Receiver's Reply to Zi Corporation's Memorandum in Opposition to Receiver's Motion for Contempt and for Sanction S

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA FORT LAUDERDALE DIVISION NIGHT BOX FILE D

SECURITIES AND EXCHANGE COMMISSION , K' - 6 2006

Plaintiff, ;. t 4 MADDAX ~' . U~ACISDpldlMIA V.

MICHAEL LAUER, LANCER MANAGEMENT GROUP, LLC, and LANCER MANAGEMENT GROUP II, LLC, Case No. 03-80612 CIV-MARRA Defendants, Jointly Administere d and

LANCER OFFSHORE, INC ., LANCER PARTNERS, LP, OMNIFUND, LTD., LSPV, INC ., and LSPV, LLC ,

Relief Defendants . /

In re : Chapter 11 Cas e LANCER PARTNERS L .P., Case No. : 04-8021 1 -CIV-MARRA

Debtor.

RECEIVER'S REPLY TO ZI CORPORATION'S MEMORANDUM IN OPPOSITION TO RECEIVER'S MOTION FOR CONTEMPT AND FOR SANCTION S

Marty Steinberg, Esq ., the court-appointed receiver (the "Receiver") for the Lancer Entities' submits this Reply to Zi Corporation's Memorandum in Opposition to Receiver's Motion for Contempt and for Sanctions (the "Response Brief') .

'Lancer Management Group LLC ("Lancer Management"), Lancer Management Group II LLC ("Lancer Management II"), Lancer Offshore Inc . ("Offshore"), Omnifund Ltd . ("Omnifund"), LSPV Inc . ("Offshore LSPV"), LSPV LLC ("Partners LSPV"), Alpha Omega Group, Inc . ("AOG"), G .H. Associates LLC, and CLR Associates, LLC (the "Receivership Entities" ), and Lancer Pa rtners, L.P. ("Partners") . CASE NO. 03-80612 -CIV-MARRA /VITUNAC Case No.: 04-80211 -ClV-MARRA - Jointly Administere d

1. INTRODUCTION In a feeble attempt to hopefully avoid the inherent problems created for Zi Corp . ("Zi") by the Voting Rights Agreement ("VRA") it executed on July 15, 2004, coupled with this Court's Receivership Order and Case Management Order ("CMO"), Zi asserts futile and/or inapplicable legal doctrines and principles in its Response Brief as purported justification for the Court's denial of the Receiver's Motion for Contempt and for Sanctions (the "Contempt Motion"). Specifically, Zi contends : 1) the Receiver never served Zi with process of the contempt proceeding thereby depriving the Court of jurisdiction ; 2) Zi is not otherwise amenable to the jurisdiction of this Court ; 3) Zi has not, as a matter of law or fact, violated any of this Court's Orders or the automatic stay in bankruptcy and therefore is in compliance with the statutory exception articulated in 28 U.S.C. § 959 (a); and 4) Florida is an improper forum based upon the doctrine offorum non conveniens. For these reasons, Zi contends the Court should deny the Contempt Motion and award it fees and costs for responding to the Motion . Through this Reply, the Receiver argues that Zi was properly served with the Contempt Motion and further that Zi is estopped from challenging this Court's jurisdiction as well as venue based upon forum non conveniens. The Receiver believes Zi has intentionally violated Orders of this Court and only this Court has jurisdiction to enforce its duly entered Orders . Moreover, Zi has intentionally breached the VRA, which provides for jurisdiction and venue before this Court. Because the arguments articulated in Zi's Response Brief are merely designed to obfuscate the underlying issues attendant to the Contempt Motion, the Receiver requests that both Zi and Michael Lobsinger ("Lobsinger") should be sanctioned and held in contempt . II. BACKGROUND Interestingly, from 1996 to 2005, neither Zi nor Lobsinger contested or challenged the right of the Lancer Entities to vote their respective shares of Zi . Specifically, from 1996 to the summer of 2003 when the Lancer Entities, under the operation and management of Michael Lauer ("Lauer") acquired their respective positions in Zi, both Zi and Lobsinger knowingly sold significant blocks of Zi shares to the Lancer Entities through a series of private security transactions . Thereafter. from July 2003 to August 2005, after the Receiver disclosed that the Lancer Entities owned approximately 49% of Zi's outstanding and issued shares, Zi never contested or challenged the Receiver's right to vote those shares of Zi . In fact, Zi never questioned the Receiver in 2004 when he filed certain reports in Canada and the United State s

2 CASE NO. 03-80612 -CIV-MARRA/VITUNAC Case No.: 04-8021 1-CIV -MARRA - Jointly Administered disclosing the Lancer Entities' ownership interests in Zi . Instead, Zi requested the Receiver to refrain from selling any of its shares for 150 days in order to facilitate a $10 million private placement for Zi . Also, in July 2004, through the VRA, Zi authorized the Receiver to not only appoint a member to its board of directors, but it further agreed not to contest the Receiver's right to vote any of the Zi shares . Indeed, the VRA confirms Zi's acknowledgment of the Lancer Entities' ownership of its shares as well as the rights that came with those shares as it states in paragraph 3 that the parties : " . . .acknowledge that the Lancer Entities are not now restricted fro m voting or causing to be voted any shares of the Company beneficially held by any or all of them, and further agree not to take any action or to solicit or encourage any other party to take any action that would restrict any of the Funds from voting or causing to be voted any share of Zi beneficially held by any or all of them ."

Moreover, at the time Zi executed the VRA, it was on notice of the injunctive and jurisdictional provisions contained in both, the Receivership Order and the CMO, which bestowed broad authority upon the Receiver to marshal and safeguard all of the estate assets, to manage the business affairs, funds, chooses in action and other property of the Lancer Entities. It is this understanding of the Orders that presumably explains why Zi consented to the exclusive jurisdiction provision contained in paragraph 5 of the VRA which states , in pertinent part: 1 . "Any disputes relating to or arising under this Agreement shall be considered proceedings ancillary to the Lancer Entities ' action styled Securities and Exchange Commission v. Lauer et al., Case No. 03-80612- CIV-ZLOCH ;"

2 . The District Court " shall have original and exclusive jurisdiction over any such disputes;"

3 . The parties "irrevocably submit in any suit, action or proceeding arising out of or relating to this Agreement to the exclusive jurisdiction of the District Court and waives any and all objections to such jurisdiction or venue that it may have under the laws of any state or country, including, without limitation, any argument that jurisdiction, situs and/or venue are inconvenient or otherwise improper ;" and

4. "Process may be served upon it in any manner authorized under the laws of the United States or Florida, and waives any objections that it otherwise have [sic] to such process."

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During the summer of 2005, upon learning of the resignation of Zi's President, Michael Donnell, an event which Zi itself acknowledged could have a materially adverse impact on its business, the Receiver, pursuant to the VRA, requisitioned a special meeting of Zi's shareholders to seek nominations for additional members to Zi's board of directors . Zi responded by commencing an ex parse proceeding before the Queens Bench in Calgary seeking an injunction precluding the Receiver from conducting the shareholder's meeting. On the grounds that the ex parte order entered by the Calgary Court on August 10, 2005 violated the VRA as well as the Receivership Order and the CMO, the Receiver asked the Canadian Court to dismiss that action . The Receiver concurrently filed the Contempt Motion before this Court . III. DISCUSSIO N A. Zi's Argument That It Has Not Been Properly Served With Process Is Inaccurate . First and foremost, the Contempt Motion, which was filed November 7, 2005 was served on Joseph Galda, Esq . of the Hodgson Russ firm in Buffalo, New York. Mr. Galda has represented himself to Hunton & Williams LLP as counsel for Zi in connection with receivership related matters as far back as 2003 . Neither Hunton & Williams LLP nor the Receiver received any notice or indication that neither Mr. Galda nor his former firm no longer represents Zi in connection with the receivership . In addition, Zi's Canadian litigation counsel has not filed an appearance in the receivership proceedings. In order to avoid all doubt, on December 23, 2005, the Receiver forwarded the Contempt Motion by registered mail, return receipt requested to Zi Corporation in Calgary, and by First Class mail to Zi's Miami counsel . A true and correct copy of the Receiver's Certificate of Service dated December 23, 2005 is attached hereto as Exhibit "A." Hence, service of the Contempt Motion on Zi complies with the Federal Rules of Civil Procedure, the Local Rules of Civil Procedure for the Southern District of Florida as well as the service of process provisions contained in the VRA . Second, Zi's argument that this Court lacks jurisdiction because of improper service is fallacious for two additional reasons . First, the Receivership Order and the CMO do not only govern parties to litigation. They apply to any person "with notice" of the Orders . Zi admits having notice of both Orders . Zi in fact attached the Receivership Order to its Canadian pleadings in August . Furthermore, the VRA states that any dispute shall be considered "proceedings ancillary" to this very case . Hence, Zi had actual notice of the receivership proceedings .

