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Danny Guy, Derrick Snowdy and the Strange Wars of Confused Men

Derrick Snowdy is probably as close to a celebrity as Canada’s private investigator community has.

Starting in 2010, Snowdy burst into view as a prime mover in the political controversy colloquially known as “the busty hookers’ scandal.”

Snowdy proved to be a quick study at capturing an audience’s attention, ever ready to regale listeners with some of the inside stories from his investigations.

So when Catalyst Capital founder Newton Glassman brought a stemwinder of a defamation litigation in 2017 against a host of hedge fund managers and journalists, it was not surprising to see Snowdy involved.

(Foundation for Financial Journalism readers will recall our two 2018 investigations that looked into the quality of disclosures at Callidus Capital and Catalyst Capital, the two investment vehicles Glassman controlled. In July 2019 Catalyst amended the initial defamation claim to add Bruce Livesey, the article’s co-author, as a defendant.)

After all, given the numerous well-heeled defendants — and their lawyers, many sporting big litigation budgets — the prospects for an investigator with a knack for digging into corporate fraud seemed attractive.

There was just one thing.

A series of filings were unsealed late last week in Catalyst’s litigation revealed that Snowdy had indeed been hard at work on these types of issues for several years. (The filings were made by West Face Capital and the other defendants.)

But it had been for the other side.

So who bankrolled Snowdy’s efforts? A single client: Danny Guy, a veteran Canadian money manager and the general partner of Harrington Global Opportunities Fund.

Meet Danny Guy

Little about the arc of Daniel Gerrison Guy’s career in finance would imply a disposition towards garish conspiracy theories.

After starting in brokerage research in 1993, Guy joined Banfield Investment Management, a then prominent Toronto risk arbitrage fund in the late 1990’s. In 2001, Guy led a buyout of the fund and renamed it Salida Capital. Becoming Salida’s chief investment officer, Guy changed the fund’s investment strategy to a more directional, commodities oriented focus with a heavy emphasis on private equity.

(Salida is Spanish for “exit,” a commonly used term in private equity that means an investment was successfully concluded via a fund either selling an asset at a higher price or to the public through an initial public offering.)

From 2002 through 2007, Salida posted very handsome returns, but in 2008, the one-two punch of the global financial crisis and the collapse of Lehman Brothers, the fund’s prime broker, led to disastrous losses. Though Salida’s performance in 2009 and 2010 was stellar, restoring the fund’s assets under management proved much more difficult, and in 2013 it began to shutter its portfolios.

In 2011 Guy moved to Bermuda, but it is unclear when the Luxembourg-domiciled Harrington Global was formally launched, or if it has limited partners. The fund does not appear to report to hedge fund industry databases.

Snowdy told the Foundation for Financial Journalism that his connection with Guy began when Salida Capital’s then CFO asked him to perform some due diligence on an investment Salida had made that the fund was concerned about.

“It was to look at a company called StarClub. I did some work and determined it was pretty much a fraud,” he said. (StarClub’s product was a software application that purported to help so-called social media influencers track the reach and impact of their endorsements.)

Snowdy continued that he delivered a report and forgot about it until November 2016 when Salida’s CFO called him and said, ” ‘It looks like you were really right on [StarClub] and asked me if I could I help them build a case for a lawsuit.’ ”

Snowdy said in the course of investigating StarClub in 2016 he wore a hidden recording device while posing as a potential investor during a meeting at Goldman Sachs’ headquarters, and he identified and obtained photos of a yacht that StarClub’s founder Bernhard Fritsch allegedly owned. The FBI knew about and approved everything he did, Snowdy said.

In August 2017 federal prosecutors in Los Angeles unsealed an indictment that charged Fritsch with a series of fraud-related counts. The case is scheduled to go to trial in January 2022.

According to the indictment, Guy invested more than $22.4 million of Salida and Harrington Global’s capital in StarClub.

The road to vengeance

Guy’s experience with a pharmaceutical concern called Concordia Healthcare is why he became consumed by the idea of exposing how short sellers operate.

Concordia was a once high-flying company in which Harrington Global had a 2.7 million share stake, at one point amounting to over 5.2 percent of its shares outstanding.

Concordia’s business model was similar to that of Valeant Pharmaceuticals International, in that it used aggressive borrowing to fund purchases of established drugs. The goal was to simultaneously raise drug prices while avoiding costly (and recurring) research and development expenses.

It was a model that worked for a little while.

Unfortunately for both Concordia and Guy, when presidential candidate Hillary Clinton sent out a 21 word tweet on September 21, 2015, everything changed.

Clinton’s retweet of a New York Times article about a series of astronomical price hikes in a drug called Daraprim brought the issue of drug prices front and center in the 2016 presidential race.

And much of that ensuing dialogue centered on how constant drug price increases were forcing brutal sacrifices and trade-offs for many American families.

Congressional hearings soon followed.

A month later Valeant Pharmaceuticals came in for its own reckoning: On October 15 the Foundation for Financial Journalism exposed how the company’s Philidor subsidiary helped it keep certain drug prices artificially high, as well as evade pharmacy ownership regulations.

Concordia, with about $4 billion in debt and reliant on acquisitions to fund the revenue growth investors were demanding, was suddenly hamstrung in its ability to boost prices.

With a business model whose future had suddenly become an open question, Concordia’s share price soon began to slide. Moreover, it attracted numerous short sellers, including Marc Cohodes, an ex-hedge fund manager who uses his twitter account to offer unfiltered, often profane takes on companies he is short.

Starting in October 2015 Cohodes began building a short position in Concordia’s shares. In June 2016 company CEO Mark Thompson sued Cohodes for defamation; Cohodes happily fired back with lengthy letters to U.S. and Canadian regulators in July and August enumerating several ways he thought the company was misleading investors.

In August, six weeks after suing Cohodes, Thompson was subject to a humiliating  margin call, and two months later he quietly resigned. He withdrew his suit against Cohodes soon after.

Cohodes, asked for comment about Concordia, said he was happy to have shorted it, “in the $70 range,” but declined to elaborate more on the experience, beyond noting tersely, “[Concordia] was a piece of shit.”

