Ontario Securities CommissionPeter Power/The Globe and Mail
A former corporate finance lawyer at Bay Street law firm Davies Ward Phillips and Vineberg has been accused by the Ontario Securities Commission of tipping, handing over confidential information on several corporate deals that was used by others to trade stocks.
Mitchell Finkelstein, who no longer works at Davies, "sought out and acquired material, non-public information concerning corporate transactions" that he would send to an old friend, Paul Azeff, who worked at CIBC World Markets in Montreal, the OSC alleges. Mr. Azeff would share that information with a colleague, Korin Bobrow, the OSC said.
That information was, in turn passed on to "family members, friends and clients," who would use it to make investing decisions, the commission alleges. The OSC estimates the accused and those they shared the information with reaped a profit of almost $3-million from the securities they purchased.
Mr. Azeff and Mr. Bobrow, along with two former TD Waterhouse employees who were also allegedly involved in the scheme, were also accused of wrongdoing by the OSC.
The deals that Mr. Finkelstein is alleged to have gathered information on were four major Canadian business transactions that took place between 2004 and 2007. The were the acquisition of Masonite International by Kohlberg Kravis Roberts & Co.; Vista Equity Partners' purchase of MDSI Mobile Data Solutions Inc.; Barrick Gold Corp.'s purchase of Placer Dome Inc.; and Sherritt International Corp.'s purchase of Dynatec Corp.
After Mr. Finkelstein got information on these deals he contacted Mr. Azeff by phone, the OSC alleges, and within a few days Mr. Finkelstein made deposits to his bank accounts consisting of $100 bills.
Davies managing partner Shawn McReynolds issued a statement late Thursday saying that the firm had been informed of the allegations against Mr. Finkelstein and had cooperated fully with the OSC. "We have reviewed the allegations and have concluded they are isolated to actions allegedly taken years ago by one individual" who is no longer with the firm, he said.
"Davies demands and expects that its lawyers and staff will at all times adhere to the highest legal, professional and ethical standards," he said. "Our firm's policies concerning the duty to keep client matters confidential are very clear, and are well understood by our people. We will tolerate no breach."
According to people familiar with the case, Davies was alerted earlier this year that there was an insider trading investigation involving one of its lawyers. The firm did not know the details until the OSC released its allegations late Thursday afternoon.
"You can't imagine the shock" a source said. Mr Finkelstein left the firm Thursday.
The OSC's allegations expand on a much narrower set of charges it levelled last September against two TD Waterhouse employees, Jeffrey Miller and Man Kin Cheng. They were accused of illegal trading and tipping of Masonite securities, but at the time the OSC did not say where they got their information.