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Second, in the context of a motion for contempt, the contemnor "waive[s] any objection to the manner of service [when] it does not claim lack of actual notice." First City, Texas Houston, N.A. v. Rafidain Bank, 281 F.3d 48, 55 (2d Cir 2002) ; see also Titra California, Inc . v. Titra Film, 2001 WL 1382587, *3 (S .D.N.Y.) (S .D.N.Y ., 2001) (contemnor has no objection to service where it had actual notice, was afforded more than six weeks to respond even where "no notice of motion ever was filed") . Even where the contemnors are not party to an action, the contemnor waives any objection to service where they file an opposition to the motion for contempt -- because by doing so they admit actual notice . See, e.g., Merz v. Hemmerle, 90 F.R.D. 566, 568 (E.D.N .Y. 1981) (citing cases)); S.E.C. v. Diversified Growth Corp ., 595 F. Supp . 1159, 1171 (D .C.D.C. 1984). Here, Zi received actual notice of the Contempt Motion . Indeed, Zi filed two motions with the Court requesting extensions of time for it to respond to the Motion and then timely filed its Response Brief. B. Zi And Lobsinger Knowingly Violated This Court's Orders . The Receivership Order and CMO enjoin Zi "from prosecuting any actions or proceedings which involve the Receiver or which affect the property of [the Receivership Entities]" and "from initiating, maintaining, or in any way prosecuting in any court any proceeding, suit or action that may diminish or usurp property of the Receiver or the Receivership Entities' estates" unless expressly authorized by the Receiver or the Court ." Zi `s Response Brief boldly concedes that the plain language of the Receivership Order prohibits the commencement of the Canadian action against the Receiver . See Memorandum at 12 ("At first blush this [language in the Receivership Order] would seem to bring within its ambit the Canadian Action."). Zi, however, proceeds to cite 28 U .S.C. § 959(a) to somehow suggest that it can sue the Receiver in Canada without first seeking leave of this Court or otherwise violating this Court's Orders because the Receiver is merely "carrying on business connected with" property of the receivership estate, namely its "hostile takeover" of Zi . Insofar as the Zi shares represent the largest remaining positions in any of the Lancer Entities' portfolios and because the Receiver's relationship with Zi concerning his rights with respect to the subject Zi shares by virtue of the VRA, it can hardly be argued that the Receiver's conduct in connection with the ownership of the Zi shares resembles anything that constitutes the "ordinary course of business ." The Receiver's request for a shareholders meeting was well within his rights under the VRA . If Zi opposed that request, like the Receiver, it should hav e

5 CASE NO. 03-80612 -CIV-MARRA/VITUNAC Case No .: 04-8021 I-CIV-MARRA - Jointly Administere d complied with Paragraph 5 of the VRA and initiated a proceeding before this Court rather than the Canadian Court . Zi's argument that the Receiver is using receivership property in a manner contrary to Canadian securities law borders on ridiculous . The Receiver, who owes a fiduciary duty to the Lancer Entities, would never use estate property in a manner contrary to law. Again, if Zi believes the Receiver is violating either of the Court Orders, the VRA, or even Canadian security laws, it should initiate a proceeding before this Court, upon notice and a request for oral argument. Instead, Zi filed ex parte pleadings before a court in Calgary with no notice to the Receiver. There is, however, no reason for Zi to suspect that it would not receive a full, fair and appropriate adjudication from this Court . Indeed, Paragraph 5 of the VRA states that it shall be "governed by, and construed in accordance with, the law of the Province of Alberta and the civil laws of Canada." Zi essentially asserts that the Receivership Order is overly broad, thereby giving it the right to ignore the Order . To the contrary, "orders of courts having jurisdiction to enter them [must] be obeyed until reversed, even if proper grounds exist to challenge them ." Spartan Mills v. Bank of Am . 111., 112 F.3d 1251 (4th Cir . 1997) (citing Celotex Corp . v. Edwards, 514 U .S. 300 (1995)) . Zi also argues that the Receiver's right to vote his Zi shares is not a property right . Therefore, the Canadian action seeking to restrict the Receiver's voting rights violates neither the Receivership Order nor the CMO . Not surprisingly, this contention, is made without citation to any legal authority and is in fact contrary to uniform authority in this country directly on point . The Delaware Chancery Court, for example, has held that "stock is property, and the right to vote that stock is an interest in property." Lobato v. Health Concepts IV, Inc., 606 A.2d 1343, 1348 (Del. Ch., 1991). Numerous other courts have held that "the right to vote a share of stock is a property right." Klaus v. Hi-Shear Corp ., 528 F.2d 225, 234 (C .A. Cal . 1975) (citing Meyberg v. Superior Court, 19 Cal.2d 336, 341, 121 P .2d 685 (1942)) .2 Seeking to prevent the

2 See also Brown v. McLanahan, 148 F .2d 703 (4th Cir. 1945) (holding that that the voting strength of shares of stock is a property right meriting judicial protection) ; Feinberg v. Federal Deposit Ins . Corp., 420 F. Supp. 109 (D.C.D.C . 1976) (Suspension order which was entered by the Federal Deposit Insurance Corporation and which prohibited bank officer convicted of felony of mail fraud from participating in any manner in affairs of bank, resulting in bank officer being prevented from voting his bank stock, deprived bank officer of property interest protected by due process) ; Global Natural Resources v. Bear, Stearns & Co., 642 S .W.2d 852, *854 (Tex .App. 5 Dist.,1982) ("The trial court signed the temporary restraining order granting injunctive relief without notice o r (continued. . . )

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Receiver from voting its shares serves to "diminish" the value of those shares to the Receivership estates-precisely the harm that the injunctive provisions of the CMO and the automatic stay of the Bankruptcy Code are designed to prevent . The thrust of Zi's opposition is that, even if the right to vote one's stock is a property right, the Receiver is deprived of that right because the Lancer Funds acquired the shares without first filing the appropriate public disclosure documents . This position is in stark contrast to Zi's own conduct over the past two years in which it acknowledged the Receiver's right to vote its Zi shares. Lauer's prior failure to file disclosures, which was remedied by the Receiver's public filings, also cannot be used as grounds to prevent the Receiver from voting his Zi shares, particularly where, as here, the Receiver and the investors are the only innocent parties given Lobsinger and Zi's complicity in the Lancer Entities' accumulation of Zi shares . Finally, no securities laws of Canada have been violated by the Receiver . 1 . Zi Is Estopped From Challen2in2 The Receiver's Right To Vote Its Shares Over the past two years, Zi acknowledged the Receiver's right to vote Lancer's shares of Zi . Zi took no action to contest the Receiver's ownership or its voting rights after the Receiver disclosed the extent of his ownership of the Zi shares in 2004 . Instead, in July 2004, after the disclosures were filed, Zi voluntarily executed the VRA thereby consenting to the Receiver's nomination of a Zi director, and "acknowledg[ing] that the Lancer Entities are not now restricted from voting or causing to be voted any shares of the Company beneficially held by any or all of them, and further agree[ing] not to take any action or to solicit or encourage any other party to take any action that would restrict any of the Funds from voting or causing to be voted any shares of Zi beneficially held by any or all of them ." Having previously consented to the Receiver's rights to vote the Zi shares in a binding contract, Zi should be contractually estopped from arguing that Lauer's failure to file disclosure statements in Canada somehow prohibits the Receiver from voting the Zi shares now, particularly when any filing deficiencies, if any, have been corrected by the Receiver . See, Price

hearing . The order scheduled an adversary hearing on a temporary injunction for September 17, four days after Global's annual meeting . By the terms of this ex parse order, the McFarlane shareholders were prevented from voting their shares at the annual meeting or from seeking a postponement of the meeting until the court could conduct the temporary injunction hearing . In effect, the McFarlane shareholders were thus deprived of a valuable property right--the right to vote their Global shares at the annual meeting--without trial or hearing .")

7 CASE NO. 03-80612 -CIV-MARRA /VITUNAC Case No .: 04-8021 I -CIV-MARRA - Jointly Administere d v. Humana Ins. Co., 285 F.3d 971, 976 (11th Cir. 2002) (holding that the purpose of the doctrine of equitable estoppel is to prevent a party from "trying to have his cake and eat it too" by relying on a contract when it is to his advantage and trying to avoid it when it does not), rev'd on other grounds sub nom PacifiCare Health Sys., Inc. v. Book, 538 U .S. 401 (2003); Marine Transp. Services Sea-Barge Group, Inc. v. Python High Performance Marine Corp ., 16 F. 3d 1133 (11th Cir. 1994). 2. The Pre-Receivership Acts of the Lancer Entities Do Not Preclude the Receiver from Exercising His Voting Rights The acts of which Zi complains -- failure to file certain "early warning statements" -- occurred long before the appointment of the Receiver (and likely with the full knowledge of Zi's insiders). These acts cannot be imputed to the Receiver . See Scholes v . Lehmann, 56 F .3d 750, 754 (7th Cir. 1995) ("The appointment of the receiver removed the evildoer from the scene") . The pre-receivership acts of Lauer do not preclude the Receiver from voting the Zi shares. "Defenses based on a party's unclean hands or inequitable conduct do not generally apply against that party's receiver. While a party may itself be denied a right or defense on account of its misdeeds, there is little reason to impose the same punishment on a trustee, receiver or similar innocent entity that steps into the party's shoes pursuant to a court order or operation of law." FDIC v. O 'Melveny & Meyers, 61 F.3d 17, 19 (9th Cir. 1995) (citations omitted); see also McHale v. Huff (In re Huff), 109 B.R. 506, 513 (Bankr. S .D. Fla. 1989) ("[A] receiver represents the rights of creditors and is not bound by former corporate officers' or directors' fraud ."). 3 The Receiver was appointed to preserve the assets of the Receivership estates for the benefit of investors and to effectuate the orders of the Court. "The receiver is an arm of the Court and the funds in his possession are as though they were in the hands of the Court and are held for the benefit of all lawful claimants ." Columbia Bank for Coop . v. Pkeelanta Suga r

3 See also, e.g.,McCandless v. Furlaud, 296 U.S. 140, 160 (1935) ; O'Neal v. General Motors Corp., 841 F .Supp. 391, 398 (M .D. Fla. 1993), Scholes, 56 F.3d at 754; O'Melveny & Meyers, 61 F.3d at 19; Schacht v . Brown, 711 F.2d 1343 (7th Cir. 1983); Meyers v. Moody, 693 F .2d 1 196 (5th Cir. 1982); Welt v. Sirams, 3 F.Supp.2d 1396 (S .D. FIa. 1997); Waslow v. Thornton (In re Greenberg.), 212 B .R. 76, 91 (Bankr . E.D. Pa. 1997); Gordon v. Basroon (In re Plaza Mortgage and Fin. Corp.), 187 B.R. 37 (Bankr. N .D. Ga. 1995); Dept. of Ins. v. Blackburn, 633. So. 2d 521, 524 (FIa . 2d DCA 1994); Huff, 109 B.R. at 513 ; Dirks v. Clayton Brokerage Co . of St. Louis, Inc., 105 F.R.D. 125 (D. Minn. 1985); see also 65 Am .Jur.2d Receivers § 372 (2001).