(A word of disclosure: In 2017 Cohodes made a donation of $344,593.20 to the  Foundation for Financial Journalism. He is discussed further below.)

Guy approached Canadian securities regulators in 2016 to allege that short sellers were depressing Concordia’s share price through illegal trading tactics such as “spoofing” in order to trigger a wave of algorithmic selling. No regulatory action was taken.

Concordia sought protection from creditors in October 2017, and Harrington Global liquidated its Concordia position at an approximately $150 million loss. (After reorganization, the company is now known as Advanz Pharma Corp.)

Sustaining such brutal losses galvanized Guy’s thinking about Concordia’s demise: A cabal of short sellers spread disinformation about the company’s prospects while using illegal trading tactics to pressure its share price.

Central to proving this claim, Guy felt, was obtaining the identities of those responsible for perpetrating the “short-and-distort” campaign on Concordia. His attempts to get the information through hearings with regulators failed because of concerns over privacy.

To that end, Harrington Global petitioned for a Norwich Order — a motion delivered on a third-party in possession of material information — that would have compelled Canada’s brokerage regulator, the Investment Regulatory Organization of Canada, to disclose those names.

But Harrington Global’s request was denied in a 2018 Ontario Superior Court ruling.

In January Harrington Global sued a series of U.S. and Canadian banks in the U.S. District Court for the Southern District of New York. The claim primarily alleges that traders at large banks used illegal tactics that served to manipulate Concordia’s price downward.

Asked about Guy’s views on Concordia’s collapse, Snowdy assessment was blunt.

“I told Danny that [Concordia CEO] Mark Thompson was a lying sack of shit,” Snowdy said.

But, Snowdy continued, “Danny defended Mark Thompson. And then [Guy] would start screaming about naked short sales, Marc Cohodes’ role in all this, and that crap. I told him that [Cohodes] was right about Concordia.”

In a long, rambling letter to West Face’s lawyers in which Snowdy discusses his role in the Catalyst case, he said that his take on Concordia’s collapse antagonized Guy a great deal. On one occasion, when Snowdy was vacationing with his kids in the Bahamas, Guy accused him of being there to only to make secret financial arrangements — the implication being that Snowdy would only have said that because short sellers paid him off.

This darker turn in Guy’s worldview was on display in an April 2018 email to the Ontario Securities Commission. After Guy saw that Greg Boland, West Face Capital’s general partner, looked at his LinkedIn profile, Guy wrote an a threatening email to several OSC attorneys that promised “a fucking war” if short sellers targeted other companies he was invested in, or if anything happened to his family.

[Guy was not the only one being paranoid. In a phone interview, Snowdy related how in 2018, en route to a meeting with Nate Anderson — also a defendant in the Catalyst case — he detected two people following him. This led him to believe that perhaps Anderson’s office had been somehow compromised. Anderson said that in that period his office was at a WeWork, and he didn’t think that being infiltrated by private investigators was a very big risk.]

The Foundation for Financial Journalism repeatedly sought to interview Guy. His conditions — fly to Bermuda and interview him — proved unworkable. In a response to a text message about his opposition to short selling, Guy said, “I have no problem with shorting when it’s done right.”

Penetrating the wolfpack

There was nothing terribly complex about what Snowdy did.

Starting in 2017, Snowdy began posing as a sympathetic, knowledgeable fraud-fighting ally to many of the reporters and short sellers named in the Catalyst claim. More importantly, Snowdy leveraged this nascent rapport to obtain introductions to other investors and forensic analysts who were researching and shorting publicly traded companies.

A big part of Snowdy’s operating methodology was taping phone calls, according to emails he sent; one of his two phone numbers was set to automatically record and was stored on his home computer. That may pose a prospectively large legal headache for him since he described recording California resident Marc Cohodes, and the state’s  laws require both parties to consent to having a call recorded. (Cohodes strongly denied having given his consent for recording.)

The unsealed documents, however, do not specify what information he got from taping Cohodes. When asked about taping Cohodes and the absence of his consent, Snowdy did not reply.

In a recently unsealed, multi-month WhatsApp message exchange between Guy and Glassman, Guy called this strategy “penetrating the wolfpack.” This echoes the theme Guy began enunciating with his angry email to the OSC: Short sellers are dangerous people.

Simultaneously, Snowdy was providing what he overheard — the gossip, the sources, targets and methods – to a small group of corporate executives who felt short sellers were unfairly (or illegally) attacking their companies.

The pay for doing these infiltrations was at least decent.

According to a memorandum of an August 2017 meeting between Snowdy and private investigators working for Catalyst and its lawyers, Guy paid Snowdy $25,000 per month and covered his expenses.

What Snowdy found

What Snowdy told people he uncovered, according to the court filings, looks very much like a version of a common short selling conspiracy trope. It usually follows along these lines: A loose network of short sellers — taking their cue from one individual leader — manipulate the press with misleading information, and then game the greedy or incompetent prime brokerage units at investment banks to allow them to flood the market with improperly borrowed stock. The result is a rapidly sinking share price for any company targeted.

Elements of this idea have been around for decades, but it was not until former CEO Patrick Byrne, during a 2005 presentation he called “The Miscreant’s Ball,” that these disparate complaints about reportorial malfeasance and short selling perfidy were housed in a unified theory.

Byrne claimed a Sith Lord — later revealed to be former Drexel Burnham Lambert executive Michael Milken — was then orchestrating (somehow) much of the dubious short selling activity to his benefit. He also argued that a large group of business journalists were merely transcriptionists for short sellers, and that the miscreants preferred to wage their campaigns in groups.

Snowdy, during a September 2017 meeting where he presented his findings to Jim Riley, former Catalyst COO and general counsel and others, leveled allegations that seemed to check many of the same boxes Byrne had complained about.

There are “puppet masters” that control the network and their connections to shadowy foreign capital, as well as a slew of seemingly nefarious linkages between everyone he named. And for good measure, Snowdy touched upon regulatory capture, a favorite theory of Byrne’s, when he appeared to suggest short sellers had somehow neutralized the Ontario Securities Commission.

