) and Exchange Act (U.S) , with respect to registration and continuous disclosure. [ 25 ] The Securities Act concerns the primary market, where securities are sold to the public. The Exchange Act concerns the secondary market, where securities that have already been offered to the public are resold on various stock markets, such as the New York Stock Exchange, the NASDAQ, the Bulletin Board, and the OTC markets, among other places.

The securities of small companies are traded on the last two markets, which are also governed by the Securities Act . [ 26 ] Under the Securities Act , in order to offer securities to the public, a company must register or obtain an exemption. Upon registration, the company must provide a detailed portrait of its situation, along with supporting documents, including audited financial statements. Once registered, the company has continuous disclosure obligations and becomes a “reporting company”. [ 27 ] Restricted securities are shares that cannot be traded or sold on a public market.

These shares bear the words “restrictive legend”, which informs the share’s holder of this feature. [ 28 ] There are some regimes that provide exemptions to the rule that a company has to register to issue securities to the public, including Rule 144 and Rule 701, which were used by the defendants and other members of A. Cortellazzi’s organization. [ 29 ] Rule 144 is an exemption under the Securities Act and concerns the distribution of securities by a person other than an issuer, underwriter, or dealer.

A person who has met the conditions under Rule 144 is deemed not to be engaged in a distribution of securities. [ 30 ] There are five conditions for the sale of securities under Rule 144.

For the purposes of this judgment, it is important to understand that a person who acquires securities from an issuer is subject to a holding period, and the minimum holding period for a promissory note begins only after full payment of the note. [ 31 ] It must be emphasized that a promissory note may be considered a security under U.S. law, provided that the amount stated in the note has been paid in full. [ 32 ] In addition, Rule 144 is not available to shell companies – that is, companies with no economic activities or few shares – for the resale of their shares. [ 33 ] The other registration exemption regime, Rule 701, applies to non-reporting companies.

A non-reporting company can issue shares to directors, officers, employees, consultants and advisors under a pre-established compensation plan. Rule 701 allows a startup company to make payments in shares rather than in cash. [ 34 ] Like Rule 144, there are certain conditions that must be met for offering shares under Rule 701. [ 35 ] For the purposes of this judgment, it is important to understand that a consultant or advisor must be a natural person (not a legal person).

He or she must provide actual services to the issuer, which are not aimed at raising capital. [ 36 ] Officers or employees who are paid with shares must perform work for the issuer and a compensation plan must be in place. Shares issued under Rule 701 are restricted shares and, because of this, may not be freely traded on the market unless they are registered with the Securities and Exchange Commission (“SEC”) under a regime providing an exception.

In addition, there are limits to the number of shares that a company that is a non-reporting issuer can issue. [ 37 ] Last, under the Exchange Act , penny stock securities are securities issued by a small issuer and that trade at less than $5 per share.

Despite their low price, they are securities according to the laws under the jurisdiction of the SEC and are subject to the legal regime established by these laws. 2) “X” [ 38 ] In 2012, “X” was recruited by the RCMP as an informant and, in 2013, as a civilian undercover agent for Project Concession, a project that did not give rise to any charges. [ 39 ] The RCMP paid him for the information he provided as well as for the undercover operations in which he participated as part of this project.

X’s cooperation with the RCMP was motivated by his desire to make a fresh start. [ 40 ] X has not acted as a source or a civilian undercover agent since January 2016. The only thing forcing him to testify in this matter is the subpoena issued by the prosecution. [ 41 ] X studied management and accounting. Between 2006 and 2008, he acquired knowledge on the continuous disclosure requirements of mining companies listed on the TSX Venture Exchange. [ 42 ] In his testimony, X covered a broad range of topics, including the market manipulation scheme orchestrated by A. Cortellazzi and Serge Ollu (“Ollu”).

He was one of the company’s many collaborators. [ 43 ] He focused more specifically on the HE-5, UMining and Neuro Biotech companies. He addressed the scheme employed by the organization with respect to these companies in a general way, but without distinguishing one from the other, since the scheme was the

same for all of them and executed simultaneously at different steps with the particularities specific to each. [ 44 ] Last, X testified on the involvement of the prête-noms, the securities promoters, the organization’s collaborators, as well as the document destruction at 4020 Saint-Ambroise Street, in Montreal. [ 45 ] The evidence as a whole, of both the prosecution and the defence, reveals that the organization’s operations were conducted at three different addresses depending on the period and the persons concerned.

Often, these operations were carried out simultaneously or successively at more than one address. [ 46 ] The addresses are 1212 Redpath Crescent, 1411 Peel Street and 4020 Saint-Ambroise Street, Montreal, for the period from 2008 to 2011. (a) 1212 Redpath Crescent, Montreal (“1212”) [ 47 ] In late 2008, A. Cortellazzi and Ollu recruited X to help them with the operations of a mining company listed on the TSX Venture Exchange, namely, Excel Gold Mining. [ 48 ] According to X, A. Cortellazzi and Ollu were specialists in the operations of companies listed on the U.S. Pink Sheets market.

They gradually introduced him to this field by giving him tasks, first for HE-5, and then for UMining and Neuro Biotech. [ 49 ] At the time, A. Cortellazzi was in charge of the office. He had a say in all projects related to the manipulated companies, the issues of shares, promotional campaigns, and the sale of shares. He was in charge of the operations along with Ollu and Michel de Montigny (“de Montigny”). [ 50 ] Many people gave A. Cortellazzi large sums of money to finance the scheme.

In return, he made them promises, mainly that they would receive shares of HE-5, UMining, and Neuro Biotech. [ 51 ] Among these individuals was Yannick Lessard (“Lessard”), who was trying to pay back several persons from whom he himself had collected money. [ 52 ] Ollu’s role was almost as important as A. Cortellazzi’s.

He had a say in all the projects that were part of the scheme. [ 53 ] X gradually became involved in the market manipulation scheme involving the three companies. [ 54 ] He explained that the market manipulation at 1212 was not limited to companies listed on the Pink Sheets, including the three companies primarily concerned by this case. [ 55 ] During his testimony, which was supported by documentation, he described the scheme, which involved issuing large quantities of shares and publishing press releases riddled with false, misleading and exaggerated information, the purpose of which was to create hype about the securities of the manipulated companies, and thus make it possible to sell their shares. [ 56 ] The members of the organization all had their respective tasks related to one or more of the daily management activities for the operation of the scheme.

They were carried out successively, even simultaneously, in some cases. [ 57 ] X participated in or witnessed some of these activities, such as, the issues of issues, communications with a transfer agent or a lawyer, the preparation of false corporate documents, the drafting of press releases, etc. [ 58 ] These activities were carried out at the three above-mentioned addresses. Each of these addresses played a role in the market manipulation. Over time, the people in charge of the operations changed. [ 59 ] X identified Raso Cortellazzi as A. Cortellazzi’s son.

