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MDS Inc. logo displayed during Chief Executive Officer John Rogers’s addresses to the bio-sciences company’s annual general meeting in Toronto, March 10, 2005. (J.P. Moczulski/REUTERS)
MDS Inc. logo displayed during Chief Executive Officer John Rogers’s addresses to the bio-sciences company’s annual general meeting in Toronto, March 10, 2005. (J.P. Moczulski/REUTERS)

Ex-MDS e-mail administrator to pay $1.5-million Add to ...

A former e-mail administrator at MDS Inc. has been ordered to pay $1.5-million in penalties and costs after the Ontario Securities Commission ruled he improperly bought shares of a takeover target after allegedly tapping into confidential executive documents.

In a sanctions decision published Thursday, the OSC ordered Shane Suman to “disgorge” almost $1-million in profits he earned from trading securities after learning MDS was eyeing a takeover bid for U.S. biotech company Molecular Devices Corp. in 2007. The commission ordered him to pay an additional $250,000 administrative penalty and said Mr. Suman and his wife, who also traded securities in advance of the takeover deal, to pay a further $250,000 in OSC investigation costs.

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The hearing panel said the penalties would have been higher, but the U.S. Securities and Exchange Commission concluded a similar case against Mr. Suman and his wife, Monie Rahman in 2010, and ordered them to pay $1-million (U.S.) to disgorge their trading profits and a further $3-million (U.S.) in civil penalties.

“Those are very substantial sanctions for the same misconduct that was the subject matter of this proceeding,” the hearing panel concluded.

Indeed, the OSC decision said Mr. Suman will not have to repay the $954,938 of “disgorged” profits that were ordered by the OSC as long as he pays the $1-million (U.S.) disgorgement of profits ordered by the SEC.

“It would not be fair or appropriate ... for Suman to have to pay as disgorgement substantially the same amount twice for the same misconduct,” the panel said.

The further $250,000 administrative penalty and the $250,000 of costs ordered by the OSC must be paid regardless of the SEC decision, the ruling states. However, it may prove difficult to collect as Mr. Suman and his wife now live in the United States, according to the OSC decision.

The OSC ruled in March that Mr. Suman acted “contrary to the public interest” when he bought Molecular Devices options after learning about a takeover bid when a member of the deal team at MDS contacted the company’s IT department to ask for help with a Blackberry problem. He also had opportunity to learn about the deal, the OSC concluded, when another employee asked for held retrieving a lost document relating to the deal, the commission said.

Shares of Molecular Devices climbed 44 per cent after the takeover offer was announced in 2007.

The OSC ruling said Mr. Suman was not accused of illegal insider trading for his actions because Molecular Devices was not technically a “reporting issuer” in 2007 under the definition provided in the Ontario Securities Act. If the company had been a reporting issuer, the hearing panel said the trading would have constituted illegal insider trading.

 
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