For his part, Guy seems to agree with Deep Capture.

Guy sent Glassman a link, and told him that the article will “make your head spin.” (Snowdy, speaking about Guy’s support for Deep Capture in a meeting with Catalyst’s lawyers in September 2017, said that he felt that 25 percent of it was so untrue it calls into question the balance of the work.)

And it ought to be recalled that making these types of allegations can have consequences, especially in Canada, where libel and defamation laws favor the plaintiff.

In 2008,’s Byrne and his then colleague Mark Mitchell published “Deep Capture,” a conspiratorially virulent expansion upon Byrne’s “Miscreant’s Ball” thesis. Altaf Nazerali, an occasional small cap stock promoter depicted in Deep Capture as an international terror finance operative, sued for libel in British Columbia’s Supreme Court. After a lengthy and expensive trial, Byrne, Mitchell and the other defendants lost the case, and in a scathing judgment, were ordered to pay $1.2 million dollars in damages.

Wearing a wire 

One company that appears to have placed great stock in Snowdy’s information is MiMedx Group, an Alpharetta, Georgia-based manufacturer of skin graft and wound care products.

MiMedx filed suit in October 2017 against a series of short sellers, claiming the company had been libeled and that its business prospects were interfered with. A month later, Parker “Pete” Petit, MiMedx’s outspoken founder and CEO, began making public remarks about short selling that were nearly identical to Guy’s.

Petit focused particular ire on Marc Cohodes, accusing him in an October 13, 2017, post on the company’s website of being the ringleader of a short seller “circus” and spreading misinformation. This was baffling in that, as Cohodes put it, “I had never heard of the company until that moment.” (Cohodes also won the fight against MiMedx’s management: On February 23, Petit was sentenced to one year in prison; the COO received the same sentence.)

To get more information on Cohodes and other short sellers, MiMedx’s outside law firm, Wargo French, hired Snowdy. (David Pernini, the firm’s Atlanta-based partner that directed Snowdy’s engagement, did not return a phone call seeking comment.)

Snowdy confirmed that he had worked in 2018 for MiMedx, but that it was not a standard engagement for him. He said that he was doing so within the context of “working undercover” for an unspecified federal agency.

“Any email or report I wrote for [Wargo French] was scripted” by this federal agency, said Snowdy.

Pressed on the identity of this purported agency over several weeks, Snowdy would only say this organization’s mission is, “criminal justice, with the power to arrest people.”

Asked how much MiMedx paid him to report on Marc Cohodes and other investors critical of the company, Snowdy said he didn’t get a dime. When Snowdy was asked why he would work for free, and if that triggered any suspicions at MiMedx, he declined to comment.

Incredibly, this story gets even more unusual, with Snowdy alluding to “settlement terms” in the U.S. and Canada that prevented him from discussing his MiMedx activities.

A call to the FBI seeking comment was not returned.

Vincent Hanna dials in

Guy initiated contact with Glassman on August 11, 2017, via email, and using the pseudonym “Vincent Hanna,” a character portrayed by Al Pacino in the 1995 movie “Heat.”

(In a strange aside, Snowdy, in his letter to West Face’s lawyers, recounted meeting a pair of individuals in a New York office lobby in early 2018 who introduced themselves as “Vincent Hanna” and “Neil McCauley,” the name of the movie’s Robert DeNiro character.)

While Guy used a pseudonym for an additional 12 days, he wasted little time in telling Glassman the names of short sellers he suspected were involved with Callidus Capital’s stock. Ironically, given Snowdy’s role, as well as Catalyst’s extensive use of Black Cube, Guy warned Glassman that private investigators were likely tailing him and that Russian hackers could be trying to disrupt his fund’s operations.

(There has been no suggestion Guy or Snowdy had anything to do with Black Cube’s operations; Snowdy, in remarks to the Foundation for Financial Journalism, said that he believed he was a target of Black Cube too.)

In notes from an August 23, 2017, conference call with Catalyst executives and lawyer’s, Guy — still using the “Vincent Hanna” moniker — continued to frame his objection to short selling along familiar lines: Arguing Concordia was “a dry run” for taking down the much larger Valeant Pharmaceuticals, making allegations of possible Russian and Hong Kong money laundering, speculating about organized crime money at work shorting stocks, and Marc Cohodes.

Glassman was not a fan of Snowdy

The unsealed documents show Catalyst executives and lawyers eagerly anticipating Snowdy’s research, and they afforded him three separate opportunities to present his findings.

But when Snowdy could not — or would not — produce the desired recordings and emails that Guy had assured them his investigator possessed, Glassman became a vehement critic.

Glassman, quoting his lawyer after one meeting with Snowdy, said he provided, “Two and a half hours of interesting but unusable bullshit — and two and a half minutes of food for thought.”

And Glassman appeared especially angry at Guy’s inability to force Snowdy to produce them since any of his work product would belong to Guy as the client.

“Right now [Snowdy] is using u and hurting u badly. U clearly r too stupid or blind to see it,” wrote Glassman.

Snowdy’s evidence, “was less valuable than what my dog’s left for me on my lawn this [morning.]”

All those documents? None of them are real

For six weeks the Foundation for Financial Journalism has been in frequent contact with Snowdy about his work for Danny Guy. Questions begat more questions and Snowdy’s response has never wavered.

He insists that almost none of it happened.

In other words, Snowdy did not work on behalf of Danny Guy to infiltrate any networks, and has not spoken to Danny Guy since “sometime in 2016.”

The Foundation for Financial Journalism showed Snowdy emails between himself and Guy discussing his assignment in April 2018, naming certain reporters and short sellers of interest to Guy and Catalyst.

“Forgeries,” he speculated in a phone interview. “But I can’t really be sure. You would be amazed at the shit I’ve seen go down up here in terms of corruption.” (He was entirely indifferent to a reporter’s speculation that no one would believe a word of what he said.)

