Shugar was working for the Department of Health and Welfare when he was detained by the RCMP in 1946.  Previous to this appointment, Shugar had worked for the British and Canadian navies in developing anti-submarine equipment and served on the executive of the Canadian Association of Scientific Workers. The commission accused Shugar of spying for the Soviets mainly as a result of his known association with Fred Rose and Sam Carr, and because "his explanations failed to convince us."  The documents stolen by Gouzenko from the embassy also suggested that Shugar had conspired directly with the Russians, although there was never any direct evidence of his criminal activities.

Shugar was the first of the suspects to be acquitted in court.  The ruling was handed down before the commission completed its final report, yet the government refused to edit the report to reflect the fact that he had been found innocent at trial.  Even more surprising was the commissioners' decision to comment on the results of Shugar's trial in their report.  Specifically, they criticized the judge's decision and argued that there was sufficient evidence to find Shugar guilty based on the requirements established in the Official Secrets Act .  Despite his innocence, Shugar was later dismissed from his job in the Department of Health and Welfare.