1. Anton Piller Orders Page 1 Civil Search Warrants: How They Are Used In Fraud Cases ACFE 2014 Canadian Conference September 8, 2014 Rosanne Walters, CPA, CA, CFE, CBV Michael Galambos, LLB, BA

2. Anton Piller Orders Page 2 Anton Piller Orders Overview Definition and History of the Anton Piller Order Criteria to obtain the Order Issues arising from Anton Piller cases in Canada Supreme Court of Canada guidelines to conduct Anton Piller Orders Connection with Mareva Injunctions Use of Anton Piller Orders in recent fraud cases Benefits of Anton Piller Orders Opportunities for CFEs Questions and answers

3. Anton Piller Orders Page 3 Anton Piller Orders Definition The Anton Piller Order is a court order that provide the right to search premises and seize evident without prior warning (ex-parte). Essentially, it is a civil search warrant.

4. Anton Piller Orders Page 4 Anton Piller Orders First Case Anton Piller KG v. Manufacturing Processing Ltd. (1976) Anton Piller (a German company) sued Manufacturing (an English sales agent) because of alleged leaks of copyrighted information to competitors. Anton Piller was a major supplier to IBM. This case established the criteria that must be met to obtain an Order.

5. Anton Piller Orders Page 5 Anton Piller Orders Criteria A strong Prima Facie case Misconduct causes serious damage to plaintiff, potential or actual Convincing evidence that the defendant has in it possession documents or information that is incriminating A real possibility, factually demonstrated, that the defendant may destroy such material before the discovery process can do its work in the normal course of civil litigation

6. Anton Piller Orders Page 6 Anton Piller Orders Prima Facie Evidence Prima Facie means..“At first appearance” It does not need to be conclusive or irrefutable. Just strong enough to warrant going to trial. In the original Anton Piller case, the Prima Facie evidence was evidence that two agents of the Defendant were corresponding with competitors about the copyrighted information.

7. Anton Piller Orders Page 7 Anton Piller Orders Damages Damages to the Plaintiff must be serious. In the original Anton Piller case, there was a huge possibility that there would be damages if competitors obtained copyrighted information, especially at the time Anton Piller was going to market with some new innovations.

8. Anton Piller Orders Page 8 Accounting Records Possession of Evidence There must be convincing evident that the Defendant has in its possession incriminating evidence. In the original Anton Piller case, the evidence suggested that the Defendant had correspondence and other evidence to support the sharing of copyrighted information with German competitors.

9. Anton Piller Orders Page 9 Anton Piller Orders Destroy Evidence There must be a real possibility that the Defendant may destroy evidence. In the original Anton Piller case, it was determined that there was grave danger that the evidence of providing information to competitors would have been destroyed if notice of the application was given.

10. Anton Piller Orders Page 10 Anton Piller Orders Issues Arising from Anton Piller Orders in Canada Privacy issues when a search occurred in a home Dealing with privileged documents List of contents removed from premises was not itemized Documents lost or destroyed after the Order carried out Subsequent litigation arose due to privileged documents

11. Anton Piller Orders Page 11 Anton Piller Orders Guidelines established by the Supreme Court for conducting Anton Piller Orders Normal business hours Defendant needs to be present during the search People who conduct the search should be specified and limited in number A copy of claim should be serviced on Defendant Defendant has right to contact a lawyer

12. Anton Piller Orders Page 12 Anton Piller Orders Guidelines established by the Supreme Court for conducting Anton Piller Orders (continued..) A detailed list of evidence removed should be made Documents seized should be placed in the custody of a Supervising Solicitor and the Defendant should have an opportunity to review them Contested evidence should be kept in the Supervising Solicitor’s custody

13. Anton Piller Orders Page 13 Anton Piller Orders Role of Supervising Solicitor during the search Act neutral Explain the Court’s Order to the Defendant Supervise the search for and seizure of evidence Objectively report to the Court Aid the Court and counsel for all parties in technical matters

14. Anton Piller Orders Page 14 Anton Piller Orders Role of Supervising Solicitor after the search The Order should make clear the responsibilities of the supervising solicitor after the search File a report of the search within a time limit describing the search and evidence seized Oversee the review of evidence Protect privilege

15. Anton Piller Orders Page 15 Anton Piller Orders Mareva Injunctions used with Anton Piller Orders This is an interim or interlocutory injunction made, in most cases, without notice. Prohibits the Defendant from disposing of assets pending the outcome of the action between the parties. Must show a real risk that the assets may be disposed of.

