in the Casino Niagara Deal.

Mar. 3, 01:00 EDT
Intrigue grows over casino bid
Documents turn up in suit over Niagara deal
Kevin Donovan
Staff reporter
In the ordinary course of legal business, Box 9 was summoned from the filing catacombs of a Bay St. law firm representing a winning partner in the Niagara Casino deal.

As part of the sharing of documents in a lawsuit, lawyers for the winning partner sent copies of Box 9 to lawyers for a Toronto business group that claims it was wrongly cut out of the lucrative deal.

There was just one problem. Nobody at the law firm representing the casino partner checked Box 9 before it was photocopied and sent out.

So nobody discovered that Box 9, due to a filing mistake, was inadvertently packed with legally explosive documents the casino partner wanted to keep secret. The contents of the box, according to the Toronto business group's submissions to court, revealed that incriminating documents had been withheld from their case, and computer files destroyed.

The contents, court was told, also hinted at shady business in the way the Ontario government awarded the deal. Notes in Box 9 indicate the winning bid partner withheld documents that may show the American consultant running the casino contest and a prominent Tory lobbyist helped the partner on the way to victory.

It's the latest twist in the saga of the Niagara Casino, a mystery thriller involving lawyers, political operatives, wealthy land barons and high-stakes gamblers.

An Ontario Court judge recently found that many documents in Box 9 were privileged, meaning they were communications between lawyer and client and could not be used in court. But the judge, after reviewing Box 9, also ordered the winning partner to turn over all non-privileged documents relevant to the case, which had not been done before.

All documents have been sealed by judge's order pending an appeal by the Toronto business group. It's impossible to determine at this point which documents will eventually make it into the public eye.

On the receiving end of Box 9 was Bill Hamm. With brother Brian and other businessmen, they run a company called Nova Growth.

The Hamm brothers claim in their lawsuit that they bankrolled the man who put the winning casino bid together. That man, tennis and casino promoter Andrzej Kepinski, is the person they are suing. He and four companies, including the Hyatt hotel company, won the bid to build and operate the billion dollar gaming palace, the second in Niagara Falls.

The allegations in the Hamm lawsuit relate only to Kepinski and his partner Richard Boxer. Neither Kepinski nor his lawyer would speak to The Star. In the past, Kepinski has stated that the Hamms have no claim to the Niagara Casino.

The Hamms allege they worked tirelessly with Kepinski for several years — even making him president of their company — only to be cut out of the deal two weeks before the Ontario government awarded the contract in February, 1998. The casino is now being built. Its annual fees to each of the five partners will be in the millions of dollars.

The Hamm brothers filed a lawsuit against Kepinski shortly after the casino contract was awarded. They claim half of Kepinski's 10 per cent share of the casino.

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`Documents in Box 9...indicate that (Kepinski) chose not to produce certain documents and/or electronic records, which reveal their involvement with Michael French and Leslie Noble in pursuit of the Niagara Falls casino opportunity.'

— Submission to court

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But the Hamms had a hard time with their case. Kepinski, they stated in their original claim, removed documents and a computer from their company when he walked out. Tough to prove a case with no evidence. Then Box 9 came along.

(The chronology that follows comes from the judge's ruling, along with what the judge calls the "factual portions" of the Hamms' lawyer's submissions to court. Kepinski's submissions are under court seal because they reveal the substance of the privileged material).

In November, 2000, with a trial date looming, the Hamms changed lawyers. They hired Lerner and Associates, who decided they needed a complete set of case documents, so they called Kepinski's lawyers at Gowling Lafleur Henderson. It was a routine request.

Kepinski's lawyers had their file storage people retrieve 10 boxes. Without examining them, the lawyers sent the boxes to a copying firm. The copies were then sent back to Kepinski's lawyers, who forwarded them to the Hamms' lawyers, again without examining the documents.

In December, 2000, with Christmas in the air, the busy lawyers working for the Hamms called their clients to say the boxes were in, but they would not get to them for a while. Bill Hamm was keen to see the documents, so he headed for his lawyers' office. Over the next few days, calling his older brother Brian from time to time, Bill sifted through the boxes. At Box 9, he paused.

Stuffed inside it was a thick sheaf of papers he did not recognize from the earlier productions. His heart rate cranked up a notch. According to the Hamms' submissions to court, Bill saw notes describing the casino deal; the destruction of pertinent documents; the decision not to reveal Kepinski's telephone records related to the casino deal. Bill also discovered a contract that showed Kepinski had hired a computer company to professionally "wipe" the hard drive of the Nova Growth computer he had taken with him. The Hamms believe the computer held many records key to proving their claim on the casino.

Bill also discovered notes in Box 9 indicating Kepinski had decided not to turn over records related to his business relationships with two people: Michael French (who ran the Niagara Casino bid contest) and Leslie Noble (a lobbyist who was also a top adviser to Premier Mike Harris).

Bill called his brother and told Brian he had stumbled on key information. Bill tried to reach lawyers in the Lerner office near the boardroom, but his calls were not returned. Wanting to continue looking at Box 9, he bundled it up and headed home. The next morning, Brian drove over to pick up Bill. Both men were heading to a resort in Haliburton for a few days. When Brian walked in the door, Bill took him to the kitchen. On his floor, laid out methodically, were the key documents.