What about Snowdy’s prominence in numerous documents written by Glassman’s own lawyers, which a judge – as part of a broader 55 page rulingordered submitted into discovery? Snowdy told the Foundation for Financial Journalism that he did not care to speculate “who got what wrong, or why.”

Snowdy did admit being at the meetings with Catalyst’s Jim Riley and the firm’s outside lawyers, but said he primarily discussed whether Catalyst had a role in some hacking attempts he had discerned on his own smartphone and computers.

Not so strong on the facts

There is a chasm between what Snowdy reported to Guy, Catalyst’s lawyers and investigators, and what can be objectively verified.

Snowdy said that he had worked with Carson Block on his Sino-Forest short and was an attendee at a Christmas party he threw. Block, however, said Snowdy had nothing to do with Sino-Forest — which he shorted in 2011, and which filed for bankruptcy protection in 2012 — and that apart from one breakfast with him in 2015 in San Francisco, he has never met him again.

[In disclosure: In 2020 Carson Block donated $5,000 to the Foundation for Financial Journalism.]

“Over the years, maybe from 2016 to 2018, we used [Snowdy] to help us track down documents on a handful of Canadian marijuana companies [Muddy Waters Capital] was considering shorting. I’m confident that we didn’t pay him over $10,000,” said Block. “And it’s been awhile since the fund worked with him, I can tell you that.”

Snowdy claimed Cohodes asked him to short stocks along side him, that he was invited to stay at his house, and, as “a loyalty test,” that he had been left alone with his son Max, Cohodes’ 33-year-old son with cerebral palsy. Nothing close to that happened.

“My God what bullshit,” said Cohodes.

“None of that happened. The part with Max is maybe the most insulting,” he said.

More stuff that Cohodes said didn’t happen: Having offshore bank accounts — something he denies in full throat — and using Anson Funds (a Canadian money manager named in the litigation) to manage his money.

“I don’t need help from [Anson] to make money,” Cohodes said.

The truth of the matter, according to Cohodes, is that Snowdy came to his house once for lunch. When he traveled to Toronto for business on several occasions, Cohodes said Snowdy drove him around.

For all that, Cohodes said he had been dragged into this controversy despite never having shorted a share of Callidus’ stock.

A personal disclosure and a mea culpa

One thing Snowdy was at least partially correct on: The introduction to Cohodes, an obvious ticket into the broader short seller community — came from me.

So some first person disclosure is called for.

First off: How did I get introduced to Snowdy? Carson Block.

According to Block, in early 2015 Snowdy contacted him out of the blue and pitched him on a story on Canadian Rail. He passed on it but suggested to Snowdy I might find aspects of the story compelling from a journalism standpoint. Block and I spoke briefly about why he passed on the story at the time and have never again discussed the issue.

I shelved the story for months. Later in the year I re-examined the parts of it that I found interesting, and in 2016 I began to report it. As part of that I reached out to Snowdy — there had been no contact between us since the year before — and he agreed to put me in contact with a man he said was his client. The client had a large cache of Canadian Rail documents that emerged from a litigation he was then involved in.

His client wanted to interact in person so I flew to Toronto. Snowdy picked me up and drove me to his client. We had a few meals in transit, and on two of the four days I was in the area, Snowdy gave me a lift to his client, and he discussed with amusement a judge’s attempt to prevent him from speaking about Canadian Rail. The story I wrote in December 2016 was almost entirely informed by my work in those documents.

It turns out Snowdy lied to me about his legal trouble in that case, having received a restraining order in 2014, according to the recently unsealed documents. (I recall looking for a mention of him in the court record and not finding any, but the ruling may have been sealed at the time or attached to a motion I overlooked.)

While driving with Snowdy, he repeatedly discussed his skepticism of Concordia and Home Capital Group, a then troubled mortgage issuer Cohodes was publicly critical of. Snowdy asked me for an introduction to Cohodes. I agreed, sent an email introducing them, and never thought of it again.

What emerged afterwards is personally and professionally horrifying: Cohodes took my word that Snowdy seemed like a regular, well intentioned guy; he proved to be the very opposite of that. Over the course of a few years Snowdy used Cohodes’s name to come into his own house, meet numerous investors and it is a fair bet that any number of the people Snowdy met through Cohodes were surveilled, recorded, and through no fault of their own, may yet have some legal headaches.

Worse, with a connection to Cohodes established, Snowdy eventually got work surveilling him from MiMedx, a company that took fighting short sellers to a new level. The campaign initiated by the company’s ex-CEO was so ugly that even baseless money laundering accusations became forgettable after he leveraged his political connections to a Senator who requested that the FBI visit Cohodes’ house and warn him about a threatening tweet.

And all from my brief email introduction. It is a mistake I deeply regret.






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Newton Glassman and Other People’s Money

Things are not going well for Newton Glassman.

Southern Investigative Reporting Foundation readers will recall Glassman was the subject of a lengthy exposé in April that detailed the many ways his direction of Catalyst Capital Group Inc., a Toronto-based private equity fund with $4.3 billion in capital commitments, and its sister company Callidus Capital Corp. should alarm both investors and regulators.

Specifically, the reporting illuminated the risk Catalyst’s limited partners face because of the fund’s continually growing exposure to Callidus — a lender to distressed companies the fund bought in 2007 and took public in 2014 — whose performance has been disastrous. If that wasn’t bad enough, Glassman directed the fund’s plunge into a series of costly and reputation-threatening lawsuits against a host of purported enemies.

On both fronts, things have gotten worse.

Callidus is kept alive only because Glassman has repeatedly violated one of the cardinal tenets of investing: Don’t throw good money after bad.

But the bigger questions for the limited partners who invested in Catalyst’s funds is how are they going to get all of their money back — especially if Catalyst can’t sell its holdings?


Catalyst’s specialty is what’s known as distressed investing. In a nutshell this is how it’s supposed to work: Glassman raises money from pension funds or endowments and then seeks to buy either the stock or debt of a company that’s hit some kind of rough patch and thus available cheaply, on the view that with some capital, better strategy or new leadership, the business turns around. (The “turnaround” part is key because private equity funds, unlike hedge funds, don’t offer regular redemptions to their limited partners, and so are set up with an eight- to 10-year lifespan.)