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Coop., 52 So. 2d 670, 673 (Fla . 1951). To permit Zi to impute Lauer's non-compliance with certain notice provisions under Canadian securities laws would undermine those purposes . Given Lobsinger and Zi's participation in Lauer's alleged misconduct, the only remaining innocent parties are the investors . Zi's assertion that the Lancer Entities' acquisition of its shares was done without Zi's knowledge is incredulous . Zi's CEO, Lobsinger, arranged for the Lancer Entities to acquire the shares through numerous private placements . The most notorious of those occurred in 1998 when Eric Chappell, who had 4,525,000 Zi shares, began selling his shares, putting downward pressure on the stock . Lobsinger requested Chappell to cease selling on the open market and instead arranged a private sale of the remaining shares . Thereafter, 3,197,000 of Chappell's shares, representing 11 .3% of Zi's outstanding shares at the time were sold to Lauer's hedge funds. Although Lobsinger arranged the trade, neither he nor Lauer disclosed the identity of the buyer. This particular transaction is described in detail by the author of "The Right Connections -- Allegations of Political Interference at Alberta's Market Regulator Raise New Questions About the Cozy Ties Between a High Flight Tech Firm [Zi] and the Provinces Most Powerful People", published in the December 12, 2005 edition of the Western Standard, and attached hereto as Exhibit "B ." In March 1999, Lauer's funds purchased another 400,000 units, or 20 .5% of yet another Zi private placement. A year later, Lauer's funds bought 225,000 units, or 18% of another Zi private placement . Through a series of dubious consulting agreements, Zi and Lobsinger also gave Lauer and the Lancer Entities options to acquire 100,000 shares of Zi common stock in August 1997, another 100,000 shares in August 1999 (plus $99,805 in cash), another 100,000 shares in October 1999, as well as another 100,000 shares in May 2000 (plus $111,250 in cash) . Lancer and Zi also purchased and sold companies together, as evidenced by their acquisition and sale of Magic Lantern Group in August 2002 . Given the sizable participation by Lauer in the multitude of private placements orchestrated by Zi and its board, Lobsinger and Zi knew precisely the rate at which Lauer and his funds were accumulating Zi shares and further knew that the statements Zi made regarding Lancer's ownership of Zi shares over the course of several years were false and misleading . The Court should not allow Zi to use its complicity in Lauer's acquisitions, as well as Zi's own conduct in itself not publicly disclosing the acquisitions, to defeat the voting rights of the Receiver on behalf of innocent investors .

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3 . The Receiver's Efforts to Vote Zi Shares Does Not Violate Canadian Law Zi repeatedly refers to the Receiver's request of Zi to convene a special shareholders' meeting as an "illegal takeover bid." See Response Brief at 3, 4, 11 and 12 . The Receiver's actions, however, are neither illegal nor do they constitute a "takeover bid," as that term is defined under Canadian law . Section 158(1)(r) of the Canadian Securities Act provides, in relevant part, that: (r) "take-over bid" means an offer to acquire outstanding (i) voting securities of a class of the offeree issuer, or (ii) equity securities of a class of the offeree issuer, that is made to any person or company that is in Alberta or to any holder in Alberta where, as of the date of the offer to acquire, securities that are subject to the offer to acquire, together with the offeror's securities, constitute in the aggregate 20% or more of all outstanding securities of that class of securities .

R.S.A. 2000, c. S-4, s. 158(l)(r). Insofar as the Receiver's request for a shareholders' meeting does not contemplate the acquisition of more Zi shares, it clearly does not constitute a "takeover bid" within the meaning of the Canadian Securities Act . Likewise, nothing in the Canadian Securities Act restricts the Receiver's entitlement to exercise rights as a shareholder, notwithstanding the funds' alleged prior failure to make certain required public disclosures . Rather, restricting those rights in some form or fashion is one of the broad range of options potentially available to remedy violations of the Canadian Securities Act . See R.S .A. 2000, c. S-4, s. 180(1). Similarly, since the Receiver's appointment, there has been no suggestion that the Alberta Securities Commission ("ASC") intends to take any action or to employ such remedies against the Receivership Entities . To the contrary, the Receiver has cooperated with the ASC to ensure that all deficiencies have been corrected and that all public disclosures have been properly and timely made by the Receivership Entities . The Receiver is also working with the ASC to confirm that none of Zi's shareholders were prejudiced by the pre-receivership actions of Mr . Lauer or the Lancer Entities . Accordingly, absent a judgment or order imposing a restriction on the Receiver's rights to vote the Receivership Entities' Zi shares, none exist. Hence, the Receiver's simple request for a shareholders' meeting is hardly illegal .

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C. The Court Has Jurisdiction Over Z i 1 . Zi Voluntarily Consented to the Court's Jurisdiction Zi argues that the Court lacks jurisdiction over it because it does not have minimum contacts with Florida. Separate and apart from the traditional minimum contacts analysis, a court has personal jurisdiction over a non-party based upon the court's inherent authority to enforce its own orders. See Waffenschmidt v. MacKay, 763 F.2d 711, 721 (5th Cir. 1985); N.Y. State Nat'l Org. for Women v. Terry, 732 F. Supp . 388, 399-400 (S .D .N.Y. 1990) . In Waffenschmidt, for example, the Fifth Circuit upheld an adjudication of contempt over non-parties, even though such non-parties had no contacts with the forum, because the exercise of personal jurisdiction was linked to their knowing engagement outside of the court's territory in activities that dissipated assets acquired through securities fraud . In other words, given Zi's knowledge of this Court's Orders, Zi must have necessarily foreseen litigation against it before this Court as a consequence of its violation of the Receivership Order and the CMO . Clearly, Zi filed its ex parse pleadings in Canada to avoid the foreseeable litigation it anticipated it would encounter in Florida for violating this Court's Orders. Such foreseeable litigation does not, however, offend traditional notions of fair play and substantial justice . Waffenschmidt, 763 F.2d at 721 . To quote the Southern District of New York : "Respondents' brash assertion that they should be allowed to . . . intentionally violate a court order of which they had actual notice, while retaining impunity from the imposition of coercive sanctions fashioned to assure compliance with the order, is as groundless as it is insolent ." Terry, 732 F. Supp . at 400 n. 5 . Minimum contacts are also irrelevant when a party has consented to a court's jurisdiction. See Burger King Corp. v. Rudzewicz, 471 U.S . 462, 472, n. 14 (1985); Lipofsky v. New York State Workers Compensation Bd., 861 F.2d 1267 (11`h Cir. 1988) . Concerning the Receiver's right to vote its Zi shares, Zi contractually "submitted itself to the exclusive jurisdiction of this Court and waived all objections to such jurisdiction or venue that it may have under the laws of any state or country, including, without limitation, any argument that jurisdiction, or venue are inconvenient or otherwise improper ." See VRA § 5 . Zi's Canadian lawsuit seeking to enjoin the Receiver from voting his Zi shares in accordance with the VRA, directly contravenes paragraph 5 of the VRA, the Receivership Order, the CMO and the automatic stay . Thus, regardless of Zi's contacts with Florida, this Court has jurisdiction over Zi to enforce its Orders -- of which Zi had actual notice and knowingly violated -- because it wa s

11 CASE NO. 03-80612-CIV-MARRA/VITUNAC Case No. : 04-80211 -CIV-MARRA - Jointly Administere d foreseeable that Zi's violation of those Orders would result in contempt proceedings in Florida . Similarly, Zi's consent to jurisdiction in Florida for matters relating to the Receiver's right to vote Zi shares under the VRA -- to which this contempt proceeding relates -- also disposes of a minimum contacts analysis . 2 . Jurisdiction is Proper Even Under a Minimum Contacts Analysis Even in the absence of Zi's consent to this Court's jurisdiction, the exercise of jurisdiction over Zi by this Court still comports with all due process requirements . See SEC v. Carillo, 115 F.3d 1540, 1543-44 (11`h Cir . 1997) (holding that when service is made under a federal statute providing for nationwide or worldwide service of process, the less stringent requirements for minimum contacts with the United States under the Fifth Amendment should apply); see also, United Elec. Workers v. 163 Pleasant St. Corp., 960 F.2d 1080, 1085-86 (1st Cir. 1992) (same) (cited with approval in Carillo). The exercise of personal jurisdiction comports with due process when: "(1) the nonresident defendant has purposefully established minimum contacts with the forum . . . ; and (2) the exercise of jurisdiction will not offend traditional notions of fair play and substantial justice." Francosteel Corp . v. MIV Charm, 19 F .3d 624, 627 (11th Cir. 1994). "The nature and quality of [the required] contacts, however, vary depending upon whether the type of personal jurisdiction being asserted is specific or general." Consol. Dev. Corp. v. Sherritt, 216 F .3d 1286, 1291 (11`h Cir. 2000). The Court has specific jurisdiction over Zi in connection with this Contempt Motion . Specific jurisdiction arises when the party's contacts with the forum relate directly to the matters being litigated. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U .S. 408, 414 nn. 8 & 9 (1984). Furthermore, specific jurisdiction arises if Zi purposely availed itself of the privilege of conducting activities in the forum such that Zi "should reasonably anticipate being haled into" this Court . See Sheritt, 216 F.3d at 1291 ; Vermeulen v. Renault, U.S.A., Inc., 985 F.2d 1534, 1546 (11`h Cir . 1993) . All three criteria to establish minimum contacts have been satisfied in this instance . First, in 2004, Zi approached the Receiver, in his capacity as the agent of this Court 4 for the purpose of garnering the Receiver's cooperation to facilitate Zi's attempt to secure equity financing . Members of Zi's management traveled to Miami to meet with th e

4 See O'Neal v. General Motors Corp ., 841 F .Supp. 391, 398 (M .D. Fla. 1993) (citing Sunland Mortgage Corp. v. Lewis, 515 So .2d 1337, 1338-1339 (Fla . App. 1987) (holding that receiver is an arm of the court)) .

