B.C. Supreme Court rejects demand to strike down provision of federal law that recognizes foreign forfeiture

A B.C. Supreme Court has rejected a demand to strike down a provision in a federal law that allows a forfeiture order of property in another country to be recognized in Canada.

The ruling is the latest setback in efforts by the wife of a convicted financial fraudster to stop the forfeiture of a luxury West Vancouver property and forfeiture of the proceeds of the sale of a luxury Whistler home, both tied to a $325 million stock fraud.

The value of the West Vancouver home and proceeds from the sale of the Whistler home total $7.2 million.

Delia Mulholland and two companies that hold the properties argued a provision of a law that deals with cooperation in criminal matters between Canada and other countries should be struck down as unconstitutional because it improperly allows a core jurisdiction of the B.C. courts and the federal justice minister on forfeiture of property to be decided by the United States.

The Attorney General of Canada disagreed, saying the focus of the federal law is jurisdiction over forfeiture of the proceeds of crime with a purpose to stifle international crime.

The B.C. Supreme Court agreed in a ruling at the end of September.

In a 28-page decision, B.C. Supreme Court Justice Jeanne E. Watchuk wrote that the federal government in reviewing and approving a treaty request under the forfeiture provision is not engaging in resolving a private dispute but engaging in a public decision of mutual benefit to Canada and the U.S.

“The Minister is engaging in a government-to-government process designed to allow Canada to respond on the basis of a treaty to requests from a foreign jurisdiction for assistance in enforcing a confiscation order issued by a court in that jurisdiction in relation to proceeds of crime derived from the commission of a criminal offence for which the accused was convicted,” noted Watchuk.

In May 2016, Gregg Mulholland pleaded guilty in the U.S. to money laundering conspiracy for fraudulently manipulating stocks of more than 40 U.S. publicly traded companies and then laundering more than US$250 million in fraudulent proceeds through at least five offshore law firms.

In February 2017, Mulholland, a dual Canadian-American citizen, was sentenced to 12 years in prison.

In 2019, the U.S. forfeiture order was recognized as enforceable in British Columbia following a request to the Canadian government from the U.S. government.

In 2020, the B.C. Supreme Court also rejected a demand from Delia Mulholland for wide disclosure of documents between the U.S. and Canadian governments related to the forfeiture order, as part of an effort to quash the forfeiture order as an abuse of process.

One of the properties Gregg Mulholland agreed to forfeit is 3630 Mathers Ave. in West Vancouver. It was purchased in full without a mortgage in 2014 for $4.85 million, according to B.C. Land Title records. The 6,000-square-foot, five-bedroom, five-bathroom home on a quarter of an acre with a pool is now valued at $5.96 million, according to B.C. Assessment Authority records.

The Whistler property was sold and proceeds of about $1.3 million paid into trust in 2016, according to a B.C. Supreme Court suit launched by the U.S. Securities and Exchange Commission to recover a penalty owed by Mulholland in a different stock fraud scheme.

In 2015, the U.S. SEC filed a certificate of pending litigation on the Mathers Avenue house, which remains in place and which is an obstacle to the property being sold.

The Mulholland properties were among those Postmedia earlier examined in an analysis of money laundering in real estate.

In the 2020 court action challenging the recognition of the U.S. forfeiture order, Delia Mulholland and the other parties asserted her husband had never claimed any interest in the West Vancouver and Whistler properties.

The judge in that case, B.C. Supreme Court Justice James Williams, noted that documents he reviewed including the agreement to forfeit assets satisfied him that when the U.S. made its order, it was acting on the basis that Gregg Mulholland had an ownership interest in the properties and was agreeing to relinquish his interest.

ghoekstra@postmedia.com

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