Crack open a marketing brochure from Goodmans LLP, and you'll find one way the Bay Street law firm sells its services to potential clients is by highlighting work for construction company Aecon Group Inc.
Yet in recent weeks, Goodmans partner Grant McGlaughlin escorted a fellow named Michael Beattie through the Ottawa offices of federal politicians, along with media outlets such as The Globe and Mail, as part of a campaign to block the $1.5-billion sale of Aecon to a state-controlled Chinese infrastructure company.
Mr. Beattie, who claimed to be a veteran construction chief executive officer with sterling professional and academic credentials, also got advice from public relations agency Navigator Ltd. as he slammed a takeover offer from Beijing-based China Communications Construction Co. Ltd.
(CCCC) as "a destructive and destabilizing transaction."
Like Goodmans, Navigator also worked for Aecon in the past.
It turned out that Mr. Beattie misrepresented himself just about every time he opened his mouth. The Globe and Mail learned this week that he's not a construction executive, he faces criminal charges for fraud and he was never awarded the university degrees he claimed.
The Aecon takeover is now a political hot potato, in part due to Mr. Beattie's efforts, as the federal Liberals weigh approval of a transaction that has major implications for Canada's relationship with China.
Mr. Beattie's motivation for opposing the deal remains something of a mystery: After regular contact with media over the past four months, he is no longer returning calls, and did not respond Tuesday when reporters knocked on the door of his home in Brantford, Ont.
As this transaction continues to be reviewed by the federal government, it's worth asking why Mr. McGlaughlin and Goodmans, along with Navigator's PR experts, opted to work with Mr. Beattie, whose goal was to do significant damage to Aecon. What duty did these professionals owe to their former client?
Mr. McGlaughlin declined to comment, opting instead to have Goodmans' general counsel Ken Crofoot respond to questions with an e-mail.
"As we hope you know from your previous dealings with Goodmans, we have high professional standards and strictly adhere to all professional obligations," said Mr. Crofoot. He said: "These obligations also prevent us from discussing this matter with the public. As has been reported, Goodmans LLP has no further involvement in this matter."
Navigator executive chairman Jamie Watt said in an e-mail: "We have a robust internal process for checking potential conflicts. We do not have a conflict on this file." (Full disclosure: Navigator is advising The Globe and Mail on regulatory affairs.) Mr. Watt said: "We are proud of the success we have had on this matter."
Academics say a foundational duty of a lawyer is one of loyalty to clients, current and former, a principle that's been driven home by past court decisions. Trevor Farrow, a professor at Osgoode Hall Law School who specializes in legal ethics, said: "Put yourself in the client's shoes, and ask what the expectations of a reasonable client would be, with respect to loyalty."
There is wiggle room on these issues. Dr. Farrow said in the relatively small Canadian legal community, the courts have endorsed law firms that represented clients with opposing interests, if the work done for one party is clearly unrelated to work done for the other. That may be the case at Goodmans: The firm's brochures highlight outsourcing projects done for Aecon, not corporate transactions.
Dealers for General Motors of Canada Ltd. won $45-million from Cassels Brock & Blackwell LLP - an award that is expected to be scaled back during an ongoing appeal - because the law firm was simultaneously advising both the dealers and the federal government in its negotiations with GM Canada.
A law firm in Saskatchewan, McKercher LLP, landed in hot water for acting against Canadian National Railway Co. after previously doing work for the company. In a landmark 2013 decision, the Supreme Court said such behaviour is offside without the former client's consent.
If Aecon's deal with CCCC fails to make it over the finish line, the Canadian construction company's share price will take a hit. Aecon stock traded around $16 prior to the sale process, while CCCC is offering $20.37 per share. Such a setback is bound to kick off a blame game, and the question of client loyalty would feature prominently in that discussion.
© The Globe and Mail
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.