When X arrived at 1212 in 2008, Raso Cortellazzi was there. He was part of the inner core of the scheme, as was Savaris. They worked with the people in charge of the operations. [ 60 ] During the entire period of the market manipulation operations, Raso Cortellazzi’s office was at 1212 and he worked for the organization from this address. [ 61 ] X met Savaris for the first time at 1212. X’s knowledge about Savaris’s involvement in the execution of the scheme falls in the period after X moved to 1411 Peel Street (“1411”) and then to 4020 Saint-Ambroise Street, Montreal (“4020”).

According to X, Savaris always worked out of 1212. (b) 1411 Peel Street, Montreal (“1411”) (2009 and 2010) [ 62 ] From 2009 until early 2010, X worked with de Montigny at 1411. [ 63 ] De Montigny gradually took control of the operations involving HE-5, UMining and Neuro Biotech. Ollu joined him to take over the activities formerly controlled by A. Cortellazzi. [ 64 ] Ollu’s children, Marie-Christine Raynault-Ollu (“Marie-Christine”) and Marc-Alexandre Raynault-Ollu (“Marc-Alexandre”) joined them.

They handled mainly the Neuro Biotech and Triple Crown (HE-5) projects. [ 65 ] Triple Crown was the second economic activity presented by HE-5, the first was Trading Barter, which will be discussed later.

[ 66 ] Triple Crown was Lessard’s idea. It involved using the Mustang software and software licences. This project existed to provide the members of the organization and their collaborators with information for distribution in press releases, which were used to create hype about the securities, thereby making it possible to sell the shares when the timing was deemed right. That information was false and misleading. [ 67 ] The change in control of the projects related to the manipulated companies was due to difficulties experienced by A.

Cortellazzi and his indebtedness to numerous persons who had loaned him money. Not only was A. Cortellazzi unable to pay back the large sums of money he had borrowed, he was not fulfilling his promises. [ 68 ] Trading Barter was the first economic activity presented by HE-5. This project was an online bartering platform.

Although the project was real, everything around it was false because there was no intention of marketing it. [ 69 ] As de Montigny said in his testimony, there was no truth to this project because all of the people involved [ translation ] “were liars and fraudsters”. [ 70 ] Just like Triple Crown, Trading Barter existed only to provide false information for the press releases. [ 71 ] A. Cortellazzi and his [ translation ] “inner core” did not participate in the Trading Barter (HE-5) project led by the group at 1411. However, with the help of the defendants, A.

Cortellazzi became involved in creating and distributing press releases for Trading Barter (HE-5) and Fraser Gold (another project intended for UMining and Neuro Biotech). [ 72 ] At 1411, X’s tasks increased.

They involved preparing documents intended mainly for fraudulent issues of shares, preparing falsified financial statements, drafting and distributing false press releases, opening brokerage accounts, and selling shares. (c) 4020 Saint-Ambroise Street, Montreal (“4020”) (2010-2011) [ 73 ] Shortly after the 2010 Super Bowl, de Montigny and Ollu got into an argument, which resulted in Ollu moving to 4020, along with his children and X, where Ollu took control of operations. [ 74 ] During this period of change, A. Cortellazzi and the defendants worked at 1212.

Their tasks involved drafting and distributing press releases and managing public relations with English-speaking investors using a telephone number at a fake call centre. [ 75 ] X acknowledges that he took part, with Ollu and Ollu’s children, in destroying numerous pieces of evidence (including documentary evidence) related to HE-5, UMining, and Neuro Biotech and relevant to the present charges, even before the search performed by AMF investigators at 4020. (

d) The five steps of the “pump and dump” scheme for HE-5, UMining and Neuro Biotech [ 76 ] X explained how each of the steps of the “pump and dump” worked, as well as the role of the defendants and the organization in the implementation and continuity of the scheme. vi. Step 1: Issue shares [ 77 ] It all starts with the acquisition of a shell company, that is, a company with no economic activities and no assets.

HE-5, UMining, and Neuro Biotech are shell companies. [ 78 ] The scheme was set in motion by issuing thousands of free trading shares of HRRN and MRES created from false promissory notes issued by the organization as reimbursement for fake debts owed to the three companies.

Individuals’ names were used as prête-noms, with or without their knowledge, to increase the volume of shares without alerting the authorities. [ 79 ] The debts to the three companies were fake, since none of the three companies held any debts, received any money, or had a bank account. [ 80 ] Shares were issued to reimburse the debts contracted by A. Cortellazzi to finance the day-to-day operations of the organization or to realize a capital gain. [ 81 ] X explained the process leading up to the issue of shares. He explained that a fake debt in favour of the company was created in its financial statements.

Next, a false backdated promissory note was issued to a certain beneficiary. Then, a false corporate resolution was drafted authorizing the creation of the promissory notes. These documents contained fake signatures, often those of the prête-noms. [ 82 ] X acknowledges, with supporting documents, that he altered financial statements and created templates for false promissory notes.

All of the promissory notes dated 2007 are false, since he did not arrive at 1212 until 2008. [ 83 ] The signed documents were then sent to an American lawyer – either in collusion with the members of the organization or not – to prepare a legal opinion letter based on Rule 144 or Rule 701. These lawyers were Michael S. Krome, Roger Kimmel, and Morgan Petitti. [ 84 ] Once these steps were completed, all of the documents were sent to a transfer agent at an American or Bahamian brokerage firm, depending on the company concerned and the period in question.

On the basis of these documents, the transfer agent authorized the issues of shares in the name of the persons designated in the documents, as well as the deposit of the share certificates. The share certificates, the account statements, and the transactions observed confirm the issues of shares. [3] [ 85 ] The members of the organization had to open American or Bahamian brokerage accounts to make it possible to issue the shares and deposit the share certificates because Canadian accounts do not allow for the deposit of share certificates of companies listed on the Pink Sheets market.

[ 86 ] X explained that the Bahamian brokerage accounts held with the Maritimes and Gibraltar brokers were used to prevent the fraudulently issued shares from being traced. [ 87 ] According to X, Savaris received shares of the companies in exchange for participating in drafting the press releases. [ 88 ] X explained that it was in the defendants’ interest to continue collaborating and to help the scheme succeed, since they both held shares of HE-5 (issued in the days of 1212), even though control had passed to1411 and/or 4020 [4] . [ 89 ] X acknowledges that he drafted templates for documents, promissory notes, and corporate resolutions used to make possible the fraudulent issues of shares of the three companies. vii.

Step 2 : Economic activities [ 90 ] X explained that the economic activities (or projects) of HE-5, UMining, and Neuro Biotech did indeed exist, but that everything around them was fictitious since there was no intention of marketing or exploiting these activities. [ 91 ] These projects existed only to give some credence to the companies, provide information for the press releases, and make it possible to realize a financial gain by the sale of shares. [ 92 ] Once the shell companies were empty, they were set aside to be reused in the future to promote new fictitious activities. viii.

Step 3 : Promotion [ 93 ] X explained that promoting the three companies was essential to the “pump and dump” scheme. Not only did it ensure the visibility of these securities, above all, it created volume in them so that they could be sold when the organization deemed the timing right. [ 94 ] Promotion was done through press releases, websites, forums, alerts, and emails. The goal was to create a news item, an event likely to provoke hype about the securities. Next, the members of the organization had to agree on the ideal time to sell the securities, that is, once the promotion had created the desired interest.

