Swissair crash may not have been an accident: ex-RCMP

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An investigator looking into the crash of Swissair Flight 111 near Peggys Cove, N.S., says he was prevented by senior RCMP and aviation safety officials from pursuing his theory that an incendiary device might have been the cause.

"There was sufficient grounds to suspect a criminal device on that plane," retired RCMP sergeant Tom Juby, who was an arson investigator assigned to the Swissair file, told CBC's The Fifth Estate.

"I'm convinced that the investigation was improperly done," he said.

The flight from New York to Geneva crashed into the Atlantic Ocean on Sept. 2, 1998, killing 229 passengers and crew. The plane carried a Saudi prince, a relative of the former shah of Iran and high profile UN officials. A half a billion dollars of diamonds and gems were also never found.

The Transportation Safety Board (TSB) of Canada said that it was an accident caused by a fire in the cockpit, likely sparked by an electrical fault.

But Juby said high levels of magnesium — a key ingredient in an incendiary device — were discovered in the cockpit area. Several other investigators and a federal scientist who The Fifth Estate spoke to supported Juby's informed suspicions.

Metallurgist Dr. Jim Brown discovered suspicious levels of magnesium and other elements associated with arson in melted wiring from the section of the plane that suffered the greatest fire damage.

"There was a lot of magnesium. More than I would have expected," he said.

Instead, the TSB was focused on the crash being the result of an accident. Any hint of criminal activity meant it would be forced to drop the probe and turn it over to the RCMP.

Juby said the RCMP did not support his findings and that he was pressured to stop his own inquiries. He said the RCMP brass ordered him to remove any reference to magnesium or a suspected bomb from his investigative notes.

Juby said he has tried but failed to set the record straight inside the RCMP for years. He said the system failed too.

"If Canada can't follow through on 229 potential homicides, then you know, what happens when there's only one?" he said.

The RCMP and the TSB repeatedly refused to comment about Juby's allegations.

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Sarah Palin bio claims cocaine use, NBA fling

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Cocaine snorting, adultery and a one-time fling with a future NBA All-Star are among some of the alleged activities Sarah Palin partook in, according to salacious details leaked from a new unauthorized biography about the former Republican candidate for vice-president.

Whether or not they hold true, the claims made in journalist Joe McGinniss's highly-anticipated book, The Rogue: Searching for the Real Sarah Palin, may be politically damaging and could imperil the former Alaska governor's expected bid for the U.S. presidency.

McGinniss moved next door to the Palins in Wasilla, Alaska, from Massachusetts in 2010 to gather research for the biography, which quotes former NBA champion and Miami Heat player Glen Rice confirming a 1987 one-night stand with Palin, according to a story about the book published by The National Enquirer.

Rice was a junior at the University of Michigan playing at a college tournament in Alaska at the time, the supermarket tabloid reported. Palin allegedly met him while she was working as a TV sports reporter for the Anchorage station KTUU.

The book says the pair had sex once, and Palin married her husband, Todd, nine months later, according to the tabloid.

The Enquirer also reports that McGinniss's book, which is being billed as an exposé, supposedly corroborates previous rumours that Palin had a six-month-long extramarital affair in the mid-1990s with Brad Hanson, with whom her husband once ran a snowmobile dealership.

As for the cocaine use allegations, McGinniss paints a bizarrely vivid picture: that of Palin snorting coke off an overturned 55-gallon oil drum during a snowmobiling trip with her husband and friends. McGinniss claims Todd experimented frequently with cocaine, the Enquirer reports.

In a blog posting this week, McGinniss blasted the Chicago Tribune, Newsday and Atlanta Journal-Constitution, accusing the newspapers of dropping a Doonesbury comic strip "for a full week because the strip contained quotes from The Rogue."

The book is due for release by Random House on Sept. 20.

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Quebec roadwork industry rife with corruption: report

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A leaked report prepared by Quebec's anti-corruption squad and obtained by Radio-Canada describes the province's roadwork industry as rife with underground deals and tied to organized crime.

The report, obtained by the CBC's French-language service, says it's routine for consulting engineering firms to inflate estimates for projects and for entrepreneurs to go over budget.

In some cases, they're the same entrepreneurs who attempt to charge the Ministry of Transportation for extras.

The ministry rarely fights those overages and, when it does, often settles out of court, the investigation found.

The report also says some of the money may end up being passed from the consulting firms on to political parties or used to pay workers under the table.

No companies or individuals are named in the report.

Premier Jean Charest did not comment on the report Wednesday.

A spokesperson from his office said it has not been reviewed yet.

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Swiss bank reports $2B loss to rogue trader

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Swiss banking giant UBS said Thursday that a rogue trader has caused it an estimated loss of $2 billion, stunning a beleaguered banking industry that has proven vulnerable to unauthorized trades.

Police in London said they arrested 31-year-old Kweku Adoboli in connection with the loss.

Switzerland's largest bank warned that it could report a loss for the entire third quarter as a result, sending its shares plummeting.

The bank provided little information on the incident, saying it was still under investigation and no client money was involved. The unauthorized trades could cost UBS almost as much as the two billion Swiss francs ($2.26 billion) the bank said last month it hoped to save by cutting 3,500 jobs over two years.

The incident comes as UBS is struggling to restore its reputation after heavy subprime losses during the financial crisis that resulted in a government bailout, and an embarrassing U.S. tax evasion case that blew a hole in Switzerland's storied tradition of banking secrecy.

Shares in UBS AG plummeting more than 8 per cent in early trading on the Zurich exchange. By midmorning shares were down 5.8 per cent at 10.30 francs ($11.67).

In a statement released shortly before markets opened Thursday, the bank informed investors that "UBS has discovered a loss due to unauthorized trading by a trader in its investment bank."

"UBS's current estimate of the loss on the trades is in the range of $2 billion," it added. "It is possible that this could lead UBS to report a loss for the third quarter of 2011."

In a letter sent to its employees, the bank said it regretted that the incident came at a difficult time.

"Although the news is regrettable, the fundamental strengths of the company won't be affected by this," the note said. "We ask that you continue concentrating on your customers. In these uncertain times they are counting on your support."

It promised to keep employees briefed on developments in the case.

Peter Thorne, a London-based equities analyst at Helvea, said the loss was financially manageable for UBS, Switzerland's biggest bank. But he said it was a blow to the reputation of UBS and its management, and reinforced the case of slimming down the investment banking unit.

UBS chief executive Oswal Gruebel recently warned that the bank, which posted sharply lower second-quarter net profits of 1.02 billion Swiss francs in July, wouldn't achieve its aim for a pretax profit of 15 billion francs a year by 2014.