So when an opportunity presents itself, the fund looks to monetize their investment and sell it via an initial public offering — or to another company — for a windfall with most of the profits flowing to its LPs. But of the billions of dollars Glassman has raised in Catalyst’s five funds, only the first has since cashed out, back in 2013. The second fund was supposed to have cashed out more than four years ago in the spring of 2014. But Catalyst has repeatedly extended the deadline, and it’s now due to conclude in the fall of next year, just before its third fund is slated to cash out.

So why is Glassman not paying back LPs, some of whom are among the most prominent institutional investors in the US and Canada?

The answer appears simple: He doesn’t have the money because — at least in the case of Funds II and III — it’s been sunk into a series of investments whose performance has often been nothing short of brutal.

The mess starts with Catalyst’s 72.2 percent ownership stake in Callidus, a block amounting to almost 41.25 million shares, primarily concentrated in Funds III and IV, with 24.8 and 10.8 million shares, respectively; Fund II has 4.7 million.

Callidus’ loan book is geared towards mid-sized companies and at the end of September was valued at CA$1.1 billion. But as last April’s Southern Investigative Reporting Foundation investigation revealed, many of these loans have turned sour.

Indeed, through the first three quarters of the year Callidus has racked up CA$68.2 million in losses, while its stock tumbled to new lows, to CA$1.36 from CA$10.30 at the beginning of the year. Marked to market, this one position has cost Catalyst just under CA$369 million on paper, or about 8.6 percent.

And it’s a safe bet that Callidus’ losses will continue, helped along mightily by the mysterious CA$201 million loan extended to Horizontal Well Drillers, an Oklahoma-based oil drilling contractor that made news in September 2016 when Venezuela’s state oil company announced Horizontal was awarded a license to drill up to 191 wells – a contract purportedly worth nearly $1.3 billion. Inexplicably, this loan was made despite Horizontal’s lack of experience in working on projects of that size and scope.

Moreover, as noted in April, Venezuela’s ongoing economic collapse and political collapse has forced even the largest multinational oil exploration companies to cease operations there.

Against this backdrop, it’s not clear what, if anything, the loan was used for. It appears Horizontal has not begun drilling any wells. Nor, given its new high profile, has the company obtained any other big contracts. More simply, it’s an open question why, if the Venezuela project isn’t currently feasible, any unused funds haven’t been returned.

(Oddly, the news tab on Horizontal’s website lists only two items: a 3-year-old announcement about a new “information management” system and a press release from four years ago about the new website. There is no mention of Venezuela.)

Accordingly, Callidus wrote down the loan’s value to CA$78.6 million in the fourth quarter of last year. A call to Horizontal’s headquarters was not returned.

While loans like that to Horizontal Well Drillers stand apart, the sheer density of bad loans on Callidus’ books — the company has been forced to assume control of at least 13 borrowers — often requires Catalyst to ride to the rescue.

Through Sept. 30 CA$112 million of Catalyst LP cash had been either loaned or guaranteed in the hopes of stabilizing Callidus and, according to a trio of disclosures posted April 30, a lot more of their money will be headed that way.

For example, this filing suggests Sun Life Assurance Company of Canada (Callidus’ senior lender since 2014) was unhappy about Callidus’ request to again defer the repayment of a CA$50 million loan. In return for perhaps not calling its loan – thereby triggering a “going concern” warning from Callidus’ auditors – Catalyst guaranteed the loan while also agreeing to pay $15.5-million of it by early next year. As of Sept. 30, just under CA$8.5 million had been paid.

Additionally, the filings note how Catalyst is funding up to $150 million to cover a Callidus loan, which is likely the Horizontal Drill loan. Catalyst also agreed to extend up to $30 million to pay Callidus’ operating expenses.

Afterward, look at Callidus’ third-quarter interim financial report, where the mounting loan losses have left its shareholders with no tangible book value — or what’s left after the physical and marketable assets are sold and the liabilities paid off — the most common measurement of a company’s worth. As of Sept. 30, Callidus has a CA$40.9 million deficit.

Why does this paper deficit matter? In a bankruptcy, if a company’s current liabilities exceed its tangible assets, the subordinated lenders have to make up the difference by taking a so-called haircut, or accepting less than the amount they are owed.

Since Catalyst’s cash is Callidus’ sole lifeline, it’s a valid risk for the limited partners of Catalyst Fund’s III and IV, whose capital is behind the CA$377.2 million subordinated bridge lending facility. Moreover, the situation is bafflingly circular: Catalyst’s “advances” are how Callidus is paying the principal and interest on the subordinated loans owed to the fund. In the most recent interim management discussion and analysis Callidus reported that Catalyst has pledged to extend the maturity date of the loan for as long as necessary.

Meanwhile, language in that interim filing suggests that the Ontario Securities Commission is beginning to put a foot (lightly) down over the quality of Callidus’ financial reporting, and has placed the company on its refilings and errors list for the next three years. This list warns the public of companies that have either failed to disclose all material information or whose filings contained an inaccuracy. Additionally, the OSC made Callidus discontinue its references to yield enhancements, a term dreamed up to make impaired loan write downs more palatable by claiming that they would be offset by the increases in borrower principal and interest payments.


All this bad news about Callidus couldn’t come at a worse time for Catalyst’s limited partners in Funds II and III, who are justifiably anxious about getting their money back. Catalyst Fund II, as shown in this New Jersey Division of Investment disclosure, has returned 45.1 percent of its initial CA$635 million of capital.

In a typical private-equity fund, the diversity of investments would likely provide enough cushion to help absorb the losses from a bet gone wrong like Callidus.

Catalyst is not the typical private-equity fund manager, however. In prior years Catalyst’s initial fund with CA$185 million in assets returned an average of 32 percent a year and he could note to the Wall Street Journal that he was the “[No. 1] distressed-debt manager in the world.” But it’s fair to say that the days of Glassman and his colleagues wielding a hot hand are long gone.