This agreement was essential to the scheme’s success. [ 95 ] Drafting the press releases was an activity that had to be managed on a daily basis. [ 96 ] The individuals involved in this step of the scheme, including the selected promoters, agreed on a strategic plan to establish the share value that had to be achieved, the length of the promotional period necessary to achieve it, and the number and frequency of the releases. [ 97 ] The news was first distributed through press releases.

The timetable for the distribution of the press releases and their content was planned. [ 98 ] One or more people who shared ideas and rough drafts were responsible for the content of the press releases. [ 99 ] X stated categorically that these press releases contained false or misleading information since there was never any desire for the projects discussed in the press releases to see the light of day. To comply with continuous disclosure obligations, the content of press releases must be true and reflect the economic reality.

In addition, it is not permitted to include information of a speculative nature. [ 100 ] Over time, and according to the anticipated chances of success of the promotions, priority was given in turn to the Trading Barter (HE-5), Triple Crown (HE-5), Neuro Biotech, and Fraser Gold (UMining) projects. [ 101 ] The individuals drafting the press releases were always the same, regardless of the company concerned. [ 102 ] When X worked at 1212, the drafters were A. Cortellazzi, Raso Cortellazzi, and Ollu. When X was at 1411, he was one of the drafters, along with Montigny and Ollu.

At 4020, the drafters were X, Ollu, and those working out of 1212, namely A. Cortellazzi and the two defendants. [ 103 ] They all communicated with each other by email, by telephone, or in person. [ 104 ] The defendants participated in drafting and publishing press releases for all of the companies named in the charges. They acted in concert with the other people involved in this task to plan the content and the timetable for future press releases.

According to X, the defendants knew that the names of the individuals in the press releases were fictitious or that they were prête-noms. [ 105 ] X cited an example of concerted action involving Savaris. [ 106 ] In an email exchange, X asked A. Cortellazzi and Savaris to send him the most recent draft of a press release. Marie- Christine sent a draft, asking that it not be modified.

Savaris replied asking when it would be issued [5] . [ 107 ] X identified Savaris’s email address ([address 1]), as well as the email addresses he regularly used to communicate with Raso Cortellazzi: ([address 2]) and ([address 3]) [6] . [ 108 ] Once an agreement had been reached on the content of the press releases, the news items were published and distributed to the public. At the relevant times, the individuals in charge of publication and distribution were: - At 1212: A. Cortellazzi, Raso Cortellazzi, and Ollu. - At 1411: X.

- At 4020: A. Cortellazzi, the defendants, Marc-Alexandre, and X. [ 109 ] The timetable for the press releases was sent to the promoters, who chose the speculative news to be included in them. [ 110 ] One promoter after another promoted the securities of the three companies in exchange for fraudulent issues of shares in their names or those of the companies they controlled [7] . [ 111 ] Although he did not act alone, Daniel F. Ryan (“Ryan”) was an active promoter for the three companies and the projects involving them, namely Trading Barter, Triple Crown, Fraser Gold, and Neuro Biotech. [ 112 ] Ollu kept A.

Cortellazzi and the defendants closely informed about developments with the promoters [8] . [ 113 ] The promoters’ involvement in the scheme was very important because of their list of contacts and promotional tools (e.g., blogs, finance chatrooms) that allowed them to reach a large number of individuals and generate hype about the securities.

These people received newsletters that kept them abreast of stock market activity [9] . [ 114 ] X testified about certain promotions that failed for different reasons, such as selling shares at a time other than the time provided for in the agreement in principal [ translation ] “not to sell”, using press releases that lacked credibility, and self-interested work by promoters [10] . ix. Step 4: Sell-off [ 115 ] In the era of 1212, A.

Cortellazzi and Raso Cortellazzi were in charge of selling the shares. [ 116 ] Raso Cortellazzi held and maintained access to the brokerage accounts in his own name and that of MJRC Inc., his prête- nom corporation. He sold shares in his accounts when the timing was deemed appropriate in light of the progress of the promotions. [ 117 ] In the era of 1411, Ollu and his son Marc-Alexandre opened additional brokerage accounts. A. Cortellazzi, Raso Cortellazzi, and Ollu had opened the previous accounts.

The accounts in the Bahamas were opened before the move to 4020, for the Neuro Biotech project. [ 118 ] There was an agreement to sell the shares when the timing was deemed right between the persons in charge of the scheme and the interested parties, namely, A. Cortellazzi and the defendants. The agreement was not to sell until promotion began. [ 119 ] Once the shares were issued and deposited in the brokerage accounts, the process of selling them was always the same, regardless of the security. [ 120 ] In the era of 4020, Marc-Alexandre had access to A.

Cortellazzi’s account and the defendants’ accounts so he could be sure that they were not selling the shares at the beginning of the promotional campaign. Despite this access, the accounts in question remained under the control of the three individuals. [ 121 ] Savaris had access to the brokerage accounts that were opened in his name, and he sold at the appropriate time under orders from A. Cortellazzi. [ 122 ] Nevertheless, despite the agreement, the defendants and A. Cortellazzi sold shares without the consent or knowledge of those who worked at 4020, which compromised the promotion and caused it to fail.

This led to an altercation in the fall of 2010, with X, the Raynault-Ollu family, and de Montigny on one side, and the Cortellazzi family and Savaris on the other. x. Step 5: Profits [ 123 ] The gains from selling shares, which X describes as a pool agreement, were used to finance the scheme and to repay debts contracted with various creditors (including A. Cortellazzi’s debts). [ 124 ] Several shares remained unsold due to, inter alia , the failure of multiple attempts to promote them, the premature sale of shares, etc.

Nevertheless, some of the people closest to the operation were able to make money, including X, the defendants, A. Cortellazzi, and several others. (

e) HE-5 / HRRN [ 125 ] When examined on documents related to the HRRN issues of shares, X stated that [11] : ▪ Shares of that company were issued to the defendants, to MJRC Inc. held by Raso Cortellazzi, and to other persons, including promoters affiliated with the scheme; ▪ These shares were issued by creating false documents, debts, and signatures; ▪ All of the documents signed by Daniel Beauchamp, Veronica Rojas, Catherine Pushman, and Rick Désormeaux were false because the signatures were forged. These individuals were prête-noms who had no role in HE-5.

Without their knowledge, their names were used as directors of HE-5 to issue shares of that company; ▪ De Montigny stole Rick Désormeaux’s identity for the purposes of the scheme [12] ; ▪ To receive HRRN shares, Savaris also used the name of his son Michaelis Savaris, and Raso Cortellazzi used the name of his prête- nom corporation, MJRC Inc. They did so to obtain additional shares;

▪ Trading Barter and Triple Crown were HE-5’s fictitious economic activities.

Ryan was one of the promoters responsible for promoting the securities of the Penny Stock Chaser company and used its platform. [ 126 ] When examined on emails and press releases related to the promotional campaign for the Trading Barter project, X explained that [13] . ▪ All of the news relating to the promotion of this project was false or misleading; ▪ Lington Financial never existed [14] ; ▪ The Trader Barter Bank transaction was fictitious [15] ; ▪ The franchise contract in Spain was fictitious [16] ; [ 127 ] Regarding the emails and press releases related to the promotional campaign for the Triple Crown project, X explained that: ▪ All of the news relating to the promotion of the Triple Crown project was false.

