HALIFAX -- The mastermind and the enforcer of a sophisticated multimillion-dollar stock market scheme have been granted bail, a day after being sentenced to prison for conspiracy and fraud in one of the most complex cases of white collar crime in Nova Scotia history.
Daniel Potter, the former CEO of the defunct tech firm Knowledge House, and former lawyer Blois Colpitts were released Thursday pending the outcome of an appeal.
The disgraced executives were found guilty in March of conspiracy to manipulate the firm's share price and carrying out fraudulent activities in a regulated securities market.
Nova Scotia Court of Appeal Justice Cindy Bourgeois signed the bail orders after imposing multiple conditions, including requiring them to hand over their passports, remain in the country and report weekly to police.
They have also each entered into a recognizance in the amount of $100,000, with family friends agreeing to act as sureties.
The businessmen, who appeared somewhat weary after a night in jail, agreed to the release conditions.
Crown attorney James Martin told the court Potter and Colpitts did not pose a flight risk, and that there was no concern they would commit further offences.
On Wednesday, Nova Scotia Supreme Court Justice Kevin Coady sentenced Potter, 66, to five years and Colpitts, 55, to 4 1/2 years.
In his decision, the judge said "there is virtually no risk that either Mr. Potter or Mr. Colpitts will reoffend."
Meanwhile, the court set aside eight days in September 2019 for the appeal, though the matter is expected to return to court on Aug. 23 of this year to deal with procedural issues in the complicated case.
Defence lawyer Jane O'Neill asked if the appeal book, which would include a transcript of the 44-day trial and all the documentary evidence, could be submitted in an electronic format.
"The trial transcripts alone are 22,000 pages, the exhibits are in the tens of thousands of pages," she told the court, adding that -- given several hard copies would be required -- "I'm not sure there's enough real estate in this building to hold all of those books."
The trial began in November 2015 and heard from 75 witnesses over more than 160 court days, and 184 exhibits were received including thousands of documents.
The jail terms handed down to Potter and Colpitts this week came nearly 17 years after the e-learning company's dramatic collapse.
Knowledge House, the once high-flying Halifax technology darling, developed software the company promised would revolutionize the elementary, high school and post-secondary education systems.
The co-conspirators used multiple manipulative techniques to prop up the firm's share price, including using margin accounts to dominate the buy-side of the market, suppressing sales and "high closing" the stock, or entering orders late in the trading day to boost the closing share price.
"Mr. Potter was the silver-tongued mastermind, the architect of the conspiracy, who exerted his influence to manipulate and control other shareholders," Coady said in his decision.
"He dictated who could sell shares, when they could sell, and how much they could sell."
Meanwhile, the judge described Colpitts as "the enforcer" who used his position as counsel "to threaten legal action against anyone who might derail the conspirators' efforts."
Coady said Colpitts provided legal advice in support of the conspiracy as well as negotiated investment deals and prepared legal documentation knowing that the market price for Knowledge House was being manipulated.
The tech company traded on the Toronto Stock Exchange before what the judge described as "the house of cards" collapsed in August 2001, sending Knowledge House stock plummeting to 33 cents a share from $5.10.
Though the Crown had estimated the fraud was about $86 million, Coady said he would not put a specific dollar figure on the scheme, instead calling it a "large scale multimillion-dollar fraud."