UBS isn't the first to be hit by a massive loss allegedly caused by a single rogue trader.

Société Générale, France's second-largest bank, stunned investors in 2008 when it revealed that one of its staff had lost the bank $6.7 billion through a complex scheme of unauthorized trades.

The trader, Jerome Kerviel, was convicted in October 2010 on charges of forgery, breach of trust and unauthorized computer use for covering up bets between late 2007 and early 2008. He was also banned for life from working in the financial industry and ordered to pay back the vast amount he had caused his employer to lose.

Nick Leeson, a British trader working in Singapore for Barings Bank, made unauthorized futures trades that lost more than $1 billion and led to the venerable bank's collapse in 1995. The infamous case prompted banks worldwide to tighten their internal checks.

Leeson was released from a Singapore jail in 1998 for good behaviour after serving 3? years of a 6?-year sentence. He claimed he did not make a cent from his disastrous trades but Barings' liquidators sought the return of ￡100 million on any of his earnings relating to Barings.

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Randall Hopley to undergo psych evaluation

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Hopley to be charged with kidnapping and abduction of a person under age 14, police say.Suspected was arrested Tuesday near Alberta border after massive police manhunt.Accessibility Links

A judge has ordered alleged child abductor Randall Peter Hopley, 46, to undergo a psychiatric assessment to determine if he is fit to stand trial.

Hopley made his first court appearance in Cranbrook, B.C., on Wednesday morning to face charges in the alleged kidnapping of three-year-old Kienan Hebert last week.

He appeared without handcuffs, but with his feet in shackles, unshaven and dressed in a navy T-shirt. He appeared tanned, but not gaunt or with any other appearance suggesting he lacked food during the time he was allegedly on the run from police.

Hopley stood slouched with his hands clasped as the judge ordered him to be held in custody and undergo a psychiatric assessment to determine if he is fit to stand trial.

Hopley didn't look at the full courtroom, only at the judge and his counsel. He is scheduled to appear in court again on Nov. 9. for a bail hearing.

On Tuesday police said they expect Hopley will face charges of kidnapping and abduction of a person under age 14.

Outside the court, Hopley's lawyer William Thorne said Hopley is tired and "sorry for the situation he's in," but glad the little boy is home safe.

"Hopley has a story to tell and eventually — not yet — his story will come out," said Thorne.

"This is an unprecedented case ... the police said that in their interviews. It's a very unusual circumstance and his side of it is also very unusual."

Thorne said his client only suffered minor injuries during the arrest on Tuesday, but given Hopley's notoriety, he has concerns about his client's well-being in jail, "with possible issues that other prisoners might want to take some retribution on him — vigilante justice."

"He was Canada's most wanted man there for about five days."

Thorne said he wouldn't be surprised if Hopley was on suicide watch. He said Hopley has health issues "of various kinds," but it will be up to doctors to decide whether he has mental-health problems.

On Tuesday morning Hopley was arrested with the assistance of police dogs as he was running from an abandoned cabin at a Bible camp in the Crowsnest Lake area in Alberta near the B.C. border.

Hopley is accused of abducting Kienan Hebert from his home in Sparwood last Wednesday. Kienan was returned unharmed to his family home on Sunday morning.

Court documents indicate Hopley has already been charged with two counts of breach of probation. One of the breaches is alleged to have occurred last Wednesday, and the other on Monday.

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Canada seeks Buy American exemption

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Canada is seeking an exemption from the new Buy American provisions in U.S. President Barack Obama's proposed jobs act, weeks before the exemption for the previous stimulus is set to expire.

Minister of International Trade Ed Fast, citing concerns over a potential "trade barrier initiative," has launched a round of consultations with Washington to negotiate an extension for a Canadian exemption before a Sept. 30 deadline.

Obama's proposed $447-billion US American Jobs Act is intended to give a much-needed jolt to a stalled U.S. economy, but in an interview with Evan Solomon on CBC's Power & Politics Wednesday, Fast characterized the bill as misguided.

"We believe that protectionism is counterproductive, especially during these difficult economic times around the world," the minister said, adding that 75 per cent of Canada's trade is with the U.S.

The measures contained in the bill echo Washington's original stimulus package in 2009 — a fight that Canada thought it had already won.

"I do know the last time this happened, which was back in 2009, we engaged with our American counterparts, and we were able to resolve the issue, at least on a temporary basis. Now we're back at the same place where we're now it's a new stimulus package that the U.S. has introduced," Fast said.

The minister said he was "very surprised and certainly disappointed" to learn of the provisions, adding that Canada is working "very aggressively" to raise the same arguments made two years ago with the Obama administration and to Congress.

The offending passage in the act is contained in Section 4, headed "Buy American — Use of American Iron, Steel and Manufactured Goods."

The section contains a directive that none of the funds made available under the American Jobs Act may be used for "the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel and manufactured goods used in the project are produced in the United States."

The "Buy American" section also notes that it "shall be applied in a manner consistent with United States obligations under international agreements," which offers Canadian businesses some protection under the North American Free Trade Agreement. But NAFTA doesn't apply to municipal contracts, and the bulk of spending in both the previous U.S. stimulus plan and Obama's proposed jobs plan is at the municipal level.

The bill calls for more than US$100 billion towards the renovation of schools, the construction of roads and bridges and improving transit.

Fast said history shows protectionist measures stall growth and kill jobs.

Canada is now asking for an extension for the previous NAFTA deal extending to sub-national governments, which is set to expire at the end of this month.

Ottawa is concerned about a "chill effect" that could take place as a result of the Buy American provision, as it has been noted that just because states and municipalities might be allowed to buy Canadian doesn't necessarily mean they will.

Even if the NAFTA agreement is renewed beyond Sept. 30, Canadian suppliers might worry they will still be frozen out by U.S. contractors, the CBC's Hannah Thibodeau reported from Ottawa.

"They have this box they tick that says, 'Buy American,' they tick that off and if they don't know and look at the fine print of any of these deals, then they won't know that Canada is exempt," she said.

Jayson Myers, the president of Canadian Manufacturers & Exporters, the country's largest industry and trade association, said the concern is that business owners in the U.S. may find the deal "tremendously confusing" if they don't understand Canadian companies can be included in bidding processes.

"But the bigger impact here is not just the direct opportunity that's lost for Canadian exporters; this has a chill right through the supply chain," Meyers told CBC News on Wednesday, noting that distributors may not be able to distinguish between what would be considered foreign, Canadian or U.S. goods.