12 CASE NO. 03-80612-CIV-MARRA/VITUNAC Case No . : 04-8021 1-CIV-MARRA - Jointly Administere d

Receiver and his representatives to educate the Receiver of this transaction and to thereafter negotiate the VRA. Zi executed the VRA with the Receiver and in doing so, agreed to jurisdiction in Florida. Thus, Zi availed itself of the benefits and protections afforded by the laws of the United States and this Court . In fact, armed with the executed VRA, Zi closed on its $10 .0 million private placement, thereby receiving a direct benefit from the VRA . The jurisdictional clause in the VRA demonstrates beyond question that Zi reasonably anticipated that it could be haled before this Court . See Carillo, 115 F.3d at 1544 . Accordingly, Zi is amenable to this Court's exercise of personal jurisdiction and such exercise comports with the due process clause of the Fifth Amendment. General jurisdiction, on the other hand, arises from a party's contacts with the forum unrelated to the cause of action being litigated. Here, the Court's exercise of general jurisdiction over Zi requires "a showing of continuous and systematic general business contacts between "Zi and the United States. Id. at 1292 . While Zi's Response Brief de-emphasizes its business contacts with the United States, in reality they are numerous and substantial . Perhaps most significantly, Zi has and continues to publicly market its shares for sale in the United States by listing them on the NASDAQ stock exchange . Consequently, Zi has subjected itself to regulation by the United States Securities Exchange Commission, makes numerous, regular public filings in the United States with the SEC, employs a U .S. based investor relations firm, and maintains offices and other business subsidiaries in the United States . In fact, upon information and belief, a significant portion of Zi's shareholders are U .S. citizens. Zi has also availed itself of the benefits of the U .S . legal system on a number of occasions, including litigation before the United States District Courts in Washington and California, and before California state courts, each time employing U .S. based lawyers . Based upon the foregoing continuous and systematic contacts with the United States, there can be little doubt that Zi could reasonably anticipate being haled before a court in the United States . Accordingly, the Court's exercise of general jurisdiction over Zi also satisfies the constitutional requirements . D. Not Only is This Court the Most Convenient Forum, it is the Only Appropriate Forum to Adjudicate the Receiver 's Contempt Motio n

Incredibly, Zi argues that this Court should refuse to exercise jurisdiction to consider the Receiver's Contempt Motion on the grounds the Court of Queens Bench of Alberta somehow is a more convenient forum to enforce the CMO, the Receivership Order and the automatic stay .

13 CASE NO . 03-80612-CIV-MARRA/VITUNAC Case No.: 04-8021 I-CIV-MARRA - Jointly Administere d

See Response Brief at 14-18 . Zi's entire forum non conveniens argument misconstrues the nature of this litigation. Zi focuses its argument almost exclusively on the theory that the Canadian court has the greatest interest in the Contempt Motion because the Receiver's request for a meeting of Zi shareholders purportedly implicates Canadian securities law . Yet, the Contempt Motion concentrates exclusively on Zi's deliberate disregard of this Court's jurisdiction and Court Orders . "[I]t is a well-established principle that only the court that issued an order or injunction has subject matter jurisdiction to hold in contempt a violator of that order or injunction." Barrett v. Avco Financial Services Management Co ., 292 B.R. 1, 8 (D . Mass. 2003) (citing Baker v. Gen. Motors Corp., 522 U.S. 222, 236 (1998)) . Hence, the Alberta court is neither "available" nor "adequate" to address the allegations asserted in the Contempt Motion . Furthermore, where the parties have previously agreed by contract to resolve disputes exclusively within a particular forum, as Zi and the Receiver have done in the VRA, the Eleventh Circuit has announced a "strict . . . rule that a forum selection clause constitutes the overriding consideration, which virtually eliminates other forum non conveniens considerations." Triad Financial Services Corp. v. Stewart Auto Supply, Inc., 47 F .Supp.2d 1332, 1336 (N .D. Ala. 1999) ; Florida Polk County v. Prison Health Serv ., Inc., 170 F .3d 1081 (11th Cir . 1999). Therefore, the Court should reject Zi's argument that the Canadian Court is somehow more convenient or appropriate to adjudicate the Contempt Motion and should exercise both its personal and subject matter jurisdiction over said Motion . IV. Conclusion For the foregoing reasons, the Receiver respectfully requests that the Court enter an Order granting the Contempt Motion, awarding sanctions as deemed appropriate under the circumstances and granting such other and further relief as the Court deems just and proper . Dated: January 6, 2006 Respectfully submitted ,

HUNTON & WILLIAMS LLP Counselfor the Receiver 1111 Brickell Avenue - Suite 2500 Miami, FL 33131 Tel : (305) 810-2500 Fax : (3 810`1

Craig V,,~asile (FBN 613691 )

14 CASE NO. 03-80612-CIV-MARRA/VITUNAC Case No . : 04-8021 1-CIV-MARRA - Jointly Administered

CERTIFICATE OF SERVIC E

I HEREBY CERTIFY that a true and correct copy of the foregoing Reply was furnished by First Class U.S . Mail this 6th day of January , 2006, upon all parties on the attached service list.

Craig V. Rasi (FBN 613691 )

15 64036.000002 MIAMI 323782v3 JOINTLY ADMINISTERED CASE LANCER/RECEIVERSHIP AND BANKRUPTCY CASE CASE NO.03-80612-MARRA/VITUNAC/CASE NO. 04-CIV-80211 -MARRA/VITUNAC ETC. SERVICE LIST

Christopher Martin Michael Lauer, pro se Heidi Carens Senior Trial Counse l Heidi Caren s 7 Dwight Lane U .S. Securities & Exchange Commission 7 Dwight Lane Greenwich, CT 0683 1 801 Brickell Avenue - Suite 1800 Greenwich, CT 06831 Miami, FI 33131

Patricia Beary Ms . Nina Fiskaaen M. Regina Thomas Office of the U .S. Trustee Nordea Liv Norge AS United States Trustee/Department of Justice Controller , One Century Tower, Suite 1 103 51 SW 1st Avenue - Suite 120 4 Folke Bernado ttes vei 3 8 265 Church Street 5147 Fyllingsdale n Miami, FL 3313 0 New Haven, CT 0651 0 1201 Bergen - NORWAY

David Blaylock, Esq . Gerry LaBush, Esq . Glankler Brown, PLLC Hodgsea Rusrs LL P 711 Third Avenue Pl aza. Sui 1700 One Commerce Square One h4 &T te 2000 Suite 1505 13WRI1 New York 1420 3 Memphis, Tennessee 38103 0 New York, New York 1001 7 Counsel for George R. Pidgeon, Sr.

David Newman Trisha D . Sindler Jimmy Tsakn i c/o Timothy E . Hoeffner c/o Shari A . Brandt, Esq . Special Counse l 1500 Market stree t Richard Spears Kibbe & Orbe, LLP U .S. Securities & Exchange Commission 38`h Floor 801 Brickell Avenue - Suite 1800 One World Financial Cente r Philadelphia, PA 19102-218 6 Miami, FI 3313 1 New York, NY 1028 1

Frank Paul Terzo Noah J. Schafler, Esq . Katz Barron Squitero Faust Mercedes G . Hale The Law Offices of David W. Rubin Piper Rudnick LL P 2699 S . Bayshore Drive 600 Summer Street , Suite 201 101 E . Kennedy Boulevard, Suite 2000 Eight Floo r Stamford , CT 0690 1 Tampa, FL 33602 Miami, FL 3313 3

Mark S . Gregory Kenneth B . Robinson, Esq . Robert M . Dombroff, Esq . Delphine W . Knight Brown Rice, Pugatch , Robinson & Schiller, P .A. Jonathan Alter, Esq . Kelley Drye & Warren LLP 101 NE Third Avenue, Suite 1800 Bingham McCutchen LLP Two Stamford Plaz a Fort Lauderdale, FL 33301 One State Stree t 281 Tresser Boulevard Hartford, CT 06103 Stamford, CT 0690 1

David Barae Anthony & Patricia O'Callagahan/ ~M . Hirsc &, Christopher B . O'Callaghan/ Joshua W . Cohen Diane J . Nelson/John P . Heffernan Cummings & Lockwood Attn : Timothy T. Broc k 700 State Street 200 Park Avenue Satterlee Stephens Burke & Burke LLP New Haven, CT 06509 NeW YOFIE, NY 10 1 6 6 230 Park Avenu e New . York, NY 1016 9

Thomas D. Goldberg Brian r Courtne. ES „ Barbara H .Katz Day, Berry & Howard LLP Rome MeGwigan, Sabanesh, PC Law Office of Barbara H . Katz One Canterbury Green One State Street 57 Trumbull Stree t Stamford, CT 06901 HW40FEIa , CT 06103 3402 New Haven, CT 0651 0