Catalyst Fund II is a case in point: Of its five remaining investments – in Therapure BioPharma, Callidus, Gateway Casinos & Entertainment, Sonar Entertainment and Natural Markets Food Group – two are deeply troubled (Callidus and, as Glassman noted in an August Globe and Mail article, Natural Markets), leaving only Therapure and Gateway with the potential to be sold in the near term.

Except the fund’s limited partners are learning that there’s a big difference between “potential” and “likely” when it comes to selling an investment, and an even bigger gulf between selling an investment and doing it profitably.

Consider Therapure BioPharma Inc., a core Fund II holding since 2006, and well on its way to being sold earlier this year to a joint-venture between 3SBio Inc., a China-based pharmaceutical company, and CPE Funds, a Chinese private equity fund, for $290 million.

But on May 1 the deal collapsed for unspecified reasons, and despite Catalyst’s assertions that its pursuing an IPO of Evolve Biologics, Therapure’s drug development arm, it’s anyone’s guess if the sale even occurs, let alone brings in the $100 million Glassman said he’s shooting for, according to the Globe and Mail article referenced above.

(It was the second time in three years that an attempt to sell Therapure failed. A February 2016 IPO was shelved after investors, wary of a then-choppy market and the income statement’s sea of red ink, apparently balked at the roughly CA$900 million valuation placed on the company.)

Gateway, held in Catalyst Funds II and III, is equally as speculative as Therapure and has a recent history that includes numerous failed efforts to sell it both publicly — in this case in 2012 — and to other casino companies. On Nov. 20, Catalyst filed the initial prospectus for its IPO.

All any diligent investor can conclude about Catalyst’s stewardship of the company since taking control in 2011 is that it’s a larger company, yet remains just as hamstrung from both its leverage and its longstanding inability to turn a profit — a problem its larger rival, Great Canadian Gaming, appears to have solved. Similarly, it’s unlikely they will be fooled by the CA$156 million profit Gateway has reported through Sept. 30, the result of a CA$192.3 million paper (noncash) profit booked from a one-time sale-leaseback transaction. Without it, Gateway would be well on its way to a loss of over CA$40 million this year.

Obtaining the right to operate casinos and slot machines in three Ontario region gaming “bundles” won’t be a magic bullet for Gateway either: a pro forma income statement incorporating the properties into its 2017 results shows an CA$18.7 million loss. To develop and improve them, according to the prospectus, will require Gateway to spend between CA$490 million and CA$530 million in capital expenditures over the next three years. This won’t be a light task for a balance sheet with a CA$908 million debt burden.

One thing to note is the humdinger of a related party transaction between Catalyst and Gateway involving the company’s purchase of CA$217 million in net operating losses from a bankrupt unit of Natural Markets Restaurant Corp., permitting Gateway to avoid the avoid making a cash tax payment this year on its paper profits.

Catalyst Fund III, scheduled to wind up next December, also has a portfolio that tries a limited partner’s soul. In addition to the aforementioned 24.8 million Callidus shares, and its half of the subordinated bridge facility (currently worth CA$188.6,) it owns at least three other struggling companies – Natural Markets Restaurant Corp., Advantage Rent-A-Car and Mobilicity.

The Advantage Rent-A-Car investment looks particularly painful. With roughly $310.5 million pumped into the company after buying it out of bankruptcy in April 2014, Catalyst’s sizable investment hasn’t helped Advantage strengthen its competitive position: Ranked by 2017 fleet size and revenues, the company is a distant fourth place behind Enterprise, Hertz and Avis, according to trade publication Auto Rental News.

A Reuters investigation published in March detailed how Catalyst’s Advantage valuation is extravagantly out of line with its publicly traded peers Avis and Hertz, whose market capitalizations are less than half of their revenues.

Assuming this yardstick remains valid, and using Auto Rental News’ estimate of 2017 revenues of $330 million, would imply an initial market value of less than $200 million for Advantage, making it another investment Catalyst won’t easily sell.


One of the most damaging revelations about Glassman’s activities didn’t actually involve investments, but rather the Aug. 15 Ontario Superior Court filing in which Black Cube — the notorious Israeli corporate intelligence outfit whose assignments have included working for film producer Harvey Weinstein to discredit women who alleged he had sexually assaulted them — admitted they were retained to work on Catalyst’s behalf on September 11, 2017.

(Black Cube was used by Catalyst to help improve its odds in its ongoing war with a Toronto hedge fund, West Face Capital, a fight that has launched four lawsuits and enriched lawyers on both sides of the border.)

Shortly after being retained, Black Cube launched a star-crossed sting operation against Justice Frank Newbould, a then-recently retired Ontario Superior Court judge who’d ruled against Catalyst in an important decision regarding the sale of WIND, a wireless carrier Glassman coveted but that West Face eventually landed. The sting was designed to tar him as biased and anti-Semitic prior to filing an appeal.

Ultimately, this backfired in a big way in November, 2017 when a National Post reporter — herself the target of a Black Cube-controlled operation — exposed the whole affair.

But who hired Black Cube? The answer is a bit complicated.

Catalyst, in its reply to West Face’s counterclaim, stated that in August 2017 its counsel hired Tamara Global Holdings Ltd., to provide personal and professional security to the fund’s employees, as well as litigation support. Tamara, in turn, hired Black Cube the following month (referred to in the counterclaim by its formal name: B.C. Strategy UK Ltd.) And who’s behind Tamara? Yosef “Yossi” Tanuri, a former Israeli special forces soldier better known in the Toronto area as the director general, Israel of the Jewish Federations of Canada. An email to Tanuri was not replied to.

All of which suggests a version of the late Sen. Howard Baker’s famous question during the Watergate hearings: “What did Glassman know and when did he know it?”

Catalyst attempts to thread a rather slim needle with its answer to that question.

The reply to West Face’s counterclaim said Catalyst’s principals had nothing to do with what West Face described as allegedly unlawful activity in its counterclaim. To further distance themselves from Black Cube’s widely condemned tactics, Catalyst argued that Black Cube was directed to use “[its] best professional judgement” in executing its litigation support duties. (Catalyst doesn’t describe what these duties were.)