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B.C. child abduction suspect arrested for kidnapping

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The man accused of abducting a three-year-old boy from his bed in Sparwood, B.C., has been arrested on charges of kidnapping and abduction of a person under age 14, the RCMP said as it released more details on his arrest.

Randall Peter Hopley was taken down with the assistance of police dogs as he was running from an abandoned cabin at a bible camp in the Crowsnest Lake area in Alberta near the B.C. border on Tuesday morning, police confirmed at a news conference in Sparwood in the afternoon.

Charges have not been laid, but Hopley is scheduled to appear in court on Wednesday, Insp. Brendan Fitzpatrick of the RCMP said.

Hopley, 46, is accused of abducting Kienan Hebert from his home in Sparwood last Wednesday. Kienan was returned unharmed to his family home on Sunday morning.

Court documents indicate Hopley has been charged with two counts of breach of probation. One of the breaches is alleged to have occurred last Wednesday, and the other on Monday.

Police released few details on how they tracked Hopley down and declined to say whether Kienan gave them any information that helped to locate the suspect.

Fitzpatrick said investigators were alerted after a dog handler knocking on a cabin door was given the indication from his dog that someone might be inside. He said Hopley was captured after making an effort to escape.

Fitzpatrick said Kienan's safe return was a relief to investigators, some of whom worked up to 20 hours a day on the case.

"I will say that the probability that Kienan be returned to his residence was extremely low. It's a virtually unprecedented situation," he said.

"The research that we've done tells us that. The statistics and research tells us that the longer a kidnap victim has not been returned, the higher the chances that a worse-case scenario takes place."

Police also addressed questions around how Hopley was able to return Kienan without being captured by police.

"I can tell you absolutely there was no deal made with Mr. Hopley," Fitzpatrick said.

"Purely and simply that was an investigational tactic that was employed by our investigation team. It was a plea made by the family and then a plea by the police to Mr. Hopley. The idea behind the whole thing was to appeal to him with the thought that he could be monitoring the media."

Police confirmed Hopley acted alone and dispelled reports that had indicated he may have had an accomplice.

Police did not release any information about where Kienan may have been held during the time he was missing.

Hopley is said to be in good condition and was transported by police to Sparwood and then on to Cranbrook following his arrest.

Kienan's mother, Tammy Hebert, said the news came as a welcome relief.

"I was really excited when they phoned and said they got him," she said.

"I'm happy for the community so that everybody can just move on and not be wondering and in fear and ... hopefully he'll stay there [so] we don't have to go through this again."

The boy's father, Paul Hebert, who has been the family's spokesman during the past week, was elated at the news.

"We're relieved and now we can go to bed at night and the community's safe," he said.

"We knew the RCMP were going to catch him, but to actually catch him was really exciting. We just thought it was going to happen, there was no doubt in our minds but it was just pretty exciting."

Sharon Fraser, Sparwood's acting mayor, said she hopes news of the arrest helps her community move on after what she described as "the longest week in Sparwood."

"My God, maybe now we can get back to some reality and normality, you know?"

Still, Fraser said Kienan's disappearance taught Sparwood residents some difficult lessons and she suggested life may never return completely to normal.

"This is one of the hardest lessons all of us have had to learn, that we can't leave our doors unlocked and we can't let out children just run and we know that they've maybe only gone to the neighbour."

This is not the first time Hopley has been arrested in the area. According to local newspaper reports published in the Crowsnest Pass Promoter, Hopley was arrested while squatting on a nearby property in May 2010.

Randall Peter Hopley, 46, was taken down with the assistance of police dogs in the Crowsnest Lake area in Alberta near Sparwood, B.C., on Tuesday. RCMP

According to a court official in Lethbridge, Hopley is facing 12 charges including breaking and entering and possession of stolen property in connection with that incident. A preliminary hearing was set for Sept. 19 in Pincher Creek, Alta.

According to court records and people who know him, Hopley has a lengthy criminal record and at least one brush with the law involving a child.

In November 2007, he was charged with breaking and entering, unlawful confinement and attempted abduction, confirmed Crown spokesman Neil MacKenzie. The indictment for the case indicates the victim was under 16 years old.

Hopley pleaded guilty to breaking and entering and was sentenced to 18 months in jail, but the unlawful confinement and attempted abduction charges were stayed over concerns about evidence.

In the mid-1980s, Hopley was convicted of sexual assault and sentenced to two years in federal prison, the National Parole Board confirmed. The board didn't have details about what happened or the age of the victim because parole records are destroyed after 10 years.

This past June, Hopley was sentenced to two months in jail and two months of probation after he was convicted of an assault that occurred in Sparwood in April.

Hopley was also convicted in 2006 for breaking and entering in Sparwood, and was given a conditional sentence of nine months, according to court records.

In 2003, he received a one-year conditional sentence for theft under $5,000, and in 2002 he was handed a three-month conditional sentence after he was convicted of breaking and entering. Hopley also has several convictions for breaching conditions.

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AIDS vaccine hunt gains clues

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AIDS vaccine researchers say they have some new clues to help focus their search for a safe and effective vaccine against HIV.

At the AIDS Vaccine conference in Bangkok on Tuesday, scientists announced an update to a Thai trial of a "modestly effective" experimental AIDS vaccine.

At the end of the initial 3?-year study, the vaccine prevented infection in about 30 per cent of the 16,000 Thai volunteers who received it compared with a placebo.

The new findings shed light on how the vaccine worked by identifying how the immune system responded to it.

Scientists have also discovered a part of HIV that may be vulnerable to a vaccine, which means scientists now have some idea of how the vaccine worked, and how to do more focused research.

"It might be possible in the future to do vaccine trials with many fewer people much more rapidly so we could see progress occurring a lot more rapidly," said U.S. army Col. Jerome Kim, one of the leaders of the Thai trial. The new AIDS vaccine findings could make it possible in the future to conduct vaccine trials with fewer people. (Apichart Weerawong/Associated Press)

Stephen Kent, a vaccine researcher at the University of Melbourne, described the antibodies produced by the vaccine as "friends with benefits."

"They don't necessarily prevent infection of cells but it allows them to kill infected cells," said Kent. "So it may be that that really helps protection."

The findings, along with the development of a test for the antibody response, may focus and speed up the vaccine research.

Scientists want to take the findings back to the lab or clinic to try to improve the effectiveness of the Thai vaccine. Results suggested that protection against HIV appeared highest at six to 12 months, which investigators hope to sustain or boost.