It was a speculative promotional campaign; ▪ A false letter of intention was used [17] ; ▪ Daniel Beauchamp, a prête-nom, was listed as president of HE-5, without his knowledge [18] ; ▪ The Kochi company’s purchase and investment offer was false [19] ; ▪ Bat Or Investments Inc . does not exist . The letter of intention was false [20] ; [ 128 ] A.

Cortellazzi and the defendants participated in drafting and distributing the press releases for the promotion of Triple Crown (their participation was sidelined for the Trading Barter project). [ 129 ] Among other things, Savaris prepared draft press releases that contained false or misleading information [21] . (

f) UMining / UMNG [ 130 ] When examined on certain documents related to the UMNG issues of shares, X declared that [22] : - He was the beneficiary of some of those issues of shares and that other shares were issued to Raynault-Ollu and to certain prête- noms; - All of the documents signed J.F. bore forged signatures, since J.F. was a prête-nom; - Marie-Ève Bilodeau, Réjean Morin, and Frédéric Prévost were also prête-noms for UMining; - When he arrived at 1212, an initial fictitious activity, involving mining in Guinea, already existed; - The Fraser Gold mine project was the second fictitious activity.

That project was Lessard’s idea and its only purpose, like the other projects, was to provide false, misleading, or exaggerated information for the press releases; - Pappa and Ryan were responsible for promoting the securities. [ 131 ] When examined on emails and press releases related to the promotional campaign for the Fraser Gold project, X explained that [23] : - The prête-nom, Frédéric Prévost, was listed as president [24] ; - Reference was made to a false strategic plan [25] ; - There was no signature on the so-called convertible debenture; [26] - The letter of intention concerning Fraser Gold was false [27] ; - Like the organization’s other promotional campaigns, this one was speculative. [ 132 ] A.

Cortellazzi and the defendants participated in drafting and distributing the press releases for this project, which were then used in the discussion forum “Beacon Stock”. [28] (

g) Neuro Biotech / MRES [ 133 ] When examined on certain documents related to the Neuro Biotech issues of shares, X declared that [29] : - He was the beneficiary of some of the issues of shares, as were several other members of the organization, including the defendants, MJRC Inc., Allain Barrière (“Barrière”), and de Montigny; - As with other issues of shares, the defendants used their own names, that of Michaelis Savaris (for Savaris), and MJRC Inc. (for Raso Cortellazzi);

- All of the company’s debts were false; - He sent false documents to the accountant Gilles Ouellette to create fake debts to justify the creation of false promissory notes; [30] - The documents signed by Louze Abdelkrim, Claude Poulin, Barry Summervail, and Michael Yammani contain forged signatures, since these individuals were prête-noms; - Neuro Biotech was first called QTTM and then M45 (“M45 Mining Resources Inc.”).

X was not involved in those companies; - X was no longer at 1212 when the company changed its name and vocation; - It became Neuro Biotech, a company operating in the field of neurotechnology, a new fictitious economic activity; - Allan Jones, Pappa, and Ryan were responsible for promoting the securities. [ 134 ] When examined on emails and press releases concerning the promotional campaign for Neuro Biotech, X explained that [31] . - All of the news relating to this project was false; - Dr.

Andrée Roberge provided the organization with information and she received shares of the company [32] ; - There were no permits [33] ; - The offices supposedly located in Basel, Switzerland did not exist [34] ; - It was a false quote [35] ; - Auric Pharma did not exist [36] ; - Cortellazzi and the defendants continued to collaborate in drafting and distributing the press releases [37] ; [ 135 ] When X was at 4020, Ollu, his son, and X took a trip to Nassau, Bahamas. During the trip, brokerage accounts were opened in Nassau for MRES’s shares to be deposited and then sold.

Two IBC’s were thus formed [38] . 3) Michel de Montigny [ 136 ] In December 2006, or January 2007, de Montigny became an active and important member of the organization to which the defendants belonged. He was hired by the organization for his expertise in public companies. He was directly involved in the “pump and dump” scheme. [ 137 ] The AMF charged de Montigny with market manipulation in relation to Excel Gold Mining, as well as the three companies mentioned in the charges against the defendants.

He pleaded guilty in September 2016 and was fined $1.9 million. [ 138 ] He cooperated with the AMF without requesting or obtaining preferential or special treatment in the proceedings brought against him. He said he cooperated before he was charged because he wanted to take responsibility. [ 139 ] He died on November 28, 2017. [ 140 ] De Montigny developed his knowledge of public companies and securities between 1998 and 2001, while he was working as President and Chief Executive Officer of GSI Technologies (“GSI”). [ 141 ] GSI is a reporting company, listed on the “OTCBB”.

Therefore, any material information or financial information issued by GSI must be documented and compliant. [ 142 ] De Montigny knew from his time at GSI, that the financial information transmitted to investors and the market had to be accurate and true. The same applies to information transmitted in press releases, the speculative nature of which is very limited. (

a) The “pump and dump” scheme (HE-5, UMining and Neuro Biotech) [ 143 ] In December 2006, de Montigny was approached by Ollu to do the reporting for the public company QTTM [39] . He met with A. Cortellazzi and Raso Cortellazzi at 1212. [ 144 ] When de Montigny arrived at 1212, A. Cortellazzi was the big boss and owned the assets. His office was on the second floor. Ollu was his right-hand man and he welcomed visitors on the first floor. [ 145 ] Raso Cortellazzi acted as the principal intermediary for his father and dealt with all the paperwork. He had an office on the third floor.

Raso Cortellazzi was also the person de Montigny asked when he needed something. [ 146 ] De Montigny worked for QTTM until February or March 2007. He worked at 1212 until March 2008. i. QTTM/M-45 (Neuro Biotech) [ 147 ] In December 2006, when de Montigny arrived at 1212, QTTM was a shell company. He was asked to change the name of the company to M-45 Mining Resources Inc. (“M-45”) and to file the quarterly financial reports, among other things.

[ 148 ] In addition, de Montigny was responsible for the transfer and payment in shares of mining claims [40] purchased by third parties connected to the Cortellazzi–Ollu organization. [ 149 ] He had to ask Raso Cortellazzi for the documents or information required to transfer the mining claims.

Generally, de Montigny called on Raso Cortellazzi for various things, such as information on QTTM’s share structure, share ownership, the minute book, the corporate resolutions, etc. [ 150 ] De Montigny explained that Raso Cortellazzi regularly used electronic signatures to sign promissory notes or other public company-related documents. [ 151 ] De Montigny and Raso Cortellazzi handled the relationship with the accountants and counsel for M-45.