What Catalyst’s filing doesn’t say is that Glassman and colleagues had no idea of Black Cube’s plans, both with respect to the attempted Newbould sting as well as the parallel effort to mislead the National Post’s Blatchford prior to the filing of its “Wolfpack” suit in November 8, 2017.

A strange footnote to the Black Cube drama is the collapse of PSY Group, a Cyprus-based, Israeli-directed intelligence services company that West Face’s court filings have claimed started defaming both the fund and Greg Boland through social media and blog posts last September, a charge that Catalyst has flatly denied.

West Face lawyers have requested that an Israeli court order that PSY Group’s hard drives be preserved, a motion Ontario Superior Court Justice Glenn Hainey endorsed. Both INVOP, the corporate shell that owned PSY Group, and Emmanuel Rosen, a controversial former Israeli TV journalist who West Face has alleged worked with PSY Group, have not responded to any claims and have had motions of default filed against them. On the other hand, Virginia Jamieson, a New York City-based former public relations executive who West Face alleged sought to get the National Post to write critically about Judge Newbould, has denied having anything to do with PSY Group or the purported Internet defamation campaign. She was unable to be reached by phone and her lawyer didn’t return a call seeking comment.

The animating spirit of Glassman’s furor towards West Face Capital is his 2014 defeat at the hands of West Face and a consortium of investors in a bid to buy WIND — a loss he alleges was brought about at least in part because Brandon Moyse, a former Catalyst junior analyst who worked briefly for West Face after his departure, provided proprietary information.

Unfortunately for Glassman, Judge Newbould bluntly rejected these claims in 2016. Earlier this year an appellate court took the unusual move of dismissing Catalyst’s appeal without even hearing from West Face’s lawyers. Since then, Catalyst has applied for leave to have the Supreme Court of Canada consider their appeal. If the Supreme Court declines or if it loses, Catalyst will forfeit a CA$1.3 million letter of credit, and may be assigned other costs.

A second Catalyst lawsuit against West Face and others, known as the Vimpelcom case after the Dutch telecommunications company that sold WIND to West Face, sought a whopping CA$1.5 billion in damages.

Like the Moyse litigation, it proved unsuccessful, with a judge dismissing it on April 18 after concluding Catalyst brought the case for a “second bite at the cherry,” meaning the fund was merely re-litigating the already unsuccessful Wind claim above. In fact, the judge said that at least as far as Catalyst’s lawsuit pertained to West Face, it was an “abuse of process.” Catalyst has filed an appeal.

This aggressive litigation strategy, while bringing no end to headaches for Glassman’s opponents, is poised to make a considerable dent to Catalyst’s bank account. In the Canadian legal tradition, the losing party in a civil trial is liable to bear at least some of the victor’s legal costs. On November 19, Justice Hainey ordered Catalyst to pay CA$1.6 million in costs to the defendants, describing its efforts as “an abusive attempt to re-litigate the same allegations.” (Catalyst sought to pay about CA$906,000 according to this cost submission; their payment is suspended pending a Feb. 19 appeal hearing.)

The most high-profile contest is the CA$455 million lawsuit Catalyst brought last year against West Face and a bevy of other critics, including hedge funds, former Callidus borrowers, analysts and two journalists from the Wall Street Journal that alleged a complex “Wolfpack” conspiracy designed to benefit short sellers by driving down Callidus’ stock price.

On Oct. 29, an Ontario court heard pleadings from many of the defendants, seeking the suit’s dismissal on several grounds: That Catalyst’s defamation and conspiracy claims lacked sufficient detail and made it difficult to respond to the claim, and that the Fund had missed multiple deadlines to provide those details.

For its part, Catalyst filed a motion to strike on Oct. 25 that reiterated its claim of conspiracy and said they had provided sufficient details for the defendants to respond to.

Arguably the biggest risk to Glassman’s wealth from this legal combat might be the CA$500-million counterclaim West Face launched in 2017 against Catalyst, Callidus, Glassman and colleagues James Riley and Gabriel de Alba, as well as Black Cube and their alleged sub-contractors. Catalyst tried to have the counterclaim thrown out this year but on June 15 Ontario Superior Court Justice Sean Dunphy, in a handwritten endorsement, denied the fund’s bid. This case is moving towards the discovery process.

One of the more overlooked claims against Catalyst is from Bruce Langstaff, a former managing director of equity sales desk for Canaccord Genuity Corp., a Toronto-based broker-dealer.

A 24-year equity sales veteran, Langstaff claims Glassman and Gabriel de Alba threatened Cannacord with withholding investment banking assignments unless he was fired. He is seeking CA$3.35 million from Catalyst and Callidus for breach of contract and interference with economic relations. (He is also suing Cannacord.)

Langstaff, in his statement of defense and counterclaim, acknowledged that he provided trading strategies to West Face and the Anson Fund (another Toronto-based asset management company that Glassman sued) but denied advising them to short Callidus’ shares at any point around Aug. 9, 2017 – a day the stock price dropped to as low as CA$10.57 after opening at CA$15.36, according to Yahoo! Finance. His filing also asserted that neither he nor his clients were involved with Cannacord’s trading in the stock in the time between August 9 and August 14.

A more likely — albeit much less dramatic — explanation for the abrupt decline in Callidus’ stock price: Aug. 9 was the day a Wall Street Journal article appeared that said Callidus was the subject of four different whistleblower complaints with the OSC that alleged fraud, and that the Toronto police had opened an inquiry into the firm. Moreover, the stock continued to fall because earnings, released the following day, showed net losses.

According to Langstaff’s filing, throughout that August and early September Cannacord’s management had repeated discussions with Glassman and other Catalyst executives about how his role at the firm hurt its ability to get investment-banking business from the fund. On Sept. 26 he was fired. The claim says both Langstaff’s immediate supervisor — the bank’s institutional equity chief — and an internal investigation cleared him of any wrongdoing, but says senior managers at Canaccord told him he was being terminated to insulate the company from possible litigation from Glassman.