But the vaccine and the immune response it created were specific to the type of HIV in Thailand, and the vaccine formulation used there, scientists cautioned.

The findings suggested the vaccine had no effect on the amount of virus in the blood of those who became infected with HIV. Vaccination did seem to be associated with lower amounts of virus in genital fluids.

New trials will begin this fall in Thailand to test a booster, and a similar vaccine trial is being planned in South Africa to try to replicate the Thai results.

Despite the excitement, scientists agreed that before an HIV vaccine can be licensed for use, it will have to be more broadly effective, which is years away.

The research was funded by the U.S. Army Medical Research and Material Command, the U.S. National Institutes of Allergy and Infectious Diseases' AIDS division, and the Bill & Melinda Gates Foundation.

The conference runs through Thursday.

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Canadian debt levels keep rising

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Canadians continued to rack up debt in the second quarter of the year as they took advantage of low interest rates, Statistics Canada said Tuesday.

The ratio of credit market debt to personal disposable income crept to 148.7 per cent in the July-September period, topping the old record of 147.3 set in the previous quarter. Credit market debt includes mortgages and consumer loans.

Statistics Canada said the ratio increased as the expansion in credit debt surpassed growth in disposable income.

Household indebtedness has been a source for worry for policymakers with Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty both sounding warnings in recent months. They've warned that Canadians who have become accustomed to taking advantage of relatively cheap money must tighten their belts in anticipation of the return of rising interest rates.

When those rates will eventually go up is a question mark. The central bank said last week that inflation pressures are benign, so it can keep its benchmark interest rate steady at one per cent as the global economy continues to struggle.The bank has stood firm at that level through eight consecutive interest rate decisions.

Statistics Canada also reported that household net worth per capita fell from $185,500 in the first quarter to $184,300 in the second quarter, marking the first decline since the second quarter of 2010.

Overall household net worth fell as the increase in residential real estate value was swamped by a fall in the value of household holdings of equities, including mutual funds, and pension assets.The benchmark S&P/TSX Composite Index shed 5.9 per cent during the second quarter.

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2 Saskatchewan girls killed in fire

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Twin girls died in a house fire. Family photo submitted to CBCTwo young girls have died in a house fire near Hudson Bay, Sask.

The fire broke out Monday some time before 1:30 p.m. CST on an acreage about three kilometres north of the town.

The RCMP said when fire and other emergency crews arrived at the scene, the mobile home was completely engulfed in flames and three adults were outside.

"The goal of all of us was to rescue," RCMP Sgt. Darren Simons told CBC News Tuesday. "But upon my arrival ... we knew there was nothing we could do to get in the residence."

One woman at the scene, who was visibly distraught, had suffered injuries in the fire, the RCMP said.

When the fire was out several hours later the remains of two girls, twins just under three years old, were found.

The home was destroyed.

The girls' grandmother, Jean Lewis, confirmed to CBC News that the twins, Dinika and Lilyanna, died in the fire.

The pastor at the Pine Ridge Fellowship in Hudson Bay told CBC News that he visited the girls' mother in hospital.

"The mother was in the hospital and fairly heavily medicated. Not so much because of the physical part of it, but because of the emotions that are involved and the trauma that she had been through," Fred Buhler told CBC News Tuesday.

Community members have been collecting donations to help the family.

The fire is under investigation.

Hudson Bay is in east-central Saskatchewan, about 210 kilometres north of Yorkton.

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Terry Fox Foundation admits booklet contained fake quotes

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The Terry Fox Foundation admits it used fabricated quotes by fictitious people in a booklet sent to Saskatchewan donors. CBC

A former employee of the Terry Fox Foundation in Saskatchewan says he was forced to fabricate fundraising stories in a booklet for donors.

The booklet Gregory Procknow worked on before resigning earlier this year was sent to donors of the well-known charity, which raises money for cancer research.

Procknow says he was asked to do a series of short write-ups, ostensibly by donors, talking about creative ways they had raised money.

One quotes "Norma Rae" from Saskatoon: "As a dilettante canner, I make jars of jellies and pickles and attach a Terry Fox sticker to the jars, and I allow people to make donations of any kind and take away a wonderful autumn treat!"

Procknow, a University of Regina graduate student, said he felt bad about what he had written and eventually quit his summer job.

"Who can really take pride in creating fictitious people and assigning them a gender and a name and parlaying this to the public. It's just really disgusting," Procknow said.

Robert Barr, the director of the Saskatchewan office of the Terry Fox Foundation, confirmed he told Procknow to write the fundraising stories.

"The fundraising ideas outlined in our newsletter are based on events that supporters have used over time in various parts of the country," Barr said in a written statement. "I admit to an error in judgment in assigning first names to the ideas."

The booklet with the fake quotes went out to more than 1,000 people.

Dwight Wild got one at his business and said he would continue to donate, although he was disappointed.

"I think possibly it's a sign of inattentiveness or laziness rather than any ill will or intent," he said.

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Canada unfreezing $2.2B in Libyan assets

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Canada is moving to unfreeze $2.2 billion worth of Libyan assets, Foreign Affairs Minister John Baird said Tuesday.

The government wanted to unfreeze the assets earlier but its hands were tied by United Nations sanctions imposed on Libya and its deposed leader Moammar Gadhafi. Baird said an exemption has now been granted by the Security Council and Canada can unlock the funds. The money will be used for humanitarian needs, he told reporters during a brief update on Parliament Hill.

"These funds will help the Libyan people in the short and the medium-term," said Baird. "Whether it's helping to pay for police officers, or teachers, restoring electricity or water or helping to ensure hospitals have what they need to operate, this money will help the new government of Libya get back on its feet."

Canada recognizes the National Transitional Council, the rebel group that led the uprising against Gadhafi, as the legitimate representative of the Libyan people, but under the UN sanctions it couldn't access any of the estimated $168 billion in Libyan assets around the world.

Canada is among several countries that had asked the UN to lift the sanctions they had imposed earlier. The federal government imposed the asset freeze and a ban on financial transactions with the government of Libya, its institutions and agencies, including the Libyan central bank in March, soon after the uprising against Gadhafi began.

Foreign Affairs Minister John Baird announced Tuesday that Canada will unfreeze $2.2 billion in Libyan assets that the National Transitional Council can use for humanitarian needs. Baird received a gift from the NTC when he visited Libya in June. Hassan Ammar

Canada had also imposed other sanctions, separate from the UN, and they were lifted earlier this month. Those sanctions had prevented Canadian companies from doing business with Libyan companies that are not owned by the state. Lifting the sanctions also meant the new embassy staff in Ottawa could access their Canadian bank accounts. The move unfroze about $100 million worth of assets.