In January 2007, Mtre Michael Krome from New York was counsel for M-45. [ 152 ] During his early days at 1212, de Montigny handled the marketing and drafted the press releases for QTTMM-45. He reported to A. Cortellazzi and Raso Cortellazzi to draft and proofread the press releases. [ 153 ] A. Cortellazzi and Raso Cortellazzi published two or three press releases a week, which were drafted [ translation ] “imaginatively”. [ 154 ] De Montigny used Raso Cortellazzi’s email address, [address 2], to send him the press releases.

In addition, Raso Cortellazzi was responsible for sending the press releases to the news feeds from the 1212 office. [ 155 ] Raso Cortellazzi opened a brokerage account in the United States for de Montigny, who provided him with the information necessary to do so. Raso Cortellazzi controlled the account at first, and later it was Ollu. [ 156 ] De Montigny came to realize that the daily trading volume of the shares was significant and that A. Cortellazzi and his son were using his work to issue press releases and sell their shares. De Montigny realized that they were engaged in a “pump and dump”. (

b) Hells Angels / Restructuring of A. Cortellazzi’s assets and change of control [ 157 ] On or about March 26, 2008, upon his return from a trip to Guinea-Conakry, de Montigny resigned.

His resignation was announced to the public and the market in a press release dated May 7, 2008, even though de Montigny had left the organization over a month earlier [41] . [ 158 ] First, he opened an office in Brossard, and then in late 2008, he rented out an office on Peel Street under the firm name Nano Santé. [ 159 ] De Montigny had no further contact with the Cortellazzi–Ollu organization until December 2008, when Ollu came to see him because he had received threats from Maurice “Mom” Boucher regarding debts owed by A.

Cortellazzi. [ 160 ] Following a meeting attended by de Montigny and Ollu with members of the Hells Angels, they were told that they were responsible for the $400,000 owed to them by A. Cortellazzi. It was agreed that Ollu and his team, which included X, would move to de Montigny’s office at 1411, which they did in January 2009. [ 161 ] A. Cortellazzi’s assets were also restructured. The controlling interest in UMining was transferred to Lessard, and Ollu repatriated HE-5 and M-45 to 1411.

He wanted to turn M-45 into a biopharmaceutical company. [ 162 ] At that time, Ollu supervised the operations at 1411, while de Montigny drafted the press releases for HE-5. [ 163 ] It was also during this period that de Montigny developed the idea of Trading Barter to repay the amounts owed by A. Cortellazzi. [ 164 ] De Montigny, Ollu, and his team were under a lot of pressure from the Hells Angels.

He chose various prête-noms for officers of HE-5 to distance himself from the name Cortellazzi in the eyes of the public. [ 165 ] Ollu, his children, and X left 1411 in February or March 2010, to move to 4020. [42] Promotion of HE-5 ceased because Ryan was subject to a cease trade order. (

c) HE-5 / HRRN i. Issue Shares [ 166 ] De Montigny, X, Ollu, and his spouse used their brokerage accounts to deposit and sell HE-5 shares for false promissory notes.

Ollu, his son, and X took care of the documentation necessary to issue shares of HE-5. [ 167 ] De Montigny explained that the promissory note made out to Jameson Capital, identified as P-218, refers to a fake loan of $70,000 that Jameson Capital granted to HE-5 [43] . [ 168 ] When examined on certain documents related to the issues of shares of HRRN, de Montigny declared that: • It was Mtre Michael Krome’s usual opinion letter, which was used to obtain free trading shares in the name of his company, Jameson Capital [44] ; • He was not the owner of Jameson Capital when the promissory note was made (July 1, 2007) [45] .

• The loan of $70,000 was fake, since he never loaned money to HE-5 [46] ; • The signature on the letter written to him was fake [47] ; • Ollu and Cortellazzi were responsible for the signatures at 1212. ii. Economic activities [ 169 ] De Montigny developed the Trading Barter project. He and the organization used the “pump and dump” scheme once the unrestricted shares had been issued and deposited in accounts controlled by the organization. iii. Promotion [ 170 ] De Montigny drafted all of the draft press releases relating to the Trading Barter project for HE-5.

Using the draft press release produced under P-208 as an example, de Montigny explained that it was false, like all the other the press releases for that project. [ 171 ] Referring to the same press release, he added that Trading Barter Bank, which was to be purchased by HE-5, was also a pure invention [48] . [ 172 ] De Montigny explained that the promoters hired by the organization had an essential role to play in manipulating a security. They asked for a list of future press releases to plan the stock play [49] . [ 173 ] The promoter reviewed the draft press releases before the issuer distributed them.

The promoters then used their own networks to distribute their messages promoting a security. [ 174 ] According to de Montigny, it is illegal for a public company to plan a series of press releases as he did [50] . The company must only publish relevant and true information within the time limit provided by law. [ 175 ] When examined on press releases related to the promotional campaign for HE-5 securities, de Montigny explained that: • He was the author of all the press release that followed; • Trading Barter was merely a concept without any real substance.

HE-5 did not have a place of business in Switzerland [51] ; • The organization strategically chose when the press releases would be published so as to reach a specific investor base [52] ; • HE-5 had taken no steps to acquire other businesses. The potential revenues mentioned therein [ translation ] “were completely fabricated” [53] ; • The announcement of the acquisition of a Swiss bank was [ translation ] “science fiction” [54] ; • That press release was [ translation ] “full of lies”.

The fact that Rick Désormeaux had been appointed Chief Financial Officer and Chairman of the Board was a lie [55] ; • He personally knew Rick Désormeaux, a prête-nom, who never held a position in HE-5; • All of the press releases regarding HE-5 during the period when he, Ollu, his children, and X were at 1411, were inaccurate, except when the replacement of an officer was announced; • All of the so-called officers were prête-noms [56] . (

d) UMining i. Issue shares [ 176 ] In early 2007, A. Cortellazzi and his son asked de Montigny to clean up the shell company Globex (purchased by A. Cortellazzi), change its name, and file its financial statements for it to become an “OTCBB” company. [ 177 ] Raso Cortellazzi provided de Montigny with all of the information and documents to clean up Globex, which became UMining. [ 178 ] De Montigny began having doubts about the legality of the activities of A. Cortellazzi and his son when he started handling UMining’s investor relations. He noticed that A.

Cortellazzi and his son would regularly trade securities through the brokerage accounts they controlled. In addition, he noticed that, in return, investors would obtain large blocks of shares in mining territories that were worthless. [ 179 ] Then de Montigny made other, even more surprising, discoveries. [ 180 ] Raso Cortellazzi handled UMining’s issues of shares before de Montigny became its interim CEO.

After that he continued to do so, but he had to consult de Montigny. [ 181 ] In the summer of 2007, de Montigny learned from the transfer agent Manhattan Transfer that 5 to 10 million shares of UMining had been issued without his knowledge. He also learned that there were an extra 15 to 20 million outstanding shares, in addition to what he had been told. De Montigny realized that Raso Cortellazzi was using his signature without his knowledge to have shares issued.

[ 182 ] De Montigny was the CEO of UMining and was indeed responsible for the company’s continuous disclosure. [ 183 ] He also learned that false promissory notes backdated by two years were fabricated without his knowledge to make it possible to issue unrestricted (or free trading) shares. As CEO, he was also responsible for approving the promissory notes used and the documentation sent to the company’s counsel to obtain the legal opinion required to issue unrestricted shares. However, these shares were issued without his knowledge. [ 184 ] De Montigny confronted A. Cortellazzi and his son.

