| Investors need certainty. That’s surely the business truism of the year, one marked by Donald Trump’s zig-zagging trade war, huge market swings and countless paused investment decisions. The US president is far from alone in creating unpredictable business conditions. Canada’s government has done it too. A recent court ruling holds the feds accountable for an estimated C$555 million ($402 million) in damages for negligence over the way they treated the original investors in Mobilicity, the startup cellphone company. That’s more than half a billion taxpayer dollars for backtracking on a policy designed to attract major capital investments to an important Canadian industry. The case has dragged on for ages (I first reported on it back in 2014!) and it took a year and a half after the trial to get a ruling. Jonathan Lisus, lead lawyer for the main plaintiff, New York private-equity firm Quadrangle Group LLC, told me this week his client spent the time and money to see the case through because he felt the circumstances were just that egregious. Michael Huber, Quadrangle’s managing principal, even flew up to Toronto weekly to sit through every day of the weeks-long trial. “He felt that it was an abuse of power, that the investors were treated really unfairly and that there was just basic lawlessness,” Lisus said of Huber. The case revolves around the rather arcane topic of spectrum policy, the rules governing the licensing of airwaves that carry wireless signals. In the early 2000s, the Canadian government wanted to encourage more competition in the cellphone business and structured a spectrum auction to offer new entrants a big discount on licenses. If they couldn’t make a go of it after five years, they could always sell the spectrum licenses to one of the country’s Big Three telecoms: BCE Inc., Telus Corp. or Rogers Communications Inc. At least, according to the court ruling, that’s what government officials told a handful of prospective investors, including John Bitove. The Canadian businessman, who also founded the Toronto Raptors NBA team, ultimately became the majority owner of Mobilicity. His holding company was the other plaintiff in the case.  The government’s policy on wireless spectrum, used to build cellphone networks, was at the heart of the Mobilicity case. Photographer: George Frey/Bloomberg The Mobilicity investors spent C$243 million on the spectrum licenses in 2008 and millions more building the company’s network. But facing the incumbent telecoms was a tough slog and the business floundered — by 2013, Mobilicity decided to sell to Telus. That’s when the federal industry minister announced a significant change in policy — holding a press conference to reveal a new spectrum transfer framework and stating the government wouldn’t approve transfers that reduced wireless competition. Without the option of selling to one of the Big Three (pretty much the only realistic buyers), Mobilicity’s prospects immediately dimmed and it slid into insolvency. Bitove testified that the government’s move led to “massive destruction” of the firm’s value. What followed got even stranger. Political staffers from the offices of both the industry minister and then-Prime Minister Stephen Harper frustrated Mobilicity’s efforts to sell itself through the insolvency process, according to the judge. (The company eventually sold to Rogers when the government made an exception based on handing certain spectrum licenses over to another small player, Wind Mobile.) Mobilicity’s investors were able to prove all of this thanks to a trove of emails they obtained through the legal process. The decision is recommended reading for anyone who recalls this bizarre series of events. If you’re a cynic, it confirms how you believe these types of political operatives work — putting optics and public relations ahead of jobs, investor dollars and customers. In our current economic climate, with governments across the country pledging to slash red tape and make investments easier and more attractive, that’s a problem. Foreign investors look carefully at political risk when putting their money into big projects, and cases like this make Canada look more like Venezuela than say, Germany or the Netherlands, Lisus said. On the bright side, the result proves that rule of law does in fact matter in this country, he noted. (The federal department of Innovation, Science and Economic Development said it is reviewing the decision, which remains subject to possible appeal, and declined to comment further.) But it’s a “cautionary tale,” Lisus warned. “The politicization of the regulatory process that happened in this case is very, very worrisome.” | 
