OSC lays out its evidence in blockbuster trading case

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It was during lunch hour on April 18, 2007, that Mitchell Finkelstein began tapping on his computer keyboard to gain access to confidential takeover documents at law firm Davies Ward Phillips and Vineberg LLP.

Six minutes later, the mergers and acquisitions lawyer was punching numbers on his cellphone. That phone call was to his college fraternity brother and Canadian Imperial Bank of Commerce broker Paul Azeff, according to evidence released by the Ontario Securities Commission Thursday.

Mr. Azeff did not linger on the call. Within 16 minutes, the broker and a co-worker placed the first of more than a dozen orders for clients and friends to buy $1.6 million of shares in junior mining company Dynatec Corp. for less than $4 a share. The lucky investors hit the jackpot two days later, when mining giant Sherritt International Corp. made a takeover offered for Dynatec - and delivered a two-day profit of about $250,000 to them.

Within two weeks, Mr. Finkelstein appeared at two Toronto bank branches to deposit $13,000 of cash, mostly in $100 bills.

The sequence of events is one of several scenes the OSC paints in new documents that outline the evidence against the 42-year-old lawyer, who is accused of illegally tipping takeover secrets in a case that is being closely followed by Canada's legal community. A 57-page OSC factum cites banking, phone, e-mail and credit card records to allege that Mr. Finkelstein's close friendship and constant contact with Mr. Azeff was at the heart of a sprawling insider trading case. The case has ensnared a prominent Bay Street law firm, four brokers at two major banks and a circle of clients, friends and family. It involves several major deals, including Barrick Gold Corp.'s 2005 acquisition of Placer Dome Inc.

Mr. Finkelstein left Davies last fall after the OSC alleged he had illegally tipped takeover secrets. Mr. Azeff and his co-worker Korin Bobrow have been suspended by CIBC. Two TD Waterhouse employees linked to the case, Jeffrey Miller and Man Ken Chang, are no longer employed by the bank.

At an OSC hearing Thursday, Mr. Finkelstein told reporters that he "categorically" denies the OSC's charges, which were first issued a year ago. His legal team is seeking to have the case against him dismissed on the grounds that Mr. Finkelstein had insufficient time to respond to the OSC's allegations before they were made public.

Jeffrey Larry, one of Mr. Finkelstein's lawyers, said in an affidavit filed with the OSC that his client's life has been "thrown into turmoil" and his banks have "terminated their relationship with him."

The OSC has accused Mr. Finkelstein of tipping Mr. Azeff about confidential details of six takeover deals shortly before they were announced, including the 2004 takeover of Masonite International Corp. by Kohlberg Kravis Roberts & Co. Mr. Finkelstein worked on three of the transactions, but he was not involved in the others, including the Dynatec bid. The OSC alleges he was able to obtain documents about the deals from the firm's computer system.

Mr. Finkelstein told OSC staff in an interview, according to transcripts, that he was reading the Dynatec documents to study potential legal precedents.

A spokesman for Davies declined to comment on the OSC's release Thursday.

The regulator's factum includes pages of transcripts from OSC staff interviews with Mr. Finkelstein during which he denied that he revealed takeover secrets to Mr. Azeff or received any cash from his friend.

Mr. Finkelstein did not dispute he had frequent visits with Mr. Azeff, including lunches at Bymark and Reds, two favoured Bay Street restaurants. Nor did he deny that these meetings were, in some cases, followed by visits to his banks where he made large cash deposits.

"I don't have a specific answer as to why I deposited it when I did. I just did. As to my banking methods, those are my methods. I don't really have a method to my madness," he said according to a transcript of an October, 2010, interview with OSC staff.