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of his own money and became a direc- tor of an obscure eastern European magnet manufacturer, YBM Magnex International Inc. Lawrence D. Wilder, another Cassels Brock partner, became YBM's counsel. Other reputable peo- ple were wooed onto YBM's board as well. What Peterson, the firm, and other directors didn't know at the time was that YBM was a Potemkin village of a company — a front for Russian mobsters who planned to use it to defraud inves- tors by inflating the company's stock by reporting false profit margins. YBM was controlled by Semion Mogilevich, considered the "boss of bosses" of the Russian mafia and who today sits on the FBI's 10-most-wanted list. In 1997, YBM filed a prospectus to raise $100 million on the Toronto Stock Exchange, at the very same time it was carrying out an internal investigation to verify if American law enforcement had the company in its crosshairs for ties to organized crime. The OSC approved the prospectus, despite knowing the company was under a cloud. At its peak, YBM had a stock market value of $1 billion. Then, in the spring of 1998, the FBI raided YBM's American offices. Peterson resigned from the board. But the former premier's travails were only just beginning. He and the rest of the board were charged by the OSC for failing to disclose information about the U.S. law enforcement investigation before they raised money from investors. After 124 days of hearings, the OSC deter- mined that Peterson was blameless in the debacle, although it said: "While Peterson meets the legal test of due diligence, the panel remains disappointed that he did not offer more insight and leadership to the board in these circumstances." Wilder, however, had to fork over $400,000 to cover OSC costs for its inves- tigation and court appeals. And Cassels Brock and other directors and advisers had to pay a staggering $110 million to settle shareholders' lawsuits. In spite of the bad publicity and high cost of the YBM fiasco, Cassels Brock remains a thriving law firm and Peterson its chair- man as well as a fixture on the Toronto business scene. However, more bad news emerged for the firm in January when it and two of its partners, Peter Harris and Michael Weinczok, were named in a $750-million class action lawsuit launched by now-shut- tered dealerships against General Motors of Canada Ltd. and the firm, accusing them of conflicts of interest. While still in its earliest stages, the suit is already rock- ing the legal world and could, eventually, rock the political world as well. Still, these cases show that when it comes to corporate law, one misstep can prove costly. "It takes years to build a repu- tation and it takes one stupid thing to destroy that, everyone knows that," explains Carol Hansell, a senior partner in the corporate finance, securities, and M&A practices of Davies Ward Phillips & Vineberg LLP. "Nobody can function in this environment if your counterparts don't trust you. You are basically done after that — so you can't afford it." Subscribe today to Canadian Lawyer Canadian Lawyer is the ultimate source for today's legal professional. Keep up to date and informed by subscribing today for only $65 a year! S t . John ' s city re v iew • Wild , wild web • Carri age ba ttles July 2009 July 2009 Along with 11 issues packed with insights, trends and analysis, you'll also receive access to Canadian Lawyer's exclusive digital edition and digital edi- tion archives, available only to regis- tered subscribers. You'll stay up to date on breaking news between issues with Canadian Legal Newswire, our free weekly enewsletter that is edited by our legal reporting team. 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