The son confirmed that he had used de Montigny’s electronic signature for the share issues. [ 185 ] De Montigny confirmed to the Court that Raso Cortellazzi regularly used the electronic signatures in his possession to sign various documents, including promissory notes and contracts related to the companies. He also stated that he had seen Raso Cortellazzi reproduce or imitate a third party’s signature. [ 186 ] When examined on certain documents regarding UMining share issues, de Montigny declared that Capital Power was an empty shell whose only activity was to sell shares held in a brokerage account [57] . ii.

Economic activities [ 187 ] When de Montigny confronted A. Cortellazzi about the UMining shares issued without his knowledge, A. Cortellazzi presented him with a mining project in Guinea-Conakry that could be used for UMining. [ 188 ] De Montigny, A. Cortellazzi, and Raso Cortellazzi met with a man named Keita. [ 189 ] De Montigny wanted to validate this project before agreeing to it, and he went so far as to meet representatives of the Guinea-Conakry government in New York. [ 190 ] Over time, he realized that this project was unworkable.

In addition, UMining had no assets and was unable to finance the project. iii. Promotion [ 191 ] Several press releases were published while these preliminary discussions were taking place. They were drafted by de Montigny and were [ translation ] “loosely based on reality”. [ 192 ] When examined on certain press releases related to the promotional campaign for the Guinea-Conakry project for UMining, de Montigny explained that: • This draft press release contained [ translation ] “lies”.

Contrary to what was stated, the company was not finding and hiring personnel for the mining project [58] ; • Nothing in this press release was true [59] ; • The organization knowingly used keywords like “world class iron ore resource” so that the press releases would show up in news feeds and in search engines [60] ; • Stating that UMining acquired a majority interest in Comitrag was misleading to the public given that that company was an empty shell [61] ; • The agreement was concluded in a few minutes, not after “several weeks of negotiation” [62] ; • The information that US$5 to $10 million was required for the first phase of the project was false.

No one at UMining had the competence required to assess these amounts [63] ; • The information included in this press release had nothing to do with the Guinea-Conakry mining project [64] ; • The press release was drafted by Raso Cortellazzi and his father; • The data with respect to the quantity of mineral ore was found on the internet by Raso Cortellazzi, who did all the internet searches [65] ; • The statement that UMining received a financing offer of $7.5 million from an investment bank in New York was false; • De Montigny knew a banker who was interested in this project, but he withdrew following the publication of the press release; • A.

Cortellazzi and his son invented the amounts indicated for the first phase of the project. [66] That press release announced that de Montigny had returned from Guinea-Conakry, which was true; • It contained statements that were falsely attributed to de Montigny [67] ; • The resignation of de Montigny was announced when in fact he had resigned several weeks earlier [68] . (

e) Neuro Biotech

[ 193 ] De Montigny agreed to participate in manipulating the securities of this company so that Ollu and his organization could sell the shares for profit to repay A. Cortellazzi’s debts to his creditors (which included the Hells Angels). [ 194 ] To implement this new scheme, false financial statements were prepared and published on the Pink Sheets, new shares were issued, and individuals were appointed to boards of directors. i. Issue Shares [ 195 ] De Montigny stated in reference to this promissory note that he did not invest money in M-45 and was not aware of this company at the time [69] ii.

Promotion [ 196 ] Around April 2010, he and Ryan created a blog called Beacon Stocks. At Ollu’s request, de Montigny’s role in Neuro Biotech was to distribute news. [ 197 ] De Montigny explained with reference to this email that the Beacon Stocks blog sent mailer emails to thousands of email addresses recommending the purchase of securities.

This blog also used the email wire to distribute press releases drafted using false information provided by Ollu [70] . 4) Allain Barrière [ 198 ] Allain Barrière (“Barrière”) was, like the defendants, a member of the organization, and he collaborated with them in the stock manipulation scheme. [ 199 ] Barrière met A. Cortellazzi around 2001–2002 and invested money through him. During the same period, he invested $45,000 to purchase shares of “Cort de V”, a company now known as HE-5.

He waited until the end of the promotional campaign for this security to sell at a profit. [ 200 ] In 2007–2008, when Barrière went to 1212, he regularly saw the defendant Savaris there (Ollu had left). [ 201 ] Savaris set up investment projects and solicited investors. There Barrière also met de Montigny, who acted as a liaison officer for different public companies controlled by A. Cortellazzi (including HE-5 and UMining). [ 202 ] During the entire period Barrière worked at the office of A. Cortellazzi, Raso Cortellazzi also worked there every day after school. Barrière worked at A.

Cortellazzi’s organization to learn how to trade on the stock market. He became friends with A. Cortellazzi and his son. [ 203 ] Barrière worked at A. Cortellazzi’s office on Sherbrooke Street (late 2002–2003), where he saw Raso Cortellazzi. He followed them to 1212, where he went two or three times a week to follow-up on the promotions for the securities. [ 204 ] According to Barrière, Raso Cortellazzi was A. Cortellazzi’s [ translation ] “mini-me”, carrying out his orders. He was a [ translation ] “an important link in the food chain”.

Raso Cortellazzi had several tasks: he traded the shares, did the paperwork, was involved in promotion, and purchased securities to influence the market. [ 205 ] When Barrière met A. Cortellazzi in his office, his son was present. His father explained to him what he had to do to issue shares to various persons with the help of Mtre Michael Krome and/or John Ahearn.

Raso Cortellazzi always had his notebook with him and he wrote down the details of the tasks that his father gave him. [ 206 ] Barrière says that, in 2008 or 2009, he realized that the activities of the organization the defendants belonged to were illegal. [ 207 ] Among the tasks he performed, Raso Cortellazzi prepared documents such as promissory notes that would be used for the issues of shares. [ 208 ] Raso Cortellazzi asked Barrière to open a corporation in Texas so that he could issue him shares of public companies and thereby sell them faster. [ 209 ] Barrière therefore created Barrière Consulting Inc. to obtain easily tradable U.S. shares.

He gave Raso Cortellazzi all of the documents and information necessary to proceed with the incorporation. [ 210 ] Barrière had discussions with John Ahearn, a transfer agent at Manhattan Transfer Register Company, who issued shares when Barrière brought money to the office of A. Cortellazzi and his son. [ 211 ] Barrière followed the instructions of A.

Cortellazzi or his son when he contacted Ahearn, as he also did when he contacted Mtre Michael Krome about the promissory notes. [ 212 ] Among other tasks, Raso Cortellazzi contacted the promoters who handled the promotion of the securities held by himself and the members of the organization. He had to contact Tony Pappa or Ryan [71] . [ 213 ] Barrière witnessed Raso Cortellazzi make transactions (purchase or sale) involving shares of HE-5, UMining, M-45, and Coastal Holdings. He also opened the brokerage accounts.