The Hamms were elated. They were also angry. "(The Hamms) were infuriated because they felt they were being cheated by Kepinski, not only as to the merits of their case, but also by Kepinski destroying documents and withholding other documents," wrote Mr. Justice James Farley, who was tasked with sorting out the Box 9 issue.

According to submissions from the Hamms' lawyers, they believed Box 9 showed Kepinski had perpetrated a "fraud on the court" and Nova Growth by destroying and withholding key documents.

That allegation has been denied by Kepinski and Boxer, although most of their submissions have been sealed by court order. One public portion of Boxer's submission denies the Hamm allegation about destroyed documents, calling it "hysterical and partisan." Justice Farley makes no ruling on this claim, so the issue will proceed to trial.

After the Hamms took another look at the documents, they contacted their lawyers at Lerner and Associates. The lawyers quickly realized that at least some of the documents were "privileged." (In a lawsuit, both sides are required to produce absolutely everything relevant to a case, except communication between lawyers and client, or draft legal documents, both of which are privileged.)

The Hamms' lawyers retained Gavin Mackenzie, a Toronto lawyer, to assess the documents and help the Hamms decide what to do.

After considering their options, the Hamms instructed their lawyers to tell Kepinski's lawyers they were in possession of privileged documents. Next, they went to court seeking permission to use those documents in their lawsuit.

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`(The Hamms) were infuriated because they felt they were being cheated by Kepinski, not only as to the merits of their case, but also by Kepinski destroying documents and withholding other documents.'

— Mr. Justice James Farley

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Justice Farley, who presided over that portion of the case two months ago, ruled that Kepinksi would have to turn over all relevant non-privileged documents. But he told the Hamms to return all documents that were privileged.

Farley, who called the lawsuit a "battle royale," ruled that Kepinski's lawyers had done nothing wrong. However, Farley criticized the Hamms' lawyers, finding that they intended to use the privileged material in the case, and removed them from the case. The Hamms are appealing Farley's ruling.

Even without the privileged documents, Box 9 revealed key information, according to the submissions filed by the Hamms' lawyers and attached by Farley to his ruling.

For example, just one week before the government announced Kepinski and his team had won the Niagara Casino deal, Kepinski hired a computer company to "wipe" the hard drive on the computer he took from the Nova Growth office the day he quit. Kepinski backed the information up on a CD-ROM disk, which he says was then lost. Later, Kepinski's lawyers hired another computer consultant to try and restore the hard drive information, but the attempt was unsuccessful. Until Box 9 was discovered, nobody told the Hamms.

The documents also shed light on whether the Niagara casino contest was a fair fight. Opposition critics at Queen's Park have, over the years, claimed it was not. According to the Hamms' lawyers, Kepinski withheld documents that may show the top operative for Harris and the man who ran the Niagara contest helped him along the way.

"Documents in Box 9...indicate that (Kepinski) chose not to produce certain documents and/or electronic records, which reveal their involvement with Michael French and Leslie Noble in pursuit of the Niagara Falls casino opportunity," according to the Hamms' submissions to court.

Previous documents released by Kepinski indicated that lobbyist Noble was paid $90,000 by Kepinski between Oct. 7, 1995, and December, 1996, for consulting services. The bidding contest began in Sept. 1996.

While Noble would not speak to The Star, an associate at her lobbying firm (StrategyCorp) confirmed that Kepinski had paid Noble for casino-related work. But John Matheson said Kepinski was paying Noble for general advice on casino gaming, not the Niagara bid. He also said Noble's last invoice was issued before the bid contest was opened.

Earlier stories by The Star showed that French, a senior gaming consultant with Coopers Lybrand (now PricewaterhouseCoopers), was providing consulting advice for Kepinski on several other casino opportunities at the same time as he was working for the Ontario Casino Corp. French wrote the request for proposal for the Niagara Casino, and helped judge the contest. French and Coopers were paid more than $100,000 by Kepinski and more than $500,000 by the Ontario Casino Corp.

A government report by lawyer Stanley Beck absolved French of wrongdoing, although he noted French and Coopers never told the government they were working on other casino projects with Kepinski, while he was bidding for Niagara.

According to the Hamms' factum, they state that Box 9 showed Kepinski was withholding telephone records for the year-long period in which French and the Ontario Casino Corp. were deciding who would win the bid. The Hamms, who worked alongside Kepinski during that time, allege the records may reveal that Kepinski was having ongoing chats with French while he was judging the casino bids.

"The note suggests that defence counsel decided these records would only be produced if asked for on discovery," the Hamms' lawyers told the court. Since the Hamms were unaware of these records, they had never asked for them.

The phone records will likely be turned over to the Hamms as part of the ongoing lawsuit.

Kepinski did not return telephone calls. His lawyers declined comment. Michael French also did not return calls to his U.S. office.

The next step in the case will be appeal court, where the Hamms' lawyers will argue for Farley's ruling to be overturned. Whether or not they are successful, the matter will likely proceed to trial within the next year.