More specifically, the filing asserts that Langstaff — who earned up to CA$750,000 annually at Canaccord — was let go after Glassman telephoned Dan Daviau, the bank’s CEO, and told him Langstaff had engaged in improper conduct in relation to Callidus. It also says Canaccord was told by Catalyst if they were not careful, “it would get caught in the crossfire.”

Catalyst has not replied to Langstaff’s motions, prompting his lawyers to file a notice of default on Sept. 18.

In a statement of defense and counterclaim, Canaccord denied that Langstaff was dismissed due to pressure from Catalyst, but was let go because of an unspecified misconduct, as well as an internal restructuring.

Reached by phone, Langstaff declined to discuss the lawsuit. A representative for Canaccord did not respond to three phone messages seeking comment on the Langstaff lawsuit.

One transaction that may merit extra scrutiny is a deal Catalyst had absolutely nothing to do with — which is the problem.

For once Glassman is in the background; at the center of this drama is Gabriel de Alba, Glassman’s longtime deputy and a Catalyst partner since 2002.

As a core member of Catalyst’s portfolio team, de Alba has a legal obligation to devote his professional efforts solely to Catalyst and little else, according to the corporate opportunity doctrine. It’s not a complicated principle: Corporate directors and officers are not allowed to make side deals for themselves at the expense of their employer. Additionally it states company officers have a duty of loyalty, stipulating they must try and act to the benefit of the company and investors.

Catalyst’s marketing documents embrace these concepts, emphasizing that Catalyst team members will devote 100 percent of their professional time to the fund’s investment activities, and “no Catalyst professional may sit on a non-portfolio ‘for-profit’ board of directors.”

But in 2011, de Alba had a role in a restructuring of Satélites Mexicanos (or Satmex), a struggling Mexican satellite communications company that his family had a significant ownership interest in and for which he and his sister served on the board.

There’s nothing surprising about de Alba getting involved with a struggling telecom company; he’s acknowledged by many to be an expert in the field. Moreover, in Catalyst’s early years, de Alba’s role in a series of telecom investments was a key source of the fund’s profits.

Without a doubt, de Alba’s efforts paid off in a very big way when Eutelsat Communications, a French satellite operator, acquired Satmex in 2014 for a total price of over $1.4 billion (including the assumption of $311 million of debt.) It’s unclear how much de Alba, his family and other equity holders earned from the sale, but it might have been in excess of $200 million.

Yet this deal did not benefit Catalyst’s investors. Half a dozen other investment funds, including Centerbridge Partners LP and Monarch Partners LP, provided loans for the 2011 transaction. Catalyst is not recorded as one of them.

A Catalyst’s spokesman declined to respond to questions on de Alba’s role in the transaction.


The Southern Investigative Reporting Foundation posed questions via email to Catalyst spokesman Dan Gagnier.

His reply in full is as follows: “Catalyst declines to comment. Please be aware that virtually all of your questions and statements are factually inaccurate or fanciful creations that are readily reconciled by actually doing some research of the public record and/or court filings.  Instead of parroting a pack of lies fed to you to advance the agenda of others, it would behoove you and SIRF to adhere to even the most basic of journalistic principles, integrity and decency. Failure to do so exposes you and SIRF to legal liability.”

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Mr. Boyer’s War

For eight years, Craig Boyer was a senior executive at Callidus Capital, and by the time he quit in 2016 he was its chief underwriter and vice president. But last year Boyer sued Callidus for CA$100,000 in damages, claiming the company had denied him health and other benefits and seeking the return of his stock options.

It’s safe to say that when Boyer left Callidus, he was clearly an unhappy man. In his claim, he said he had been subjected to “abusive management conduct” in the form of “abusive email and verbal treatment” from Callidus CEO Newton Glassman, including “on occasion, physical abuse.” Boyer even mentioned how in 2016 he was “participating in a meeting where a senior officer of the defendant’s parent [company] physically attacked the plaintiff’s immediate superior.”

Boyer’s portrait of Callidus as a “poisoned” workplace, whose management style focuses on the “berating and belittling” of employees, is not an isolated one: Two former employees of Callidus’ parent company, Catalyst, have alleged in court filings that they had witnessed numerous instances of Glassman being emotionally or verbally abusive to his colleagues.

Yet Callidus, in a statement of defense and counterclaim, has denied Boyer’s allegations of a poisoned work environment, saying he never raised such issues while working at the company. The statement also said, “all of Callidus’ employees are treated fairly and with dignity.” In fact, Callidus claimed that Boyer had developed a reputation of being difficult with employees who reported to him.

Moreover, Callidus struck back with a CA$150 million counterclaim, accusing Boyer of being incompetent in “failing to properly monitor loans in his portfolio.” Specifically, the counterclaim alleged that Boyer had failed to conduct proper due diligence on Gray Aqua, a fish farming company in eastern Canada, by ignoring the fact its fish stock could not be used as collateral.

Plus, Callidus accused Boyer of encouraging another borrower, Xchange Technology Group, to “artificially inflate the results shown on their . . . financial statements.” And Boyer did not inform Callidus’ credit committee that Xchange’s financial statements were “based on an artificially inflated before interest, taxes, depreciation and amortization, or EBIDTA,” according to Callidus.

When these and other problems were brought to his attention, Callidus alleged, Boyer abruptly quit.

In a reply and defense to the counterclaim, Boyer’s lawyers hit right back, saying he had no authority over others within the company. The lawyers asserted that Boyer had properly monitored the loans in his portfolio and it was his (unnamed) colleagues, after assuming oversight of his loan book, who had made mistakes, especially in Gray Aqua’s case. Boyer’s lawyers denied that he had pressured Xchange to artificially inflate the EBITDA figures.

“The complaints respecting the work environment were open and notorious and well known to those who perpetrated them” Boyer’s lawyers wrote, adding that Callidus’ counterclaim was “raised for ulterior purposes.” They asserted, “Callidus is subject to multiple complaints and regulatory investigations with respect to its material non-disclosure to fund members and the public as to the status, and transfer, of its various investments” and the counterclaim was therefore designed to “deflect these complaints and investigations.”