Ontario Securities Commission staff were "irresponsible" in suggesting former Bay Street lawyer Mitchell Finkelstein accepted cash for passing along tips about takeover deals, his lawyer told a hearing Monday.
Gordon Capern made his closing remarks Monday on the last day of Mr. Finkelstein's hearing on tipping allegations, saying the OSC has not produced any proof that Mr. Finkelstein received $42,000 in cash from Montreal investment banker Paul Azeff after allegedly tipping him about four takeover deals between 2004 and 2007.
"You cannot make allegations like this if you don't have the goods – it's irresponsible and it's wrong and it's unfair and it ruins lives, which it did here," he said. "If you're going to go big-game hunting like that, you'd better make sure you have a big rifle, and they didn't."
Mr. Capern added he has seen public statements from the OSC about its intention to crack down on illegal insider trading, and said he worries "that places undue pressure on staff, putting them in the position where they have to make high-profile allegations."
Mr. Finkelstein, a former senior partner with law firm Davies Ward Phillips & Vineberg LLP, is accused of passing along tips about six takeover deals to an old fraternity brother, former CIBC investment adviser Paul Azeff, who is accused of trading on the information and passing it along to clients, friends and family.
As part of its case, the OSC said Mr. Finkelstein deposited large sums of cash, totalling over $42,000, at various banks shortly after meeting with Mr. Azeff following four of the takeover deals. The OSC did not present evidence the cash actually came from Mr. Azeff, and Mr. Finkelstein testified at the hearing the money was his, and he was in the habit of keeping large sums of cash around his house.
OSC lawyer Donna Campbell said Friday the cash deposits were part of a broader pattern of behaviour in the case, but Mr. Capern argued Monday the claims were "salacious" and "intentionally vague." He said the OSC levelled the accusation because it otherwise had no motive to explain why Mr. Finkelstein would risk his career to tip a friend about deals.
"The truth is weird at times – not a lot of us manage cash the way Mr. Finkelstein does," Mr. Capern said. "But that doesn't make it wrong, and it certainly doesn't make it illegal."
Mr. Capern also challenged detailed evidence about the occasions when the OSC alleged Mr. Finkelstein passed along tips, focusing in particular on the allegation he phoned Mr. Azeff in November, 2004, to tip him about a pending takeover bid for Masonite International Corp.
Mr. Capern said most of the phone calls were either unanswered or were for a flat 30 seconds, which suggests an answering machine cut in. Only one call by Mr. Azeff to Mr. Finkelstein's home number, on the morning of Nov. 19, resulted in a conversation, but Mr. Capern said it was likely Mr. Finkelstein wasn't home at the time and Mr. Azeff was speaking to his wife instead.
However, OSC commissioner Alan Lenczner asked whether there could have been more calls that were not recorded in the phone records. In earlier evidence at the hearing, the panel was told phone records from the law firm in 2004 showed only long-distance calls that were billed to a client's account. As well, there were no records available of calls to toll-free numbers, including CIBC's toll-free number in Montreal.
Mr. Capern, however, said the panel cannot base its ruling on evidence that doesn't exist, and no one has any record of what, if any, other calls may have occurred.
He also disputed allegations that Mr. Finkelstein looked at documents in the firm's internal system about takeover deals on which he wasn't working to get tips about deals. He said Mr. Finkelstein looked at 8,000 documents between 2004 and 2007 on deals he wasn't working on because they provided precedents and language for documents he was drafting.
The OSC alleged Mr. Finkelstein was on the phone with Mr. Azeff on the afternoon of April 18, 2007, when he looked at a computer document about a takeover bid for Dynatec by Sherritt International. Sixteen minutes after the call ended, the first of Mr. Azeff's clients bought shares of Dynatec.
In his written closing argument, Mr. Capern said Mr. Finkelstein did not pass on information about the deal during the call, and was "multitasking" while speaking on the phone.