James M. Nugent, Esq . Gafy 9 . 4iein Joseph P . Moodhe KFO Investors Partnership Debevoise and Plimpton James M . Nugen t 919 Third Avenue Harlow, Adams & Friedman, P .C. StaffifE)Fd, CT- 06905 New York, NY 10022 300 Bic Drive Millford, CT 06460 Howard L . Siegel . Walsh Brown Rudnick Berlack Israels LLP Thaddeus E . Delonis, CPA Timothy W 12 1 Cityplace 1, 38'h Floor 290 Towne Center Drive 5 Rudnick LL P e -1 1 04as 185 Asylum Avenue Avenue of th Troy, MI 48084 -1774 New w York, NY 100200 110 4 Hartford, CT 060103

Garry M . Graber Leonard H . Hecht W. Todd Boyd, Es q. c/o Joseph Galda, Esq . 1270 avenue of the Americas Boyd Mustelier Smith & Parke r, P. L. Corsair Advisors, Inc. Suite 214 100 S .E. Second Street. 36'h Floo r 497 Delaware Avenue New York, NY 1002 0 Miam i, Florida 3313 1 Buffalo, NY 14202

Kenneth Marcus Carl F . Schoeppl , Esq. 255 East 49 Street Robert Wayne Pearce, Esq. Schoeppl & Burke, P.A . , P.A. Apartment 8B Robert Wayne Pearce 4651 North Federal Highway 1499 W . Palmetto Park Road New York , NY 10017 Boca Raton, Florida 33431-5133 Boca Raton, FL 33486

Paul Gentilozzi Michael R . Magasin, Esq . Rocketsports, Inc . Clayton Cunningham Law Offices of Michael R . Magasi n 3400 West Road 101 Penn Street 3415 south Sepulveda Boulevard East Lansing, MI 48823 El Segundo, CA 90245 Penthouse Suite 1200 Los Angeles, CA 90034-607 2

Ronald B . Ravikoff, Esq . Zi Corporation Matthew T. Davidson, Esq. Attn : President Zuckerman Spaeder LL P Suite 2100, 840 - 7 Avenue SW 201 South Biscayne Boulevar d Calgary, Alberta Canada T2P 3G2 Suite 90 0 Miami, Florida 33131-4326 E-MAIL SERVICE LIST

Scott M . Berman, Esq . Jeffrey Greilsheimer, Esq . Anne E . Beaumont, Esq . Greg T . Arnol d Hughes Hubbard and Reed, LLP Friedman, Kaplan ,Siiler & Adelman LLP Brown Rudnick Berlack Israels One Battery Park Plaza 1633 Broadway , 46th Floo r One Financial Cente r New York, New York 10004 New York, NY 10019-6708 Boston, MA 021 1 1 E-mail : greilshe t hugheshubbard .com sberman @fklaw.com/abeaumont (a?fklaw.com E-mail: arg noldc brbilaw .co m

David Cimo Esq . Travis Corde r Paul Wallac e Genovese Joblove & Battista, P .A. Brown Rudnick Berlack Israels 9701 S . Bexley Drive Bank of Tower, 36th Floo r One Financial Center Littleton, CO 80126 Boston, MA 0211 1 100 S.E. 2nd Street E-mail : wallaceclandenverlamsn .com Miami, FL 3313 1 E-mail : tcordern,brbilaw .co m E-mail : dcimo Igib-law.com

Mr . Hans Jacob Dahle David P . Milian, Esq . Bill McCowe n Vesta Forsikring AS Kozyak Tropin & Throckmorton, P .A. Metamora Multi Managers L.L.C. P . Box 707 0 2525 Ponce de Leon E-mail : mccowenbill a voya eg r.net .O 5020 Bergen - NORWA Y Coral Gables 3313 4 e-mail : hans .jacob .dahle @ vesta.no E-mail : dmilian]kttlaw .com

Aaron Podhurst, Esq . Joel H . Bernstein, Esq . Podhurst, Orseck, Josefsburg , Goodkind Labaton Rudoff& Sucharow LLP C ommerce B ank B ,ildin , Eaton, Meadow, Olin & Perwin, P .A. 100 Park Avenu e 4+namora cite 400 25 West Flagler Street - Suite 800 Coal 3313 4 New York, New York 10017 GubleC Florida Miami, Florida 3313 0 E-mail jbernstein( glrslaw.com E mail • MHanzm n4,i4a-zm anCriden e E-mail : apodhurstnpodhurst .co m

Carol Felicetta Roberto Martinez. Esq. Joseph Matthews, Esq . Reid & Riege, P .C. Colson Hicks Eidson P .A. Colson Hicks Eidson P .A . 234 Church Street, 9th Floor 255 Aragon Avenue, 2nd Floor 255 Aragon Avenue, 2nd Floor New Haven, CT 06510-1819 Coral Gables, FL 33134 Coral Gables, FL 33134 E-mail : cfelicettaGr?reidandrieae .com E-mail : bobr! colson .com E-mail: ioseph (i colson .com

David L . Snyder, Esq . Rudolph F . Aragon, Esq . Salvatore A. Barbatano, Esq . Craig B . Leavers, Esq . White & Cas e Foley & Lardner Neuberger, Quinn, Gielen, Rubin & Gibber Wachovia Financial Center, Suite 4900 150 W . Jefferson One South Street, 27`h Floo r 200 South Biscayne Boulevar d Suite 1000 Baltimore, MA 21202-328 2 Miami, Florida 33131-2352 Detroit, MI 48226-261 6 E-mail : dls(inggrg.com/cbl(i nggrg.com E-mail : raragon @ whitecase.co m E-mail : sbarbatano r foleylaw .co m

Eric A . Henzy, Esq . Donald Workman, Esq . Reid and Riege, P.C . Foley & Lardne r ., li P . Fran kel One Financial Plaza 3000 K Street, N .W . Kremer l e n N f 6L P 91 Third Avenu e Hartford, CT 0610 3 Suite 50 0 9 E-mail : ehenzyareidandrie eg com Washington, D .C. Ale,,, Vo-L New Yolk 1002 2 E-mail: dworkman(ifoleylaw .com ^n,

Lewis N . Brown Harley S . Tropin, Esq . Christopher Martin Gilbride, Heller & Brown, PA . Kozyak Tropin & Throckmorton, P .A. Senior Trial Counsel One Biscayne Tower, Suite 1570 2525 Ponce de Leon U .S. Securities & Exchange Commission Two South Biscayne Blvd . Coral Gables 33134 801 Brickell Avenue - Suite 1800 Miami, Florida 3313 1 E-mail : hstnkttlaw.com Miami, Fl 3313 1 E-mail : ]brown@ghblaw .co m E-mail : sfnkttlaw . com E-mail : mart inc!asec .gov Lewis N . Brown, Esq . Andrew L . Jiranek Michael J. Dell,-Esq . Dyanne E . Feinberg, Esq . McKennon Shelton & Henn LLP amen Levin Naffs Gilbride, Heller & Brown, P .A. 401 East Pratt St ., Suite 2315 91 9 Thi-d Avenu e One Biscayne Tower, Suite 1570 Baltimore, Md. 21202 New York New York 10022 Two South Biscayne Blvd . E-mail : andrew.jiranek@mshllp .com Miami, FL 3313 1 E-mail : Daniel A . Casey , Esq. Seth M . Schwartz, Esq . John Hochman , Esq. Kirkpatrick & Lockhart , P Miami Center - 20 1h Floor Skadden Arps , Slate, Meagher & Flom LLP Schindler Cohen & Hochman LL Four Times Square 100 Wall Street, 15`h Floo r 201 S . Biscayne Blvd . New York , New York 10036 New York , New York 1000 5 Miami , FL 33131 E-mail : jhochman@schlaw .co m E-mail : dcasey@kl .com E-mail : sschwart@skadden .com .

David Cimo Esq . Robert T . Wright, Esq. Robert Pershes, Esq . Genovese Joblove & Battista, P .A. Coffey & Wright, LLP Buckingham, Doolittle & Bouroughs, LLP Bank of Tower, 36th Floor Grand Bay Plaz a 2500 North Military Trail, Suite 480 100 S.E. 2nd Street Penthouse 2B Boca Raton, FL 33431 Miami, FL 33131 2665 S . Bayshore Driv e E-mail : rpershes@bdblaw .com E-mail : dcimo@gjb-law .com Miami, FL 3313 3 E-mail : rwright@coffeywright .com William R . Maguire, Esq. Jacqueline Wilson Kevin E . Gunthe r Jeffrey Greilsheimer , Esq. British Virgin Islands Financial Services 27 Reid Street , IS` Floor Hughes Hubbard & Reed, LLP Commission P.O. Box HM 305 1 One Battery Park Plaza Pasea Estate, Road Tow n Hamilton HM NX New York , NY 10004 Tortola, British Virgin Islands Bermud a E-mail : [email protected] e-mail : wilsonj@bvifsc vg e-mail : kevin .gunther@lom .b m greilshe(a)hugheshubbard.com . Mr. Dylan Wolff Susan V. 1)8FAeF6, Esq. Managing Director Norges Investor Value Price Findlay & Co. Michael Lauer, pro se 7 Dwight Lan P.O. Box 1863 Vika Tropic Ide Building , BVI e Greenwich, CT 0683 1 0124 Oslo - NORWAY P.O. Box 333 1 e-mail : mblauernhotmail .com e-mail : [email protected] Read Town , Tortola

William S . Fish, Esq . Michael Budwick Es q. John G . Moon, Esq. William H. Champlin , Esq. Meland, Russi n, Hellinger & Budwick, P.A. Chadbourne & Parke LLP Tyler Cooper & Alcorn, LLP 3000 First Union Financial Cente r 30 Rockefeller Plaza 185 Asylum St., CityPlace 35th Floor 200 South Biscayne Boulevar d New York, NY 1011 2 Hartford , CT 0610 3 Miami , Florida 3313 1 e-mail : jmoon@chadbourne .com e-mail : [email protected]/ e-mail : mbudwickc melandrussin .com champlin a tylercooper .co m Kristina M . Bakardjiev, Esquire Bruce Maffeo Carl F . Schoeppl, Esq . Goldstein, Tanen & Trench, P .A. Bruce Maffeo . P.A. Schoeppl & Burke, P.A. One Biscayne Tower, Suite 3700 233 Broadway, Suite 2701 4651 North Federal Highwa y 2 South Biscayne Boulevard New York, New York 10279 Boca Raton . Florida 33431-5133 Miami, FL 33131 E-mail : jbm a maffeolaw .com E-mail : sbpa@schoepplburke .com E-mail : [email protected] FILED by SW D.C. ELECTRONI C

Dec 23 2005

CLARENCE MADDOX CLERK U .S . DIST. CT. UNITED STATES DISTRICT COURT S .D . OF FLA . • MIAM I SOUTHERN DISTRICT OF FLORID A FORT LAUDERDALE DIVISION

SECURITIES AND EXCHANGE COMMISSION ,

Plaintiff,

MICHAEL LAUER, LANCER MANAGEMENT GROUP, LLC, and LANCER MANAGEMENT GROUP 11, LLC , Case No. 03-80612 CIV-MARRA Defendants, Jointly Administered

and

LANCER OFFSHORE, INC ., LANCER PARTNERS, LP . OMNIFUND, LTD ., LSPV, INC., and LSPV, LLC,

Relief Defendants .

