Regina vs. Olan, Hudson and Hartnett

Management Fraud

Assets of a Company are used to buy the Company

The case involved the purchase by Beauport Holdings of Langley’s Limited, a long established dry cleaning enterprise in Toronto that owned a substantial portfolio of blue chip securities in 1971. Hudson, President and Hartnett, Vice President of Beauport Holdings played the dominant roles aided by Olan who was to receive a finder’s fee for negotiating the sale.

To complete the purchase, Beauport Financial received funds from Langley’s that it loaned to Beauport Holdings to complete its purchase of Langley’s. The issue was whether the funds were expended in furtherance of the bona fide business interests of Langley’s or merely in advancing the personal interests of the accused and whether Langley’s suffered deprivation as a result of this action.

The accused had been convicted of fraud in 1974 but the Ontario Court of Appeal had set aside the conviction in 1975. Then in 1978, the Supreme Court of Canada ordered a new trial and in so doing established a definition for fraud, identifying two of the elements as “dishonesty” and “deprivation.” I studied this finding as Olan’s Canadian defense counsel retained me in anticipation of the next trial.

Counsel decided we needed to visit the co-accused in Dallas, so a meeting was set with their counsel. We went and met – but it was a rather brief meeting wherein counsel said, with a deep southern accent, “My clients are not prepared to meet with you and I have nothing further to say.” Welcome to Texas!

Well, we enjoyed an evening on the town, listened to a blind piano player, and were off to the airport the next day. While on the way to the plane, counsel decided to telephone Hartnett, the co-accused, who wondered why we had not called earlier. He then proceeded to discuss the case. The return flight was a lot shorter.