The NTC's representative in Ottawa, Abubaker Karmos, welcomed the news Tuesday and said it's an extension of the leading role Canada took early on in the conflict. "It’s nice to see Canada taking a leading role again and going back to Libya by reopening the Canadian Embassy in Tripoli," he said on CBC News Network. "This will show that Tripoli is a much safer city now and the NTC are in control, and it's nice to see Canada going back there to be on the ground."

Karmos said money for humanitarian purposes is in great need and the funds will be used for food, medical supplies and to pay people's wages.

"The country has gone through a terrible time for the last six months," he said.

Baird said Tuesday that Canada expects the NTC to fulfil its commitments to human rights, the rule of law, freedom and democracy and that Canada can support those efforts. He acknowledged that security is still a challenge but said that life is slowly returning to normal in the country's capital.

CBC News reported Monday in advance of Baird's briefing that Canadian diplomats have been back on the ground in Tripoli, working to set up Canada's embassy there again. The mission was closed and staff were evacuated seven months ago.

Baird announced Tuesday that Canada's ambassador to Libya, Sandra McCardell, went back to the country and assessed conditions in Tripoli along with a team of staff.

"Having fully assessed the situation on the ground, Canada is prepared to re-establish its diplomatic presence and its ongoing embassy in a temporary location in Tripoli," he said. The permanent embassy building needs refurbishing following the fighting in Tripoli, Baird said.

The team is also preparing for a larger staff of diplomats to arrive in Libya who will liaise with the NTC officials and help resume trade relations between Libya and Canada.

In March, Canada joined a UN-sanctioned NATO air mission to protect civilians in Libya. That mission, based in Trapani, Italy, has been extended once and was due to end Sept. 27, but Prime Minister Stephen Harper says Canada will continue its commitment until "the job is finished."

The government has repeatedly said Canada wouldn't send ground troops into the country, but CBC News has learned there are members of the Canadian Forces on the ground in Libya.

The U.S. has four soldiers on the ground in Libya right now, according to American media reports, including two explosives experts there to disable any traps left at the U.S. Embassy.

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Father wins new trial in spanking case

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The New Brunswick Court of Appeal has ordered a new trial for a father convicted of assault for spanking his six-year-old son in 2009.

The province’s highest court, in a 2-1 decision that was delivered on Sept. 8, allowed the appeal saying the trial judge erred by applying “a subjective standard by delegating to an onlooker the determination of guilt or innocence.”

The family was driving from Durham Bridge to a museum in Fredericton on Aug. 1, 2009, when the six-year-old boy’s behaviour caused his father to spank him. (None of the family’s names are used in the decision.)

The court document says the boy was yelling at passing cars, unbuckling his seatbelt, throwing things and kicking the back of his mother’s seat.

The father warned the child that if he continued to misbehave he would be spanked. After repeated warnings, the father ended up spanking the child.

Millicent Boldon, a Crown witness who watched the spanking, told the trial that she could hear the child yelling, “You’re beating me senseless. Stop. You’re hurting me.” She said the boy was hit at least 10 times.

The trial judge sided with the Crown witnesses and, according to the Court of Appeal decision, said the appellant’s assertion that he only spanked the child two or three time was “ludicrous.”

“When the trial judge stated that 'no spanking should go on and on to the point that strangers pick up the phone and call the police,' I am of the view she applied a subjective standard. Ms. Boldon's decision to pick up the telephone and call the police in those circumstances can be nothing but a subjective one,” the ruling said.

“Obviously, some people faced with the same situation as that presented to Ms. Boldon might have called the police earlier and others might never have called,” the ruling said.

Justices Richard Bell and Wallace Turnbull allowed the appeal.

The original trial was held on June 21, 2010, and the sentence was delivered on Aug. 18. The appeal was heard on Jan. 11.

Justice Alexandre Deschenes filed a dissenting opinion in the spanking case.

Deschenes wrote there was nothing to suggest the trial judge assessed the reasonableness of the spanking in references to the judge’s personal experiences.

“On the contrary, her decision was reached in light of the circumstances of the case and based upon the evidence she accepted. Her reference to the call made to the police was nothing else but another circumstance to consider on the issue of reasonableness of the discipline imposed by the appellant,” Deschenes wrote.

Spanking has been a contentious issue in the Canadian legal system in the past.

The Supreme Court of Canada ruled in 2004 that parents have the right to spank their children. But the country's top court also set out "reasonable limits."

The 2004 ruling said spanking could be used against children between the ages of two and 12 years old. But children could not be disciplined with an object and hits to the head would also be unacceptable.

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Air Canada flight attendants vote to strike

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Air Canada flight attendants voted Tuesday in favour of going on strike as early as Sept. 21.

Almost 5,200 ballots, representing 98 per cent of the votes cast, supported a walkout. The turnout was 78 per cent. Voting was conducted over 10 days and ended Tuesday.

"A strike vote does not mean we will necessarily go on strike, but it means we will strike if we need to. What we want and still hope for is a negotiated deal with the company," the president of the flight attendants' union, Jeff Taylor, said in a statement.

"No one wants a strike, but if we can't reach a tentative agreement which addresses our members concerns, and soon, it could be our only choice," he said.

If a deal isn't reached, 6,800 flight attendants could walk off the job in the airline's second strike in three months.

About 3,800 customer sales and service representatives represented by the Canadian Auto Workers union held a three-day strike in June.

Taylor has said members are unhappy after more than a decade of concessions and sacrifices to make Air Canada financially viable.

The flight attendants, represented by the Canadian Union of Public Employees, massively rejected an earlier tentative deal late last month.

Air Canada declined to comment about its contingency plans, but reports have suggested it has trained managers as replacements.

Analysts believe a strike would affect operations immediately and likely prompt the federal government to either block a strike or end one quickly.

"I think it would be a much more challenging situation than it was with the customer service agents because part of the flight attendant's role is the safe operation of the aircraft," Chris Murray of PI Financial, said in an interview.

"You may be able to operate some of the fleet, but not all of it."

The union has urged the government not to intervene in a strike.

But federal Labour Minister Lisa Raitt tabled back-to-work legislation two days into the CAW strike saying the government wouldn't tolerate any disruption to the public or impact on the economy.

The two sides hammered out a deal before the legislation was passed, but sent the contentious issue of requiring new hires to join a defined contribution pension plan — instead of the more expensive defined benefit system — to an arbitrator.