[ 214 ] It was Raso Cortellazzi who opened the account for Barrière’s corporation with the firm J.H. Darbie & Co. in the U.S. (

a) HE-5 i. Issue shares [ 215 ] When examined on certain documents related to the issues of shares of HE-5, Barrière explained that: • His signature was forged [72] ; • He does not remember having received the 500,000 free trading HE-5 shares [73] ; • He did not receive the 12,500 shares that were allegedly issued in his name. Barrière stated that his name was used to issue shares and to deposit them in other accounts. He added that he did not loan money to HE-5 in December 2006, contrary to what was stated in the document. [74] He explained that many fake debts were created by the organization for the purpose of issuing shares. (

b) UMining [ 216 ] With respect to UMining, Barrière explained that: • His signature was forged on this document, which he never signed. He never provided the stated amount of $10,000 [75] . (

c) Neuro Biotech [ 217 ] With respect to Neuro Biotech, Barrière stated that: • He recognized the M-45 share certificate in his name, dated February 16, 2010. He sold shares of this issuer and witnessed Raso Cortellazzi do the same [76] . 5) Testimony of certain prête-noms (

a) Daniel Beauchamp (HE-5) [ 218 ] Daniel Beauchamp (“Beauchamp) knew the issuers UMining and HE-5 through Lessard, who was a friend. [ 219 ] Lessard suggested that he invest money in UMining under the pretext that it was a company that was [ translation ] “going to explode and make profits”. Beauchamp purchased $8,000 worth of shares of the company in September 2009. This money came from the uncle of his then-spouse, Veronica Rojas (“Rojas”). [ 220 ] At that time, Beauchamp renovated patios and had no experience as an officer of a company listed on the stock exchange.

He has a high school diploma. [ 221 ] A few months after investing, Lessard asked him to act as a prête-nom for HE-5, as president of the company. He said it was for the purpose of receiving the mail and answering the telephone. [ 222 ] Beauchamp agreed to Lessard’s request even though he knew nothing about HE-5’s business.

In addition, he did nothing for this company, other than sign certain documents when Lessard asked him to (two documents over a period of one or two weeks). [ 223 ] He did not receive any compensation for the position or take any steps to resign. [ 224 ] Beauchamp’s signature was copied onto documents essential to the fraudulent issue of HE-5 shares [77] . [ 225 ] Regarding certain press releases, contrary to what was stated in the press release of February 20, 2010, Beauchamp declared that he did not contact the bankers. [ 226 ] Beauchamp never represented himself to anyone as an officer of HE-5, a positon he held as a prête-nom for one or two years. [ 227 ] He did not perform any actions on behalf of HE-5 or participate in any activities.

He was never involved in preparing the press releases and did not even know they existed. [78] (

b) Réjean Morin [ 228 ] Around the summer of 2008, Lessard approached Réjean Morin (“Morin”) to ask him to invest. [ 229 ] In late 2008, Lessard suggested he act as president of UMining, even though Morin knew nothing about that company. [ 230 ] He declared that he did not take

part in any meetings, meeting of shareholders, or board of directors of the company. He did not meet any other officer of this company or sign any documents as an officer [79] . [ 231 ] In late 2009, he ceased holding the position of president. He was not remunerated in that capacity. [ 232 ] The press release of July 12, 2010, gives the false impression that Morin resigned on that date [80] . [ 233 ] Examined on certain documents regarding UMining’s issues of shares, Morin stated that his signature had been forged [81] .

[ 234 ] Morin had contact with Raso Cortellazzi only once when, during a telephone conversation, the latter rudely berated him because he had forgotten to pay the fees due to the State of New York. (

c) Abdelkrim Louze [ 235 ] Mr. Louze is an electrical engineer by profession. He met Ollu around 2005–2006, and A. Cortellazzi was present. He invested money in HE-5 to purchase shares of that company. [ 236 ] Later, around 2010, Ollu contacted him and offered to show him Neuro Biotech’s drug development laboratory in Ville de Saint-Laurent. [ 237 ] Nothing happened. The project ended at the stage of the initial meeting with Ollu. [ 238 ] Louze did not know the defendants. He was but a small part of the organization’s planning of a Neuro Biotech project for a short time. (

d) J.F. [ 239 ] Around 2006, J.F. met with Ollu and/or A. Cortellazzi at 1212, because he was seeking financing for a project he was working on. There were discussions about turning his project into a public company. He was to be the president of the new company Globex, which was UMining’s former name. In fact, he was never appointed as president or an officer of Globex and he never performed any official actions as such. [ 240 ] J.F. received only evasive answers from Ollu regarding the progress of his project.

He was given a share certificate with no par value, and in 2007 he terminated his relationship with Ollu and the organization. [ 241 ] In 2007, J.F. learned that his name was listed as the president of Globex. He discovered several press releases containing information that he had sent to Ollu. It was at that point that he understood that he was being used by the organization for the information he had. [ 242 ] Examined on certain documents regarding the issue of shares of UMining, J.F. identified several in which his signature had been forged. [ 243 ] J.F. does not know the defendants, X, or de Montigny. (

e) Veronica Rojas [ 244 ] The organization used Veronica Rojas’s name without her knowledge to designate her as a director and officer of HE-5, even though she never acted as such. [ 245 ] Thus, the press release of February 20, 2010, which announced Rojas’s nomination as a director of HE-5, contained false information [82] . [ 246 ] Rojas’s signature was forged on several documents that were essential to issue shares of HE-5 to the defendants and other members of the organization [83] . [ 247 ] For example, an examination of some of these documents reveals the following: • Rojas’s signature in support of a letter from HE-5 to Savaris’s attention (March 2, 2010) for the issue of 10,000 shares of HE-5; • Rojas’s signature in support of a resolution of HE-5 (March 5, 2010) for the issue of 50,000 free trading shares to the benefit of six people, including the defendants and MJRC Inc [84] .

VI. THE EVIDENCE IN DEFENCE [ 248 ] The defendants testified in their defence. 1) Michael Raso Cortellazzi [ 249 ] Raso Cortellazzi is the son of the late A. Cortellazzi. He described his relationship with his father from birth to adulthood. [ 250 ] In 2004, the defendant grew closer to his father (his parents were separated), when his father was pursuing his professional activities out of a condominium in the Le Château building on Sherbrooke Street in Montreal. Barrière was already working with him at that time. Ollu joined them in 2006. Ollu and A.

Cortellazzi owned two public companies. [ 251 ] The defendant saw his father regularly at this location, since he was enrolled at Marianopolis College, which was close by. (a) 1212 [ 252 ] In 2006, the defendant turned 18. His father’s business moved to 1212 Redpath Crescent, in Montreal. Ollu followed him to his new office. The defendant went there regularly, since he used the offices at 1212 to watch movies, do his school assignments, and play video games.

[ 253 ] During this period, the defendant already knew that his father owned Pink Sheet companies. The defendant was going to 1212 on a regular basis when his father hired de Montigny to handle, inter alia , the financial statements of QTTM (M-45 or Neuro Biotech) and UMining. His father asked him to observe de Montigny’s work to understand the system applicable to these documents, which had to be periodically filed. [ 254 ] At 1212, A. Cortellazzi asked his son to perform certain tasks, such as: • Consolidate the expenses of the companies he was working on.

