It was the lunch hour, and a confidential computer file about an impending mining-industry deal was accessed by lawyer Mitchell Finkelstein as he spoke on the phone to an old fraternity buddy one day in April, 2007.
But Mr. Finkelstein – whose career as a Bay Street lawyer evaporated in 2010 after the Ontario Securities Commission alleged he was feeding tips to a group of insider traders – told an OSC hearing on Wednesday he doesn't remember what he and then-CIBC financial adviser Paul Azeff were talking about.
Whatever it was, it wasn't information from his computer screen about the impending acquisition of Dynatec Corp. by Toronto-based Sherritt International Corp., Mr. Finkelstein said. "I know what I didn't discuss."
The former Davies Ward Phillips & Vineberg partner faced a cross-examination on Wednesday from OSC lawyer Donna Campbell, who repeatedly asked him to explain phone conversations with Mr. Azeff that came after Mr. Finkelstein accessed files related to various transactions in his law firm's computer system.
In each case, Mr. Finkelstein has said he accessed the files for legitimate reasons, such as to assist in his work on other similar corporate deals, or even called them up inadvertently. He repeatedly denied discussing any deals that he or others at his firm were working on. But he could not recall the content of any of the conversations, which occurred as long ago as a decade.
The OSC alleges Mr. Finkelstein tipped Mr. Azeff about six imminent corporate deals between 2004 and 2007, and that Mr. Azeff and a group of others made $3.4-million in profits through illegal insider trading as a result. All involved have denied the allegations, which have not been proven. The OSC cannot impose jail time, but can demand fines and ban people from serving as officers or directors of companies.
Insider-trading cases are notoriously hard to prove, as they rely largely on circumstantial evidence. In this case, the OSC has cross-referenced Mr. Finkelstein's computer file access records, his phone records and the share purchases by Mr. Azeff and others that followed, which the regulator alleges violate insider-trading rules.
Ms. Campbell asked Mr. Finkelstein if he knew that within six minutes of his phone conversation that day in April, 2007, that Mr. Azeff allegedly phoned a client who then just minutes later bought 40,000 shares in Dynatec. Mr. Finkelstein repeatedly told the panel on Wednesday that he knew nothing of the trading patterns of Mr. Azeff or his clients or associates.
Mr. Azeff himself is to testify on Thursday. Tyler Hodgson, a lawyer for Mr. Azeff, told the panel he will present evidence that the OSC's case against his client and another former CIBC financial adviser, Korin Bobrow, is the result of "tunnel vision."
He said the trading patterns will show Mr. Azeff and Mr. Bobrow and their clients had "significant prior positions" in the stocks that they were alleged to have purchased with inside information, unlike in other cases, where purchases come out of the blue because of a tip. He also said clients of Mr. Azeff and Mr. Bobrow sold stock right before takeovers were announced, suggesting they were not in the know. An internal CIBC investigation, he said, found no wrongdoing.
"There are significant holes in [the OSC's] case," Mr. Hodgson told the three-member OSC panel.
He also pointed out that OSC staff had failed to produce any evidence that $42,000 in cash that Mr. Finkelstein deposited at various banks over the time period ever came from Mr. Azeff or Mr. Bobrow, despite the OSC having seized their banking and credit-card records.
Mr. Finkelstein has testified he had a habit of keeping up to $35,000 in cash at his house in metal tins.