In re: Chapter 1 I Case LANCER PARTNERS L .P., Case No. : 04-80211 -CIV-MARRA

Debtor.

CERTIFICATE OF SERVIC E

I HEREBY CERTIFY that a true and correct copy of the Receiver's Motion for Contempt and for Sanctions [DE 1119] was furnished this 23rd day of December, 2005, upon the parties identified on the attached service list in the manner indicated .

HUNTON & WILLIAMS LLP Counselfor the Receiver 1 I I 1 Brickell Avenue - Suite 2500 Miami, FL 3313 1 Tel: (305) 810-2500 Fax: (305) 810-165 3

EXHIBIT T 1 of 2 SERVICE LIST

By Registered Mail, Return Receipt Zi Corporation Attn: Presiden t Suite 2100, 840 - 7 Avenue SW Calgary, Alberta Canada T2P 3G 2

By First Class, U.S. Mail Ronald B . Ravikoff, Esq . Matthew T . Davidson, Esq. Zuckerman Spaeder LLP 201 South Biscayne Boulevard Suite 900 Miami, FL 33131-432 6

Counsel to Zi Corporatio n

2 64036.000002 RICHMOND 1606411v1

2of2 were treated with a lighter touch than others. The latest scandal over Rice, who had , until November, er Mpndayin August kept his position as chairman of Calga ry-based Tesc o tta11 dog strolled jaunti- Corporation-a subject of ASC regulatory authori- Iess; m~ Ming room of a down- ty-with the fu ll knowledge and even the permission put his arm around Bill Rice, of the commissioners themselves, only highlights Allegation : airman of the Alberta Secu rities what critics say has been the problem at the ASC all ookinga bit uncomfortable with along . In a province where the business elite and the Alberta's r creature pressed up against him, was government elite rub elbows on a regular basis, the questions al ,gpnetbeless, to promote the pooch- government-run regulator doesn 't seem to know .tor`Ed-to the reporters gathered in the room , how to act independently. high-flying nvestor Ed, after all, is, like Rice, a new face at the There was no shortage of rumours to give rise to me ASC-a fun and helpful fella who's arrived on the the allegations that the market watchdog had been Alberta equities scene to help novice investors navi- bending the rules for political purposes. On Jan. 9, gate the world of stocks Among other things, he' s 2004, Wayne Alford, who had been director of got; a website that offers tips on how to invest in the enforcement for the ASC from 2001 to 2003, wrote market safely,how to hire an adviser and how to sniff to then provincial revenue minister Greg Melchin, out pub licly traded firms that may not be playing b y suggesting that ASC bosses had created a "two-tier the rules. regulato ry regime" with two sets of rules for "nor- Bute the eight or so reporters who showed up that mal" market participants and another set for the day didn 't seem particularly charmed by Ed. They "powerful." In December of that same year, a group were more interested in the scandals that have been, of frustrated ASC employees presented to one com- well, dogging the ASC for months. Staff may have missioner, Thomas Cooke, a list of complaints about calculated that the rumours and accusations sur- their employer. Calgary lawyer Perry Mack was rounding the way the ASC operates had died down hired by the ASC to investigate the snowbal ling sufficiently, marking a good time to stake out a new, allegations against the commission in February positive track for the regulator (and what better way 2005. It would be the first of five probes into the than with a cuddly blue dog), but eradicating the bit- ASC. Mack's findings remain undisclosed, in the terness would prove much more difficult . Memo ries vaults of Alberta Finance . Another report, by com- of ruthless firings of whistle -blowers, the anonymous missioner R .J. McLeod, was completed in March, letters to the government from fearful but alarmed and submitted to the deputy premier and Minister employees within the ASC, allegations of sexua lly of Finance Shirley McClellan. It, too, remains secret . inappropriate behaviour in executive offices-all of In April, McClellan received another letter, this it was still very much present in the reporters' minds. time from a group of 35 employees, once again As were the secret reports on ASC activities, buried blowing the whistle on what they called a highly out of sight from the public, and alleged attempts by politicized regulator suffe ring from a lack of leader- ASC management to thwart the work of the auditor ship and rapidly losing its integrity as a law enforce- general in investigating them.The memories were all ment agency. still too fresh. With so many alarming allegations swir ling around The reporters peppered Rice with questions about the ASC, it was with bated breath that many inside everything but poor Ed: When would the ASC the market watchdog and in the province 's business reports be made public? How and when would the community awaited the report of Alberta's auditor fired employees be replaced ? How was the ASC general, Fred Dunn, released Oct . 27. The fact that going to address all these issues? "I don 't see any evi- the ASC had even t ried-unsuccessfu lly-to block dence of issues ," a frustrated Rice responded . "None Dunn's investigation in court , arguing he had no of what went on was on my watch . We'd like to focus jurisdiction to examine closed enforcement files, on investor education , but you'd still like to talk only thickened the plot . But if the province's invest- about what went on six months ago ." ment community anticipated a bombshell , revealing But everyone in the room, including Rice, kne w the facts behind the ocean of allegations, they would that the ASC had been facing trouble long befor e be disappointed . even that. And it isn 't over yet . Rice had been Examining 82 cases, the auditor found plenty of brought in to clean up all the mess left behind by two evidence of poor documentation and haphazard previous chairmen . But fresh revelations about enforcement procedures. Dunn acknowledged that, ice's own cozy relationship with an Albe rta stock "We found that information in the files supporting suer in November, now have the Opposition party decisions tended to diminish at higher levels . . . " and g`for the chairman's resignation. that "the most sensitive or potentially high -profile d while ASC executives have faced accusation s cases [were] the most poorly documented, likely due all sorts, one stands above the rest in terms of it s to more involvement by senior level staff and v~ty: that it may have cultivated a dual-regulatory Members, whose views were sometimes sought on a ountgnt, in which some Alberta companies matter. Senior staff and Members tended to provide 42

Timeline: The tech firm and the regulator 199 0 Zi Corp (then called Multi- Corp) is listed on the U .S.- of politi"ca based Nasdaq stock narket regulato'r exchange bout the cozy ties betty 1993 Thompson MacDonald, a tech firm and the provinc powerful provincialTory and )st powerful people friend of Alberta Premier Ralph Klein, joins Zi board, purchasing 75,000 shares at 15 cents each . Derrick Armstrong, who will go on to sit on the ASC legal advisory committee, joins Zi board, also purchasing 75,000 shares.

NOVEMBER 1993 Klein attends the opening of Zi's Hong Kong office. Hugh Dunne, director of Klein's Calgary office, privately buys 7,000 Zi shares. Klein's broth- er-in-law,Ted Hamilton, buys 250,000 shares.

DECEMBER 199 3 Zi director, Larry Novak, gives 10,000 shares to both Klein's wife and the wife of his advisor Rod Love in a "buy now, pay later" agreement. The agreement was for $1 per share, (the stock was trading at $1.62). Novak would later be fined by the ASC for failing to file an insider report for two years on the acquisition of 100,000, and subsequent sale of 85 ,000, Zi shares.

1994 Lobsinger joins Klein on a government trade mission to China to promote his Chinese-character software.

1995-1998 Nairn Nerland, Zi's vice- president of finance, says the Lancer Funds, four U .S. hedge funds run by Michael Lauer, invested throughout this timeframe in Zi's private equity deals .