Murray suspects any strike now would be short-lived, if it gets that far.

"I think they still have some time to go back to the table and come to a tentative agreement."

Air Canada has had trouble concluding collective agreements that are ratified by workers. Pilots, flight attendants and flight dispatchers all rejected tentative agreements recommended by union bargaining committees.

That highlights the challenges Air Canada faced in negotiating a deal that can win employee support.

Under the worst-case scenario, the government could send the dispute to binding arbitration.

Canada's largest airline and its regional partners carry about 31 million passengers annually to more than 170 destinations on five continents.

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'Buy American' provision returns in Obama's jobs act

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U.S. President Barack Obama's proposed new American Jobs Act is aimed at creating much-needed jobs in the United States, but it's also reigniting trade tensions between the country and Canada, its biggest trading partner.

The act, released in full by the White House this week, contains yet another protectionist Buy American provision of the type that strained the Canada-U.S. relationship for much of 2009.

Section 4, with its heading "Buy American —Use of American Iron, Steel and Manufactured Goods," contains a directive that none of the funds made available by the American Jobs Act may be used for "the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States."

There are some exceptions, however. The act states that if using all-American products increases the cost of the project by more than 25 per cent, the requirement will be waived. So too if the goods needed for the project aren't manufactured or available in the U.S.

But a fair amount of time-consuming red tape must be hacked through in order to receive such a waiver.

"If the head of a federal department or agency determines that it is necessary to waive the application ... the head of the department or agency shall publish in the Federal Register a detailed written justification as to why the provision is being waived," the act reads.

Section 4 concludes by insisting it "shall be applied in a manner consistent with United States obligations under international agreements."

At an event in Montreal on Tuesday, Gary Doer, Canada's U.S. envoy, and David Jacobson, the U.S. ambassador to Canada, faced a series of questions about the new provisions at a two-day Canada-U.S. manufacturing summit.

"They both wanted to wait to see what the exact wording was in the act ... it was certainly on their radar," said Jayson Myers, president of the Canadian Manufacturers and Exporters organization.

The Canadian government will "continue to oppose protectionism and defend Canadian interest," a spokesman for Prime Minister Stephen Harper said Tuesday.

"History has shown protectionist measures stall growth and kill jobs."

Birgit Matthiesen, the U.S. representative of the CME, expressed her dismay about the provisions given how hard Canadian officials worked two years ago to convince their American counterparts of the dangers inherent in hindering trade and commerce between two economies so closely linked.

"It's this de facto Buy American sentiment now that is so disappointing and frustrating," she said in an interview from Montreal.

"It's really disconcerting that this administration and the U.S. Senate seem to have decided that Buy America had to be inserted into this bill, ignoring our concerns that we've expressed so strongly previously and the reasons why we expressed those concerns."

Maryscott Greenwood, an international trade specialist at the McKenna, Long law firm in D.C., predicted the bill will likely pass U.S. Congress in some form given the urgency of the job situation in the United States right now.

She added there's no guarantee Section 4 will be removed by either Republicans or Democrats with a presidential election a little more than a year away.

"I think some version of it will get through, and Canada will have to press for a waiver," she said.

"It means that Canadian business interests must remain vigilant in continually explaining to U.S. policy-makers the interconnectedness of our two economies," she added. "Canada needs to constantly point to the futility of measures that don't take the special bilateral relationship into consideration."

The Buy American dispute consumed the Canada-U.S. relationship for much of 2009 until Canada finally earned an 11th hour waiver from the Buy American provisions contained in Obama's $787 billion stimulus act.

The deal allowed the use of Canadian products in many local U.S. projects funded by the stimulus program. In return, Canadian provinces agreed to sign the World Trade Organization's government procurement agreement, something they'd refused to do when the WTO was established in 1995.

That's the only bright spot, Matthiessen said -- Canadian provinces won't be excluded this time around from bidding on projects at the state and federal level in the United States.

"But if these monies get funnelled down to the municipalities and counties, then we have no protection, and the vast majority of money was spent at that level under the recovery bill," she said.

"Our work is really cut out for us."

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TV ad volumes must be lowered

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The CRTC said it has heard your complaints about TV ads being too loud. (CRTC)

The CRTC, the federal broadcast regulator, has had an earful from Canadians about the loudness of TV ads and is ordering broadcasters to do something about it by Sept. 1, 2012.

More than 7,000 Canadians responded to a call for comments from the Canadian Radio-television and Telecommunications Commission on sound volume in ads and the overwhelming majority said loudness was a persistent problem.

Many were similar to this comment from John Ring of Surrey, B.C.

“It is a major annoyance that as soon as TV commercials are broadcast that the loudness increases very noticeably. It makes me reach for the remote and either turn it on mute or change the channel,” he wrote to CRTC.

As a result, the CRTC plans to require broadcasters and television service providers to ensure that commercials and regular programming are at an even volume. But they're giving them a year to do it.

“Over the years, we have seen a steady increase in consumer complaints about loud ads,” CRTC chair Konrad von Finckenstein said in a statement. “Broadcasters have allowed ear-splitting ads to disturb viewers and have left us little choice but to set out clear rules that will put an end to excessively loud ads. The technology exists, let’s use it.”

They will be required to adhere to a standard created in 2009 by the Advanced Television Systems Committee (ATSC), an international agency that sets technical standards for broadcasting.

Broadcasters in both the U.S. and the U.K. have already addressed the problem of loudness in ads.

The CRTC is setting Sept. 1, 2012, as the deadline to implement technical solutions that will solve the loudness problem, saying it realizes there will be a cost to the technology. It will publish new rules by the end of this year.

Broadcasters and cable companies who intervened in the consultation agreed that there is technology available to stop ads being substantially louder than the program. Signal providers such as cable and satellite companies will be included in new regulations because they add Canadian commercials to simulcast programs.

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Mulcair won't confirm NDP leadership run

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NDP MP Thomas Mulcair is stopping just short of announcing he'll run for the party's leadership, as the caucus started gathering to set strategy for the coming parliamentary session.

Mulcair, the party's deputy leader, said Tuesday he's in the process of consulting people on whether he should run. He said he wants to have his team in place before he formally announces his intention to run to replace late leader Jack Layton, who died of cancer on Aug. 22.

Despite talking openly about putting together his leadership team, Mulcair insisted "no decision has been taken."

"It's a serious decision. I take it seriously," he said.

The NDP is meeting in Quebec City for strategy and planning meetings before the return to Parliament on Sept. 19.