In this regard, the defendant sent de Montigny the information necessary to prepare the financial statements; • Open three telephone lines; • Create Word documents (e.g., corporate resolutions, affidavits, etc.); • Take notes for his father. [ 255 ] According to the defendant, in 2008, his father, de Montigny, and Lessard worked mainly on UMining. Along with Ollu, they were responsible for the activities related to the public companies. [ 256 ] The defendant knew that the companies had been renamed based on the type of economic activities or projects associated with them.

He denied having been involved in the change of name process for a company, as he was not an SEC lawyer. [ 257 ] The defendant also knew that his father maintained a luxurious lifestyle, drove expensive cars, and took numerous trips outside the country. (b) 1411 [ 258 ] In late 2008, the defendant witnessed the relationship between his father and Ollu deteriorate. [ 259 ] De Montigny left 1212 in February 2008, because, according to the defendant, he was fired.

M-45 apparently lost its OTCBB status because de Montigny was late sending the financial statements to the authorities in a timely fashion. [ 260 ] Ollu also left 1212 and joined de Montigny in the office at 1411, Peel Street, in Montreal. [ 261 ] The defendant continued working for his father. Some companies were handed over to the individuals working at 1411 because of A. Cortellazzi’s debts. Lessard took control of UMining. (

c) The notebooks [ 262 ] The notebooks were central to the examination and cross-examination of the defendant. They are both personal journals and notebooks in which the defendant recorded the notes and information dictated to him by his father in the context of his job [85] . [ 263 ] The AMF seized the notebooks during a search of 1212. [ 264 ] The defendant confirmed that these notebooks were in his office at 1212 and that he reviewed them with his lawyer in anticipation of his trial.

He also confirmed that the notebooks contained notes that he wrote himself while he was working for his father’s organization and that they refer to his functions and responsibilities. [ 265 ] Throughout the trial, the defendant maintained that he merely carried out his father’s orders, that he made no decisions with respect to the organization’s business, and that he was unaware that his father’s activities were illegal. The notes in his notebooks were taken during meetings with his father and dictated by him. [ 266 ] The defendant also maintained that A.

Cortellazzi used his credit cards to help finance the organization and that his father raised his credit limits without his knowledge. [ 267 ] Furthermore, the defendant reiterated several times that his income was very low when he worked for his father, who paid him only $300 a week during that entire period. [ 268 ] The Court will address the defendant’s credibility during the analysis, as well as his testimony on his notebooks, among other things. 2) Antonio Savaris [ 269 ] From 2005 to 2009, Savaris worked as an insurance of person’s representative, selling life insurance. [ 270 ] During those years, he was registered with the AMF as an insurance of persons representative, which allowed him to sell universal life insurance, among other things.

The defendant was an attached representative of Industrial Alliance. [ 271 ] He sold investment products to his clients, namely mutual funds containing various stocks. He confirmed that during this period, he knew more about investments than most people and that he was familiar with the functioning of stock markets and public companies. [ 272 ] He knew how important it was for a public company to distribute accurate material information on the markets, in a timely fashion. He also knew that public companies had to publish press releases contemporaneously with the events reported.

[ 273 ] The defendant confirmed that, during the time he worked with A. Cortellazzi, he was familiar with the attributable obligations with respect to the content and the accuracy of press releases. [ 274 ] Savaris met A. Cortellazzi in 1992 or 1993. In 2008, A. Cortellazzi borrowed $10,000 or $15,000 from him. [ 275 ] The defendant said that he was not reimbursed for that loan. Nevertheless, he acknowledged that A.

Cortellazzi gave him between $12,000 to $13,000 to pay his lawyer’s professional fees and to pay the rent for his apartment. [ 276 ] In October 2009, the defendant stopped working for La Capitale as an insurance of persons representative. During that same period, he separated from his spouse and left the family residence. [ 277 ] In late 2009 or early 2010, he started working for A. Cortellazzi, while pursuing some personal projects. [ 278 ] Savaris received shares that were deposited in American brokerage accounts that were opened with A. Cortellazzi’s help.

He received those shares, which he then had to sell, as payment for his salary of $500 a week and in reimbursement for the loan he made to A. Cortellazzi. The excess proceeds from the sale of the shares were paid to A. Cortellazzi. [ 279 ] In October 2009, when he arrived at 1212, the defendant’s financial situation was very precarious. He had no income, no money, and no assets. [ 280 ] During the same period, he moved into A. Cortellazzi’s place at 1212. In February or March 2010, he moved to Dr. Penfield Avenue. A. Cortellazzi paid the first three months’ rent. (

a) Issue shares [ 281 ] The defendant acknowledges that he consented to opening his brokerage accounts at Alpine Securities and J.H. Darbie & Co. so that shares issued by the organization could be deposited in them. [ 282 ] He confirmed that he consulted A. Cortellazzi on the appropriate time to sell the securities held in his accounts. [ 283 ] In October 2009, when he moved to 1212, Savaris no longer had a bank account in Canada.

To open a brokerage account with Alpine Securities, he went to New York and opened an American bank account at Bank of America. [ 284 ] He confirmed that he completed and signed an Alpine Securities account application form. Contrary to what is stated therein, he had no declared income or regular employment with the employer named on the form.

This account was opened to trade the HE-5 shares that the defendant would receive. [86] [ 285 ] He confirmed that the email address indicated therein – [address 1] – is his, and that it was the only one he used at the time. [ 286 ] He confirmed that he lied about his declared income ($0 instead of $100,000 to $200,000) and his financial assets ($0 and not $1,000,000) to open this account and obtain his HE-5 shares. [87] [ 287 ] Savaris also opened a brokerage account at J.H. Darbie & Co.

He acknowledged his signature on the account application form and that he lied about his income and assets. [88] [ 288 ] He recognized the statement of account as his. He did business with Lynn Goodman, who was also A. Cortellazzi’s representative. [89] (

b) Economic activities [ 289 ] Savaris confirmed that A. Cortellazzi paid him a weekly salary of $500. His tasks were finding public companies to sell, as well as reviewing and proofreading the press releases. He also attended work meetings. (

c) Promotion [ 290 ] From the moment he arrived at 1212, the defendant knew that the information published in a press release could influence an investor’s decision to buy, sell, or keep a security. [ 291 ] He also confirmed that, during the period when shares were being deposited into his accounts, he knew that the shares had to have a certain trading volume so that he could sell them on a stock market. He and A.

Cortellazzi would agree on the appropriate time to sell to maximize his profits [90] . [ 292 ] The defendant was cross-examined at length on, inter alia , the emails he wrote to the members of the organization, including Raso Cortellazzi, and the emails he received. The Court will address his credibility during the analysis. VII. LEGAL FRAMEWORK [ 293 ] The prosecution has the burden of establishing the defendants’ guilt by proving beyond a reasonable doubt the essential elements of the offences charged against them.

Possible or likely guilt does not constitute guilt beyond a reasonable doubt. [ 294 ] When the evidence is largely or solely circumsta

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