JUNE 1995 Zi Corp (still called Multi- Corp) is listed on the Toronto Stock Exchange. 43 COVER STORY

NOVEMBER 199 5 their views verbally." The report notes Ethics commissioner Bob "one instance where the Director of Clarke issues a report on the Enforcement did not comply with the Zi shares given to the Klein Commission's conflict of interest policies family, clearing Klein and his and this non-compliance was not detected office of any wrongdoing . by the Commission 's Executive Director." 1996 But in the end , the AG concludes that, Clarke issues a second despite several enforcement cases being report on the matter of brought to his attention by ASC staff as Lobsinger's travelling with worthy of examination, "there is not suffi- Klein on the federal cient evidence to recommend to manage- government-funded trip to ment that any case file we examined be re- China, again clearing the opened." There is nothing, Dunn reports, premier of wrongdoing . to indicate that the two chairmen who preceded Rice-Peter Valentine and 1997 Multi-Corp changes its name Stephen Sibold-or any other executives to Zi Corp. had acted inappropriately. That's not what ASC insiders say. FEBRUARY 1998 Several have told the Western Standard Zi acquires all rights to that political interference has been par for its language software in the course at the provincial regulator, wit h exchange for giving employees ordered to pursue or drop files on auditor general hasn't even scratched the programmer Eric Chappell the whim of upper management (most, fearing surface of the regulator's activities . There are, 4.5-million Zi shares . repercussions, have requested anonymity) . "We Chappell immediately starts after all, nearly 7,000 companies today would have an enforcement file and would want dumping his shares into the regulated by the ASC, some with extensive open market, potentially to proceed with enforcement action, and it connections to the Klein government . putting pressure on Zi's would be killed," says one former ASC Questionable enforcement issues, they say, go stock price . Chappell sells enforcement department employee . "Someone back a long way. Years-old rumours about cozy off about 1 .5-million shares . would say kill that file, we're not moving on it." connections between high-flying tech firm Zi According to another former ASC manager, Corporation and the Alberta government, AUGUST 199 8 files were often dropped because they were insiders allege, go much deeper than anyone Just over three-million Zi considered "too hot to touch"-in other words, ever suggested . Someone, they claim, either Corp shares, representing too high-profile . Sometimes, he says, it was from the ASC or the government made sure 11 .5 per cent of the company, merely an associate of then ASC chairman are sold in one chunk to an that apparent regulatory breaches in that Sibold. Other times, the order came from the unnamed buyer. Chappell company were ignored, its enforcement cases says the shares were his and Alberta government . "I saw them meddling in dropped. alleges that Lobsinger enforcement," attests the ex-manager. And with five government reports, commis- arranged the sale . Lobsinger "Sometimes you would get calls from the sioned at hundreds of thousands of dollars of says he was unaware of the minister [of finance] inquiring about certain taxpayer money, only to be buried by the Klein buyer. Neither the buyer nor problems, issues, in which case there would be government, some wonder if the auditor Zi file a report identifying the enforcement taken . Sometimes there were general's report itself may very well have been buyer of such a large piece of lawyers who brought forward enforcement politicized . The province may have been eager equity, as is required by law . complaints and depending on who the lawyer just to make a scandal go away and return The buyer is later determined was, it would or wouldn't be investigated ." Even stability to Alberta's thriving public markets- to be Michael Lauer and more alarming, he says, "you might take Lancer Funds, now an unde- not so eager, perhaps, to drag through the mud clared "insider" at Zi Corp . enforcement action against someone just any of the province's proudest firms, the kind of because they've pissed off somebody" with "powerful" firms that Alford had alleged were 1999 power. getting special treatment . Especially them . Zi sells 400,000 shares and If it sounds like the ASC was doling out its 400,000 warrants to the own brand of justice, according to one ASC n the early nineties, reporters were calling Lancer Funds group. Zi rais- insider, it was. Like the mafia, he says, "there I Calgary-based Zi Corp (then called Multi- es an additional $2.3 million were `made' people who do the bidding of those Corp) the "Microsoft of Asia" for its in 1999 in private place- higher up in the chain . They then adopt the view groundbreaking technologies that adapt the ments, with Lancer purchas- of `It's my job to do their bidding."' Even the character-based languages of that part of the ing another 1 .9-million chairmen were in on it, according to the source, shares . world to the digital age . Today, Michael sometimes taking it upon themselves "to make Lobsinger, chairman, interim president and JUNE 2001 problems go away. It was based on an CEO of the firm refers to his company more Rod Love, then Klein's chief of expectation that you would take care of the modestly, as the "Telus of Japan," though his staff, joins Zi's board after people higher up : a power network ." software is most famous for its ability to leaving his government job . Little wonder, then, that critics claim that the simplify the input of Chinese characters into

TOP CP /JEFF McINTOSH . RIGHT CP/LARRY Mac000GAL DECE,,BER 12, 2005 J WESTERLY STAN D iRD

cellular h P ones Zi and other Corpt S eZiText, text devices. predic wh Which h In fact COVER STORY Only a few t words users w as the ability to investments in •+r Can keystroke ant to type the premie ci.Hugh Dun ada, eZiTcxt s' is usedbased In on rs ne then Mobility Phones, is a worldwide shares gary office director of vailable o . and Kl CM' handwritin And -71- n about 250 0 s broth er-lri_ , Purchased 7 AUGU recent) some TeJus f 0a sh led B video-game recognition sOftw Y licensed its ruce , . Curer media M , Cowen a Lancer portable giant Nintendo are' Decum been a Z acDonald associate, is o Fund- tf0 a, to i direct adviser a trad While g sYsterns,,o b e~nceen used ' n optionsor 1993,si to Kli ersndfctedok i e of 56 stc Zi is know in its And then thereOr D~000 shares inwhen he has massive Joint FB as part of a winning Softw n globall coin his calledheld A know are, in Albert y for its award director e Operation RCMP sting n for its ties to of the co mck Armstronth ny, hoFont nine Bermuda ao mpan kerns andinclu .Y as g as ou da ill Cons when g duriri forrse in at o g Ps mid nits broalso sat on the g he late ninetiesason ecelvene gaveligov: Whght in minceeA n blCorn tothe:?cfo er w rhad ev neiveces fo° n 5en_ wife co media who for the ASC Ben touted as a top KI -director when SibOld was Chairmansh - u one fraudB ering Wife of his Of Premier Ralph p of staff, Rod tuber one advisor ern and Love was given the Pin 2~ securities The and for the Poraril appointed to the Job' And dULY2003 understand In shares ca merchief YleavIn Zi boar lri 20()1 g that d s there laterthe Wi me with the Private g his govern (upon tem_ Ez he U'S Securities and share ves Consultant),2004 and remmnt job to beco change Co . mere then°p' bu°nl each Would pay for (when he retu ained there me a launches civilmmission $1,62 t trading On the Ipen even though of become Klein s chi rned to government until against Lance roceedings more media rl ' O f to p stories ai ed aboutmakret the are, sh ataOn ohisstff wa ), sell,-,agian an gent emeraningobti relationship deal,❑ out Orde betty Bed about the . load r Lobsin Ben Lobsinger ComfortableasWhen Zi handeassets. The Lancers federalger had accom and Klei he SEC alle n, 1/ Compan , d those heavily Lauer, throu ges that government- pan1e the pCe y shares Y discou trated through4 Lancer trade mission sponsored Tea inter Premier and his right to the rated massivea Perpe_, attended thee inChina blov i ember m Canada on a have P beenquiz a onhandman, the it l Of the ton and manipulationNatua_ office Opening of the Hoe 1994• Klein truly indep Pop quiz Might as schem e control well totala of ~Ster had inv with rn November 1993 and g Kong Zi it. theof ASCs abilitY to act ested Lob sin political roasters who Corp, though$he n Zit , Decotuber ger at a corn he celebrated The press re firlm IS i m19y4 Twon pans' the Christ secu SEC' Ported in plicated no i t reports later, ethics maspartyin ties coremission hDeccmber 1y96 th Lancer's hold' action of insider hearing i at e isconduct,but loin was cleared ° f rnm derif, "a transferred gs ar the nevertheless, ethics co oration and a nto allegations to a receiver Y would donate the both wlvalleged . of any W oislissioner's report al l °f the first selling their sh $51,000 the said gdoiri soeacleared ZiAU -SEPTEM arcs, to c madeY fro g' On the Kleinissues ER 2003B d Zt' t t ntgood, rs but there Zl file press didn't OPd r -rawer gover such hear,-, actually no e iat.i-rawe m soun I.ng they rleeases say_ Bu the dn g ev v d s r Lob e. In 1993 merit er took e i of the ' the same nnections commission insider, who Place. What'snce that any sze La of cer'sn hold' singer wife, two clo as h Year that has reQUested an who, out of fear the Aso Augus t 9s anding out shares for h a 2003 8 se associ spASC's to °nYmity, alto °r his job the receive s tho theyis had aid rthat e ofman gators,ager DavidP ge ne of the fy the unable to v investigations l Smiley, now Positionent of the eri- departm ent, be n the Lancein Zi - r ed kin enforcement ays the I:~liioiS knON tenstill gall g into Zi C release is Led Press n to Multi Co p (Which thaton daythat day. L'70 investi be .igent•ey Bator dli r) Smil i A . But in 199 and fas leve 1 h i ace ordin rOU S "'paPer r " 'OU r, he Was ordered o to the top_ that Lance eports reveal S°n' to d r had r Dayt mention the name P the Per cent of amassed 49 rtuley„ he says Corp, Pursued, . „It Multi-Corcase to Lobsinger says Today and it wasnt." should have legally or ould not have known the directive of those And Wit hadn't been Lancer's : about Would have,,, above him "he n for in Z ownershi [Smiley, . p Then there regulator Were mi the Other 9,20o4 I99$, whenght ahave wanted to question s FAN. a ormerAS Was sold massive block ask about director C enforcemen to asingle sin of the fr'r Z" In to t . 11W be informed m S Stock then WayneAlbe Afford writes Of the buyer, investors the bU identities of the awaited to minister rta revenue Yer' The chunk seller and that t Gre and ,,fjce open_ amounted he ASC Malchin allegro ent ownership of th e to an trig a ha been o g gst firm. Ca r tier Perat- i nadian • 11 .5 pe gPer cent own- Pulate that any Securities i two- staff, iceI director re treatin 'I'd adviser have a companies chief of rrm is - :1' P Or more -'-Slor with i n diffel werfuI connections I had shares an - r"uriciy traded r in the fj,M wno must snake h declar imself 1°sider,° 'someone is the first of an other firms it Plaints from fo atioris every time known he trades an dfile public mseries of com_ rent ASC cur- stock. But a culture of favoyees alleging unacc ouritism and ountability 45 COVER STORY