They'll also establish the rules for MPs and staff during the leadership race, including whether MPs in critic portfolios need to step down from those positions if they're campaigning to be the next NDP leader. That decision is ultimately up to Interim Leader Nycole Turmel.

BC MP Peter Julian, who is considering a leadership run, says MPs shouldn't be in critic positions if they put their names forward for party leadership. He is the NDP's critic on industry files.

Julian says it will take time for most people to make the decision to run. Party president Brian Topp, who is stepping down from the role as soon as he files his nomination papers, declared on Monday his intention to run.

"I think there's a mourning period for all of us and I think that's something that people respect to varying degrees," Julian said.

"It is going to take time for a number of folks before they choose whether or not they're going to enter the race.

"Those who doubt it's an important decision on a personal and financial level, just ask Ken Dryden how he left the last [Liberal] leadership race," he said. "He was a good candidate. He had lots to offer, but he left with an enormous debt."

The NDP has set the leadership fee at $15,000 and capped spending at $500,000.

The Conservatives offered a little friendly advice to the NDP Tuesday, sending MP Jacques Gourde to the New Democrats' caucus meeting in Quebec City to warn them against selling party memberships out of their constituency offices.

Gourde said the party would be sending a complaint to the House of Commons internal economy committee, but admitted he had no evidence any memberships had been sold out of NDP MP offices.

It's against the rules to use parliamentary resources, such as constituency offices, for partisan business.

In an interview Saturday on CBC Radio's The House, party treasurer Rebecca Blaikie said people could go into the party's constituency offices to sign up for memberships.

Gourde insisted he was simply offering advice about when to be partisan and when to act as an MP.

"It's a plan of prevention, to avoid it," Gourde said in French.

"It's just a friendly warning."

He refused to take questions in English or make a statement in English. He said St. Catharines, Ont., MP Rick Dykstra would hold a similar press conference in English in Ottawa.

NDP MP Alex Boulerice said he left a session on keeping partisan and parliamentary work separate to address Gourde's concerns.

"I think the Conservatives are scared of the NDP. I think they're afraid we're going to sell lots of membership cards in the days and weeks to come," he said.

Boulerice said unlike Gourde, he would have been able to understand the English-language interview.

"They are trying to embarrass us," he said.

Language politics are expected to play a role within the NDP caucus, with 59 MPs from Quebec elected in the May 2 election – 58 more than before the election.

The Conservatives lost several Quebec ridings in the same election, including a handful of high-profile cabinet ministers.

Mobile-friendly auto-updating text available here.

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TIFF VIDEO: Luc Besson on his Suu Kyi biopic

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Luc Besson is known for producing action thrillers like Nikita, The Professional and The Fifth Element, and he also penned the children's fantasy series that began with Arthur and the Minimoys, but he explores new territory in The Lady, his portrait of Burmese pro-democracy activist Aung San Suu Kyi.

With Burmese friends giving him a thumbs-up for the new drama, Besson noted that he's "never felt so proud" of a film.

The French director, screenwriter and producer sat down with CBC/Radio-Canada during the Toronto International Film Festival — where The Lady is being showcased as a gala — to discuss actress Michelle Yeoh's portrayal of Suu Kyi and how he'd like to see the movie become the most popular "undercover film" in Burma, also known as Myanmar.

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Jackie Kennedy tapes reveal personal side

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Audiotapes set to be released Wednesday offer fresh insight into the life and personality of Jacqueline Kennedy, the former president's wife who had a unique vantage point on many seminal historical events from the 1960s, including the Cuban Missile Crisis.

The eight hours of recordings were created in 1964, when Kennedy sat down with historian and former White House aide Arthur Schlesinger Jr. mere months after the assassination of her husband, John F. Kennedy, on Nov. 22, 1963.

They were set to be released 50 years after her death, but her daughter, Caroline Kennedy, decided to make them public now.

The recordings reveal a side of her only friends and family knew — funny and inquisitive, canny and cutting.

The tapes are set to be released with the new book Jacqueline Kennedy: Historic Conversations on Life With John F. Kennedy.

The book is part of a celebration of the 50th anniversary of Kennedy's first year in office. Jacqueline Kennedy died in 1994, and Schlesinger in 2007.

At the time, the former president's wife was not yet the jet-setting celebrity of the late 1960s or the literary editor of the 1970s and 1980s. But she was also nothing like the soft-spoken fashion icon of the three previous years.

She was in her mid-30s, recently widowed, but dry-eyed and determined to set down her thoughts for history.

During one conversation, Kennedy recounts how she was unwilling to leave her husband during the Cuban Missile Crisis, despite the danger to herself and her family.

“I said, ‘Please don’t send me away to Camp David, me and the children. Please don’t send me anywhere, if anything happens we’re all just going to stay right here with you,’” she says in the tapes.

In another exchange with Schlesinger, she describes how her style drew criticism from the press. She was fashionable; she challenged the notion of what an American housewife should be; and she spoke French, which was regarded at the time as a liability.

“I was never any different once I was in the White House than I was before, but the press made you different,” she said, adding that she was expected to “bake bread with flour up to [her] arms.”

“You know everyone thought I was a snob and hated politics,” she said. “Well Jack never made me feel like I was a liability to him, but I was.”

She also offers insight into JFK, saying he wept openly over world events, particularly the failed Bay of Pigs invasion.

Jackie Kennedy also describes some world leaders in unflattering terms.

She says Indira Gandhi, who was elected India’s prime minister in 1966, was “pushy” and “bitter.” Charles de Gaulle was an “egomaniac.” And Martin Luther King Jr. was phoney, according to Kennedy.

She was especially hard on Lyndon Johnson, who had competed bitterly with her husband for the presidency in 1960.

There are no spectacular revelations in the Schlesinger discussions and virtually nothing about JFK's assassination. Kennedy's health problems and his extramarital affairs were still years from public knowledge and from the knowledge of aides such as Schlesinger.

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Baird ducks questions about Dechert

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Foreign Affairs Minister John Baird said Tuesday that he has already commented on the flirtatious emails his parliamentary secretary Bob Dechert sent to a Chinese journalist and that he has nothing to add.

Baird was asked about Dechert by reporters on Parliament Hill following an update on Libya. The foreign affairs minister was asked to explain how the government can be sure that national security wasn't compromised by Dechert's relationship with Shi Rong, a journalist working in Toronto for China’s state-run news agency, Xinhua.

Baird's response was that he's already made a statement on the matter but he didn't acknowledge the security concerns that have been raised by some analysts who say Xinhua is tied to China's intelligence agencies and by opposition party critics who accuse Dechert of exercising poor judgment.

