Chief counsel putting a new face on OSC

It wasn't long ago that such observations were reserved solely for the SEC, the Wall Street watchdog that has welcomed a parade of high-profile and headline-grabbing attorneys, ranging all the way back to famed civil libertarian William O. Douglas in the 1930s.

The Globe and Mail
February 21, 2005

Chief counsel putting a new face on OSC
Chief counsel putting a new face on OSC
Beppi Crosariol

If disgraced stockbroker Mark Valentine could be seen as a poster boy for Ontario's beefed-up war on white-collar vice, Kelley McKinnon is its do-right poster girl.

It was Ms. McKinnon, after all, who extracted a landmark settlement in December from Mr. Valentine's high-profile defence lawyer, Edward Greenspan, ending in the rogue trader's unusual lifetime ban from acting as a broker or company director or officer in the province.

It was also Ms. McKinnon, manager of litigation at the Ontario Securities Commission as well as its chief litigation counsel for the past 20 months, who orchestrated the legal offensive against four mutual fund companies and three banks implicated in a market-timing scandal. That case, in which market professionals were seen to enrich themselves at the expense of long-term investors, resulted in an unprecedented $200-million in settlements late last year.

"The seriousness of the sanctions the commission has been meting out has increased for wrongful conduct," says Ms. McKinnon, 42, whose cheerful disposition and mild manner belie her reputation for toughness. "I like to think that message has been having a deterrent effect."

While Ms. McKinnon says the thrust of her activities is to help restore investor confidence, she is also part of a succession of recent OSC prosecutors who have been transforming the image of the commission within the legal profession. Once regarded on Bay Street as a relatively feckless counterpart to the more pugnacious U.S. Securities and Exchange commission, the OSC now is considered something of a plum destination for young lawyers looking to earn valuable trial and disciplinary hearing experience, say defence lawyers and the OSC's own largely young recruits.

"In my first full year here in 2002, I had seven hearings," says Yvonne Chisholm, senior litigation counsel. "All but one of them was my own case, so I had carriage of the file, I worked up the file and argued the case. That's time on my feet that you simply don't get in the world of private commercial litigation."

Defence lawyers on the other side of the Street increasingly see it the same way.

"It's an opportunity for young and not so young litigation lawyers. You need leadership and you need to create a culture, and in my association with the litigation group up there, they do have strong leadership, and Kelley is providing it," says Peter Dey, a partner at Osler Hoskin & Harcourt LLP.

It wasn't long ago that such observations were reserved solely for the SEC, the Wall Street watchdog that has welcomed a parade of high-profile and headline-grabbing attorneys, ranging all the way back to famed civil libertarian William O. Douglas in the 1930s.

"In the United States there's a real tradition of public service where good, young, bright attorneys end up working for the government and then find themselves being really highly sought after by major New York firms and other American firms," says Joseph Groia, a former OSC enforcement director who left in 1990 and broke with tradition to become a defence lawyer, helping companies fend off the OSC litigators he once led.

"In the late eighties and early nineties, that was not the case in Canada, and I had great difficulty when I left the commission in finding a position. I think more recently that's no longer true."

Mr. Groia cites several OSC litigators who more recently have gone on to prominent roles on Bay Street, including Larry Waite, president and chief executive officer of the Mutual Fund Dealers Association, and Ms. McKinnon's immediate predecessor, Melissa Kennedy, now Canadian Imperial Bank of Commerce's associate general counsel.

If the OSC is becoming more feared and respected, it's also, under Ms. McKinnon, starting to win praise for its non-adversarial and more balanced approach to some of its less egregious cases.

Alan Lenczner, a partner at litigation firm Lenczner Slaght Royce Smith Griffin LLP in Toronto, says that in the past, the OSC was held in disdain for its cloak-and-dagger tactics.

"It was extremely adversarial in the sense that they wouldn't tell the defence lawyer what they had, they would try to surprise him at the end, they would have witnesses that they wouldn't tell him about," he says. "In the last few years, and I give Kelley some of the credit for this, the prosecutorial staff has been much more forthcoming."

Ms. McKinnon gives some of the credit to OSC chairman David Brown, who has bolstered the litigation team's resources since starting in 1998. In 1997, there were just two full-time litigators at the OSC. Today there are 12.

At the same time, she says her own approach to litigation has favoured thoroughness "as opposed to perhaps grabbing a headline off the get-go."

In the market timing case, for example, the commission conducted an assessment of 120 fund companies before closing in on a small number of what it felt were clear instances of improper activity.

She is also placing more emphasis on prioritizing cases, ensuring that what she sees as the most serious insider-trading files are diverted to the criminal courts where violators are subject to jail terms.

Ms. McKinnon began her career at Fasken Martineau DuMoulin LLP in Toronto in the mid-1980s and had the "good fortune" to mentor there under veteran litigator Doug Hunt. Together they tried a wide range of criminal jury cases, from sexual assaults to crimes involving market manipulation.

Before she left Faskens for the OSC early in 2003, Ms. McKinnon rose to become the firm's director of health law practice group.

Raised on a farm near Ottawa, Ms. McKinnon was the first in her family to graduate from university, completing her BA and law degrees at Queen's in Kingston, Ont.

"We used to call her the girl from McDonalds Corners. Who would have thought that she'd be doing what she is now," quips Rev. John Lougheed, a United Church minister in Kitchener, Ont., a friend and former campus-politics colleague. Rev. Lougheed was president of Queen's student council, serving with Ms. McKinnon, who was vice-president of student affairs.

He recalls how Ms. McKinnon played the key role in diffusing a volatile campaign by students to expel a Bank of Montreal branch from the student union building because of the bank's ties to apartheid-ruled South Africa. (The branch ultimately stayed, thanks to Ms. McKinnon's mediation efforts.) "She got everybody talking," Rev. Lougheed says. "I remember her as being very tough but very sensitive. I don't know if I've ever met anybody who combines them so well."

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