DECEMBER 2004 when 11 .5 per cent of Zi changed hands on Lobsinger makes an Aug. 24, 1998, neither the seller nor the buyer announcement at a Zi filed anything with regulators. ewd_behavipur. Inflatable sex dolls . Erotic Christmas party thanking All indications are that the shares were those e- moils. Whert .e group of ASC employee s initially gottogethe,r :to complain to commissioner Michael Lauer for his of the man who created Zi's groundbreaking support. Thomas Cooke in k?ergmber 2004, It was sex-not language software . On Feb 23, 1998, according ,gnforcement matters-they had on their minds . to a company release, Zi officially acquired all JANUARY 2005 ;The X-rated work environment they alleged that Albe rta Finance Minister the rights to the program from Eric Chappell management had cuftfvated was only the most, . Shirley McClellan orders and his programming partner, Jeff Yates, in outward sign of en intolera4lewQtk environment. an investigation into the exchange for 4,525,000 company shares. The province beaded ll et+nvoved , allegations about the ASC . Chappell, who has relocated to Australia and argon et human redo p;a a intarnei whose relationship with Lobsinger, he says, had matte . t tfie;AC 8u >g 4yt an d FEBRUARY 200 5 become "pretty acrimonious," was eager to m tQ r Calgary lawyer Perry Marc dump the shares and put his relationship with releases a report on the Zi behind him. He began selling into the open problems at the ASC .The market, whittling down his holdings to just over report has never been three million shares. But the heavy sell-off was made public. Says current ASC chairman Bill Rice : putting downward pressure on Zi stock. Rather "There are matters that than allow him to continue to flood the market are not suited for public with his stock, Chappell alleges that Lobsinger analysis or exposure. If helped arrange a private sale of the remaining there was a sense all mat- shares. Lobsinger insists he never "arranged ters were to be made pub- buyers," but admits he did "make introduc- lic then people couldn't tions." The shares were purchased in one fell work ." swoop by a single investor, but Lobsinger insists his company did not report the purchaser's APRIL 2005 name because they did not know who it was . Grahame Newton , director of administrative se rvices, But if Lobsinger's the one who made the "intro- is terminated from ductions" in the first place, asks Chappell, "how employment at the ASC could he not know? " while on sick leave . He is Had Zi been aware of the purchaser of the suing the commission for stock, it would have violated securities wrongful dismissal . regulations. First, there's the simple matter of insiders being required to report their trading APRIL 2005 activities. That's a policy that gives outsiders Diane Kirby, director of some sense of how strongly management human resources is fired , believes in the future of the stock ; a heavy sell- after top officials pulled her phone records and off by a company insider might indicate that found she had been talk- things in the boardroom don't look so rosy. It ing to a repo rter. also alerts outsiders to anyone who might be loading up on company stock, perhaps with an MAY 2005 eye to a possible takeover . But none of Zi's ASC chairman Stephen future ASC filings had mentioned this Sibold's term expires and mysterious new insider on the roster . If the he is not reappointed.The company knew the investor, executives would government appoints as have knowingly filed false statements. It might interim chairman Peter be the kind of thing that could catch a Valentine . Valentine once regulator's attention-especially if it was a sat on the same board of CalgaryTechnologies Inc. company that had been on the ASC's radar reveal that Lancer had invested close to US$95 with Dr.Todd Simpson, before. In Zi's case, it appears it didn't. million in Zi, amassing 49 per cent of company Zi's former chief technical equity, without ever emerging as an insider. officer. ' n hindsight, Zi investors now know that the Perhaps Lauer was trying to stealthily prepare a buyer of Chappell's three million shares must takeover of the firm, but was stopped short when MAY 26, 2005 have been New York offshore hedge-fund his assets were frozen by the U.S. Securities and Mike Donnell, CEO of Zi, firm Lancer Funds, run by Michael Lauer. Exchange Commission in July 2003 . resigns one day after the Shareholders may have had a passing familiarity According to the SEC, Lauer wasn 't exactly company's annual meeting. with Lauer as his hedge fund had, at several what you'd call a stickler for strict regulatory points in the nineties, bought into a series of compliance. In July 2003, the U.S. market watch- private equity offerings issued by Zi, says Zi's dog moved in on the fund, alleging that Lauer vice-president of finance . Documents would later was engaged in a "massive overvaluation an d

GETIY IMAGES DECEMBER 1Z, 4M51], WESTERN STANDARD . COVER STORY 46

Operation Bermuda Short . Cowen later plead- MAY 2005 After winning a legal tussle ed guilty to securities fraud. Lauer is currently are being handled with consistency and even- with the ASC over his awaiting trial and the entire Lancer portfolio is authority to comment on handedness there are issues on the human being managed by a court-appointed receiver . resource side." closed enforcement files, Today, Lobsinger insists he "could not legally That may be putting it lightly. More than 3 0 Albe rta auditor general Fred have known" that Lancer Funds was the employees-out of 120 workers at the ASC-hav e Dunn begins his own inves- beenlet go or resigned in the past year alone . mystery insider. "Don't ask me about people tigation into the ASC . What's more, employees say that any sign that who have acquired stock in Zi and are being the :yrere airing ASC dirty laundry was a firin g investigated. It has nothing to do with Zi," he JUNE 200 5 offence . On May 25, 2005, human resources says. His firm issued a press release on Aug. 11, Current ASC chair Bill Rice is manager Diane Kirby was dismissed after execu- 2003, followed by a similar one in September appointed , taking over from tives discovered-by, scanning through her phon e stating that it was unaware of Lancer's large interim chair Peter Valentine . records-that she had been talking to a repo rter. holding, despite observing in 2002 "what APRILTO JULY 2005 McClellanhas said that talks with commissioners appeared to be a concentration of its shares held have convinced her that the market watchdog is Ten employees of the ASC at a major brokerage firm . Zi Corporation man- anxious to clean up Its offices . " We discussed th e resign or are fired, under agement requested that its attorneys obtain an numan resource issues, sne said, -i impressea o n Sibold and Valentine, of a therrl the importance of resolving those as quickl y update from Lancer concerning the level of total staff of 120 employees. as possible, and I am satisfied at this point that th e Lancer ownership in Zi Corporation, but despite commission is dealing with this," 1, i several requests, did not receive a response ." OCTOBER 2005 A governmeht~commissioned report into AS C Zi has not been implicated in the SEC inves- Dunn 's repo rt is released ierlresqurce,practices, by the consulting fir m tigation of Lancer Funds. Nor have charges of to the public while Dunn earl d' Vnt; released to ASC staff on Oct . 12 any kind been brought by the ASC against Zi himself is on vacation. The repo recommends that the do appropriately unsexy tone for the Corp, or Lobsinger for issuing what are now rt ASC "improve the recording ulator„Racgmmendations Included : known to have been false statements about e of its inquiries , discussions iprocal refationshlppetwean th company insiders. ASC investigations aren't 40 minister and confirm( ing) the, and analysis to suppo rt the made public unless and until charges are laid. i3e ASC, as well as "identifyling l decisions made on case appo iigtment.of commissioner s But the revelations of the involvement of an files, and should "review pgrlence, qualifications, share d alleged stock manipulator may be leading Zi and clarify its policies and echlpvp same." investors to worry about what other pennies are guidelines for enforcement lice said that, in additio n yet to drop: the company's stock has lost more activities' The repo rt notes ,nt w411 Implement whistle- than 75 per cent of its value this year . But .one instance where the sure,.thet employees aren't Lobsinger maintains that his company hasn't Director of Enforcemen t did not comply with the y future office naughti- done anything wrong. "Nothing we have ever Commission's conflict of A l$heg up a mi n done has been in breach of any act or any law "changing interest policies and this clud,pg anywhere in Canada or the United States," he u1 $ 'The release non-compliance was not ythe province says. "If we had broken some law, the securities detected by the Com- tepgrts by commission would be on us. And they're not ." mission's Executive resource manage- Critics of the ASC and provincial opposition Director" Dunn concludes and,whlle the parties aren't so sure about that last part . After that , despite several enforce- e,recommende d all, the commission itself is under intense scruti- ment cases being brought to artment Rice i ny for its handling of enforcement files . his a ttention by ASC staff as ux l .hepp the Meanwhile, allegations that the regulator worthy of examination, ndheed existed in what a former employee describes as "there is not sufficient evidence to recommend to the ASC is a "small -p" political environment-where Itrthese ember- management that any case investigators might be moved to treat cases file we examined be re- differently based on subtle, unwritten pressures opened " from management-aren't going away . The latest revelations that Rice, the current head of NOV. 3, 2005 manipulation scheme."The SEC alleges that the the regulatory agency, was allowed to keep his ASC chairman Bill Rice once high-flying Wall Street whiz, whose job as chairman of one of the market resigns from his position high-profile clients included Britney Spears, watchdog's client firms has only fuelled the as chairman of Tesco Corp- would buy up huge stakes in small , illiquid charges that the ASC is still incapable of acting oration, a publicly traded Calgary company stocks. When it was time to report his funds' as a truly independent authority. In a Nov. 10 . Rice's executive position at one of performance to investors, he would push prices interview, his first since the release of his report, the companies he regulates up by buying extra shares at inflated prices . It auditor general Dunn told the Calgary Herald: was approved by ASC com- wasn 't the fund's first run-in with the law. "There are important matters to be dealt with at missioners, leading critics to Lancer associate Bruce Cowen had been the ASC, and they must be overcome right charge that the ASC is still indicted the previous summer in one of the away. The integrity of the capital marketplace is unable to act independently. largest financial fraud busts in Canadian history, at stake," Dunn said . It's nothing Albertans Opposition parties call for a joint RCMP-FBI investigation dubbe d haven't heard before . They're still waiting . 0 Rice's resignation . 0