“The government has spoken to this, Mr. Dechert has spoken to this, I have spoken to this, I have nothing really additional,” Baird said. To other questions on Dechert, Baird said he's known the MP a long time and trusts him, and that he had nothing to say about Dechert accompanying Prime Minister Stephen Harper on a trip to China in 2009. Then the foreign affairs minister quickly ended the news conference and took no more questions.

Dechert, who is married, confirmed last Friday that he sent flirtatious emails to Shi, and apologized for "any harm caused to anyone by this situation.” Over the weekend, Baird called the attention to the story "ridiculous" and described Dechert as a "mild-mannered" man.

A spokesman for Prime Minister Stephen Harper said Friday that Dechert "denied any inappropriate behaviour. We have no information to suggest otherwise."

Dechert, who was appointed parliamentary secretary for Foreign Affairs in May, said he met Shi while doing interviews for Chinese-language media and she became a friend. He said the emails, sent in April 2010, were nothing more than a flirtation but the relationship has raised questions given Shi’s employer.

NDP MP Peter Julian, meeting with his party's caucus in Quebec City, called it a spectacular lapse in judgment and inappropriate on a professional level. He added he's confident Dechert will "make the right decision." Paul Dewar, the NDP's Foreign Affairs critic, called for Dechert's resignation Monday.

A Canadian-based Chinese-language newspaper is reporting that Shi will be leaving Toronto, if she hasn't already.

At the time the emails were sent, Dechert had just been made parliamentary secretary to the minister of justice.

In one email sent about midnight on April 17, 2010, Dechert thanked Shi for sending a photo of herself from seven years earlier. "You are so beautiful. I really like the picture of you by the water with your cheeks puffed. That look is so cute, I love it when you do that. Now, I miss you even more."

In another 2010 email, Dechert tells Shi to watch CPAC because he will smile for her as he stands to vote in the House of Commons that night. She replies that she will watch for him.

The correspondence was revealed last week in a mass email sent from Shi's account. Dechert said her account was hacked as part of a domestic dispute.

Dechert also serves on the Canada China Legislative Association, a parliamentary forum established in 1998 that "promotes the exchange of information between Canadian parliamentarians and representatives of the National People's Congress of the People's Republic of China in order to encourage better understanding and closer ties between the two countries."

Tom Flanagan, a former advisor to Harper, said MPs should be warned about Xinhua. "Everybody who works for the Chinese news agency is basically a member of their intelligence agency. And this should have been explained to ministers when they got their jobs, that you can't deal with reporters, Chinese reporters, as you might with a Western reporter," Flanagan said during an appearance on CBC's Power & Politics with Evan Solomon on Monday.

"So it is more serious than just a simple flirty letter, or middle-aged silliness on the part of an aging guy," said Flanagan, a political scientist at the University of Calgary. "I'm not saying he should resign, but I don't know whether the briefings were inadequate."

A former senior intelligence official with the Canadian Security Intelligence Service said Tuesday that Harper should be asking for Dechert's resignation and that the RCMP should do an investigation to determine the extent of his relationship with Shi and if she made any demands for information from him.

Michel Juneau-Katsuya said the reputation of Shi's news agency is well-known. "This particular news agency is well-known, well-documented as being part of the Chinese intelligence service. Every journalist is considered as an intelligence officer when they are posted abroad and all the Western agencies usually keep track of what these people are doing because we know their affiliation,” he told CBC News.

Juneau-Katsuya said he thinks Dechert probably didn't understand the seriousness of who he was dealing with, and that the connection between him and Shi should be considered a security risk.

Liberal Senator Jim Munson, a former journalist who worked in China and now serves with Dechert on the executive of the Canada-China Legislative Association, told CBC News the incident shows "poor judgment" and that Dechert should have known better.

"If you're talking to anyone [at Xinhua] it should have raised a flag that you are talking to the mouthpiece of the [Chinese] government, and it should be obvious that any kind of relationship could lead you to a place you don't want to be," said Munson.

Munson said he takes Dechert at his word that the relationship was limited to flirtatious emails, but still questions their appropriateness.

"As a parliamentary secretary why would he be involved with her in the first place? That's not the kind of mistake he should make as an adult," he said.

Munson said he would leave questions about Dechert's future to elected officials, but added, "It would be more honourable and less embarrassing for the government if he were to consider stepping out of the [parliamentary secretary] position."

Dechert's Conservative colleague on the China committee, MP Michael Chong, disagrees and called the controversy "much ado about nothing," adding it might be the case of an innocent mistake that media coverage is blowing out of proportion.

"Other people's sex lives aren't anybody's business," Chong said.

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Drabinsky and Gottlieb fraud convictions upheld

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The Court of Appeal for Ontario has denied the appeals of theatre moguls Garth Drabinsky and Myron Gottlieb of their 2009 fraud convictions.

However, the court reduced the prison sentences for both men by two years.

That means that Drabinsky now faces five years behind bars, while Gottlieb faces a four-year prison term.

Both men were required to spend Monday night behind bars in advance of Tuesday's decision. They will remain in custody unless they elect to appeal to the Supreme Court of Canada.

Livent co-founder Myron Gottlieb now faces a four-year term. (Chris Young/Canadian Press)

Drabinsky and Gottlieb, who produced such 1990s theatre hits as Phantom of the Opera, Showboat and Ragtime through their company, Livent Inc., were convicted in March 2009 on two counts of fraud and one count of forgery, but the forgery convictions were subsequently stayed.

Livent sought bankruptcy protection in 1998, a few months after new management took charge of the company and began making allegations of financial irregularities.

Drabinksy and Gottlieb had argued that Livent accounting staff perpetrated the fraud without their knowledge.

Edward Greenspan, who is Drabinsky's lawyer, said it was too early to determine if they would appeal to the country's top court.

"We're reviewing the judgment with a view towards determining whether we will ask the Supreme Court of Canada to grant leave to appeal to that court," Greenspan said. "We obviously won't be in a position to make a decision about that until we've had a good opportunity to discuss it with our client, who is now in jail."

In their ruling, the three-judge appeal court panel said the trial judge, Justice Mary Lou Benotto, erred by failing to take into account the absence of any evidence of the actual financial loss caused by the fraud.

"While financial loss is not an essential element of the crime of fraud, it is a significant consideration on sentence. While the absence of proof of actual financial loss could not justify a sentence outside of the substantial penitentiary range, it does justify sentences that are somewhat lower within that range than those imposed by the trial judge," they stated in their ruling.

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