The Ontario Securities Commission has expanded its case against prominent Bay Street lawyer Mitchell Finkelstein, accusing him of tipping a friend about two more deals he worked on in 2007.
The OSC has accused Mr. Finkelstein of telling former CIBC World Markets Inc. trader Paul Azeff about six undisclosed takeover deals between 2004 and 2007, including a takeover bid for Legacy Hotels REIT announced in July, 2007, and the acquisition of Toronto-based IPC US REIT, announced in August, 2007.
The two real estate investment trust deals were not included in the OSC’s original tipping allegations levelled against Mr. Finkelstein last November. He is also accused of tipping Mr. Azeff to pending takeover bids for Masonite International Corp. in 2004; MDSI Mobile Data Solutions Inc. in 2005; Placer Dome Inc. in 2005; and Dynatec Corp. in April, 2007.
Mr. Finkelstein was a mergers and acquisitions expert and partner at Bay Street firm Davies Ward Phillips & Vineberg LLP until he left the firm in November when the OSC announced allegations against him. The commission alleges he passed tips about deals to Mr. Azeff, an old fraternity friend from university, who in turn is alleged to have traded on the information and passed it to others.
Mr. Finkelstein has made no public comment about the allegations. The OSC has not set a date for a hearing in the case, but has said it is planning to schedule a pre-hearing conference to deal with the case as well as a matter relating to document disclosure. The disclosure dispute is subject to a confidentiality order.
Mr. Azeff and CIBC business partner Korin Bobrow are accused of insider trading and tipping. They have made no comment on the allegations.
The OSC said Mr. Finkelstein was working for two firms – Cadbridge and InnVest REIT – which made a joint bid to buy Legacy Hotels in July, 2007.
According to the OSC allegations, “there were several telephone contacts between Finkelstein and Azeff” during the week of July 4, 2007, while a special committee of the Legacy board met several times to consider the takeover offer before its announcement on July 12.
The OSC said the first trading by clients, family and friends of Mr. Azeff and Mr. Bobrow occurred on July 5, and continued throughout the week until the deal was announced. The commission alleges that family, friends and clients of the two traders purchased $4.15-million worth of Legacy Hotels units the week before the deal was announced.
Mr. Finkelstein was also working on behalf of IPC US REIT as it considered a takeover offer by U.S. real estate firm Behringer Harvard in August, 2007, the OSC said.
The OSC alleged that “there was telephone contact” between Mr. Finkelstein and Mr. Azeff in the days leading up to the Aug. 14 announcement of the deal, and that trading by family members, clients and friends of Mr. Azeff and Mr. Bobrow began Aug. 8, the day after Behringer presented its offer to the board of IPC.
The commission alleges that family, friends and clients of Mr. Azeff and Mr. Bobrow bought $1.9-million worth of IPC units in the week before the deal was announced.