16. Anton Piller Orders Page 16 Anton Piller Orders Recent Fraud Cases Commonly used for commercial files but increasingly being used in fraud files Especially, complex family law matters where information is being concealed Often the files are sealed, so frequency of use of the Anton Piller Order may not be commonly known Due to the ease inwhich electronic information can be destroyed and/or concealed, the ex-parte order helps preserve this evidence

17. Anton Piller Orders Page 17 Anton Piller Orders Recent Fraud Cases Family Law - Undisclosed income and assets (2013) The Plaintiff knew the Defendant spouse earned substantial undisclosed income from criminal activity. The defendant was profiled and electronic evidence was obtained that supported that there was a strong possibility of undisclosed income. An Anton Piller Order and a Mareva Injunction was ordered. As a result of the civil search, significant cash was seized, as well as other expensive assets and electronic data. The case settled prior to the electronic data being analyzed.

18. Anton Piller Orders Page 18 Anton Piller Orders Recent Fraud Cases Fraud Against an Estate – Theft of funds (2013) An individual worked himself into the confidence of an elderly person who willed him $750k to him and passed away. The rogue collected the funds. The Police investigated the individual and found that he had committed the same act with a second elderly person and was about to collect $250k on this other estate. Before the executor of the second estate paid out, the heirs to the first estate brought a civil action and obtained a Mareva Injunction and Anton Piller Order. The individual’s apartment was searched and paper evidence of existing bank accounts was found. The bank accounts were frozen.

19. Anton Piller Orders Page 19 Anton Piller Orders Recent Fraud Cases Family Law – Undisclosed Income for Support Purposes (2012) The Plaintiff knew her Defendant spouse carried on an internet business. The income from this business was not disclosed. Without an accurate determination of income, spousal and child support could not be determined. In order to gain evidence of the business income, an Anton Piller Order provided access to the Defendant’s computer records. The Mareva Injunction prevented the Defendant from using the income derived from this business until the litigation matter was resolved. During the search, computers, laptops and other electronic devices were seized. Based on the analysis of these devices and other seized documents, an estimate of the Defendant’s income was determined and support established.

20. Anton Piller Orders Page 20 Anton Piller Orders Recent Fraud Cases Family Law – Removal of Family Assets from the Jurisdiction (2005) The Plaintiff believed her husband had moved RRSP funds to Ireland and was planning on moving there. The Plaintiff attempted to obtain disclosure through a number of hearings. The husband did not comply and was found in contempt of court. An Anton Piller Order was ordered to search the home where the husband lived and removed items to assist in the dispute.

21. Anton Piller Orders Page 21 Anton Piller Orders Benefits of using the Anton Piller Order Saves cost to litigants when the Plaintiff is in a position where it would take numerous court applications to obtain the evidence Saves evidence from disappearing Serves as a motivator for the Defendant to settle

22. Anton Piller Orders Page 22 Anton Piller Orders Opportunities for Investigators Provide strong prima facie evidence Assist in conducting the search Analyze the information obtained in the search Provide expert witness testimony

23. Anton Piller Orders Page 23 Anton Piller Orders Experts Used Forensic Computer Experts (review online internet activity, copy hard-drives, analyze data, attend search party) Forensic Accountants (provide evidence in Court, review and analyze evidence obtained by the Order) Investigators (provide evidence for the Order, attend search party, provide on- going evidence)

24. Anton Piller Orders Page 24 Anton Piller Orders Contact Rosanne E. Walters rwalters@bdo.ca T: 604 646 4381 Michael Z. Galambos mgalambos@wdwlaw.ca T: 604 629 1052