Investigators called it a "pump-and-dump scheme" that saw 4.8 million shares in a shell company sold for nearly $4.8 million US during a four-month period, beginning in late 2009.
Now, a British Columbia Securities Commission panel has found that a businessman with ties to Newfoundland engaged in a "market manipulation."
The panel found that Michael Mugford and David Tuan Seng Lim were responsible for the "artificial" share price of a shell company in the natural foods business.
Mugford spent much of his career in British Columbia, but has ongoing personal and business ties to Newfoundland and Labrador.
While Mugford faces possible sanctions from securities regulators in B.C. for his past conduct, a CBC News investigation has found that he is linked to an unrelated health-foods initiative in Newfoundland.
Newfound Pure Nutraceuticals is based in Corner Brook. It has a website and Facebook page promoting the sales of berry products.
According to Mugford, Newfound Pure is not seeking investors, and is in fact no longer actively marketing its products.
And he expressed regret about past "wrongs."
B.C. 'pump-and-dump scheme'
The British Columbia Securities Commission panel published its findings last week, more than 18 months after proceedings began.
Urban Barns Foods Inc., the company at the centre of the B.C. case, was in the business of growing produce indoors.
In late 2009, a direct-marketing company received $1.2 million US to promote Urban Barns in so-called "tout sheets."
That company distributed information flyers about public companies in "mass email blasts," according to investigators.
In the Urban Barns case, they made "grossly promotional" claims, such as:
- "Investors: This little company just solved the global food crisis!"
- "Dear Fellow Investor: This is a game changer, a stunning technological breakthrough ..."
- "I'm convinced these $1 URBF shares are fast headed for $14!"
At the time these claims were being made, Urban Barns was not operational, had no revenues, and had only one asset — a $12,000 food-growing machine.
That's according to the company's own regulatory filings.
The panel found that Mugford reviewed those tout sheet materials, assisted in the payment of the promotions company, and acquired shares in Urban Barns at the beginning of the promotional campaign.
"The tout sheets were fabrications designed to trick the reader into believing that the Urban Barns shares were worth far more than they really were," the panel noted.
'The tout sheets were fabrications designed to trick the reader into believing that the Urban Barns shares were worth far more than they really were.' - British Columbia Securities Commission panel
The panel found that Mugford was one of the four principals of an escrow agreement involving a Swiss wealth management firm to hold and sell shares, and distribute the share proceeds.
Mugford did not appear at the securities commission hearing or provide any evidence, but did make written submissions.
He contended that the executive director did not prove there was an artificial price for the stock, and also failed to prove that he was a participant, or profited from any such conduct.
However, the panel found that he did play a role.
The matter is administrative, not criminal.
The process leading up to possible sanctions against Mugford and Lim will be ongoing over the summer, with a decision due in September.
Sanctions can include penalties of up to $1 million, and being required to repay money received through any misconduct.
'The highest quality and purity'
Mugford is currently linked to an enterprise in Newfoundland that bills itself on Facebook as a "medical company" that is "engaged in the production of natural nutraceutical products of the highest quality and purity."
In an email to CBC News, Mugford indicated that he is responsible for sales and business development for Newfound Pure Nutraceuticals.
But Mugford said he is not looking for people to buy into the enterprise.
"I'm not seeking investors in any company or product in N.L. or anywhere for that matter," Mugford said.
"I started Newfound Pure about five years ago as I simply wanted to bring a healthy product to market and in doing so, make a positive impact on people's health and at the same time, create a greater demand for wild (N.L.) blueberries among other berries and the folks who harvest them."
'I started Newfound Pure about five years ago as I simply wanted to bring a healthy product to market and in doing so, make a positive impact on people's health.' - email from Michael Mugford to CBC News
CBC News has tried to buy products from the Newfound Pure Nutraceuticals website, without success, over a period of several weeks. The berry powder is listed as being out of stock.
"Newfound Pure is no longer actively marketing its products," Mugford wrote.
According to its website, Newfound Pure is located at a residential condo in Corner Brook.
Mugford told CBC News that its products were made at facilities owned by another company, Sedna Nutra, in Whitbourne.
"Newfound Pure was a brand utilizing products produced by Sedna," Mugford noted in his email.
Officials at Sedna Nutra explained that the company had a contract to provide product to Newfound Pure. Mugford sent them Newfound Pure bags. Sedna would fill them and send them out for sale by Mugford.
"We made the product, but we had nothing to do with the marketing," Lionel Rodrigues of Sedna Nutra told CBC News.
He said the last order came in more than six months ago.
Newfound Pure made a series of claims on Facebook about its production and research and development facilities that have been "recognized globally," and its "collaboration with Memorial University of Newfoundland."
But Mugford stressed those online comments relate to Sedna Nutra's facilities and work.
Listed as company director in error
Mugford confirmed that the Newfound Pure brand is managed by a numbered company registered at the same Corner Brook residential address listed on the nutraceutical company's website.
According to documents filed at the province's registry of companies, Mugford had been listed as a director of that firm, 73173 Newfoundland and Labrador Inc.
He wasn't actually permitted to hold that position, and indicated that it was a mistake that he fixed on Wednesday. He is now delisted.
Under Newfoundland and Labrador law, being in bankruptcy disqualifies someone from acting as director of a corporation.
Mugford declared bankruptcy in British Columbia back in 2013, and has yet to be discharged.
The federal Department of Justice objected to that happening, saying Mugford "appears to be using the bankruptcy process to entirely avoid payment of his tax debt."
According to a May 2014 court submission, Ottawa says Mugford owed nearly $1 million in personal income taxes, interest, and penalties for the six taxation years from 2005 through 2011.