Law Times

PAGE 4 NEWS January 31, 2011 • Law Times sider trading by the U.S. Securi- ties and Exchange Commission. Toronto lawyer settles SEC insider-trading probe for $810K A BY MICHAEL McKIERNAN Law Times Toronto lawyer has agreed to pay US$810,000 to settle a complaint of in- According to the SEC, Phil- lip MacDonald consented to a final judgment against him entered in the U.S. District Court for the Southern Dis- trict of New York on Jan. 11. MacDonald didn't admit or deny any of the allegations in the commission's complaint against him. MacDonald was the last of three Canadian defendants to settle in the case in which the SEC alleged he had made more than $900,000 (all figures are in U.S. dollars) out of a total of $1 million in ill-gotten gains. According to the Law Society of Upper Canada, MacDonald has no disciplinary history but has been under administrative suspension since July 6. Admin- istrative suspensions are normally the result of a failure to pay fees. MacDonald couldn't be reached for comment. In June 2009, the SEC ENGAGING UNIONIZED EMPLOYEES EMPLOYEE MORALE AND PRODUCTIVITY Blaine Donais HOW TO BUILD A MORE PRODUCTIVE WORKING RELATIONSHIP This is the first book dedicated to employee engagement in the unionized work environment. Written by conflict management expert Blaine Donais, this text gives you the practical tools and guidance necessary to achieve an engaged unionized workforce. 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It alleged MacDonald had received stock tips from a business associate, Michael Goodman. An employ- ee at a scrap-metal company in Thornhill, Ont., Goodman was married to a woman who was an administrative assistant at Merrill Lynch Canada Inc. According to the SEC's allegations, Goodman would collect information on upcoming mergers and acquisi- tions from his unwitting wife and then pass on the details to MacDonald and another associ- ate, Martin Gollan. Goodman's wife worked for the managing directors at Merrill Lynch's Toronto office who were involved in advising clients on potential takeovers. She had ac- cess to their mail, fax, and e-mail accounts. The SEC said that while Goodman and his wife often dis- cussed her work and spoke dur- ing business hours, she expected him to keep the contents of their conversations confidential. According to the SEC, Mac- Donald and Goodman became friends after they met at a bar in 2002 and would frequently rec- ommend stocks to one another. The regulator alleged Goodman wanted to "ingratiate himself" with MacDonald and had con- vinced him to invest in one of his own deals involving steel bins. The SEC also claimed Mac- Donald was aware that Good- man's wife was the source of his tips about unannounced business combinations and that he knew she had learned about them through her work. According to the allegations, Inside you will find: • an up-to-date alphabetical listing of more than 57,000 barristers, solicitors and Quebec notaries, corporate counsel, law firms and judges in Canada; • contact information for the Supreme Court of Canada, the Federal Court of Canada, Federal Cabinet Ministers, departments, boards, commissions and Crown corporations; • legal and government contact information related to each province for the Courts of Appeal, Supreme Courts, County and District Courts, Provincial Courts, law societies, law schools, Legal Aid, and other law-related offices of importance. More than a phone book Hardbound • Published February each year • On subscription $146 • P/C 0600140999 One-time purchase $162 • P/C 0600010999 • ISSN 0084-8573 For a 30-day, no risk evaluation call 1.800.565.6967 Canada Law Book. A Thomson Reuters business. Prices subject to change without notice, to applicable taxes and shipping and handling. CLL 1/4 3X.indd 1 www.lawtimesnews.com 1/13/11 10:35:51 AM MacDonald purchased the shares through a variety of accounts held in his own name, his wife's name, in trust for his son, and the names of corporations he controlled. He also used an offshore account at Bank Leu in the Bahamas to buy securities, the SEC claimed. In one case detailed in the complaint, the SEC said Good- man's wife received an early morning e-mail about a fairness opinion meeting for Project 29, a code name for the acquisi- tion by Eastman Kodak Co. of Creo Inc., a printer software manufacturer based in Burnaby, B.C. Merrill Lynch was advis- ing Creo. That afternoon, she called Goodman, who alleg- edly promptly called Gollan and MacDonald. Over the next 20 minutes, MacDonald pur- chased 46,500 shares in Creo through his various brokerage accounts, according to the SEC. The next business day, Jan. 31, 2005, Eastman Kodak formally announced it would buy Creo. In that period, Creo's stock price had risen by $1.92 per share, which would have in- creased the value of MacDon- ald's shares by almost $90,000. Nearly three months later, Goodman's wife received de- tails of another fairness opinion meeting, this time involving Electronics Boutique, a video game retailer based in Delaware that Merrill Lynch was advising, and GameStop Corp. Goodman's wife received the e-mail about the meeting at 3:13 p.m. on April 14, 2005. By 5:07 p.m., Goodman was on the phone to MacDonald, according to the SEC. The next morning, MacDonald allegedly began purchasing common stock in Electronics Boutique and ended the day with almost 25,000 shares. On April 18, the next business day, GameStop announced its intention to buy Electronics Boutique, whose share price rocketed to $55 from $41. That would have increased the value of MacDonald's hold- ings by almost $350,000. The SEC alleged MacDon- ald also purchased stock in six other target companies advised by Merrill Lynch. It claimed he made $900,000 in ill-gotten gains from illegal trading. It also alleged Gollan had made more than $90,000 from the trades. Goodman co-operated with the SEC and settled on the same day it issued the complaint without admitting or denying any of its claims. According to the final judgment against him, Goodman was found jointly lia- ble for MacDonald and Gollan's gains of about $1 million. Gollan settled his case on Jan. 12, 2010, again without admit- ting or denying the SEC's alle- gations but agreeing to pay dis- gorgement of $91,000 plus pre- judgment interest of $22,000. All of the illegal trades took place on U.S. exchanges, ac- cording to the SEC, which said it received assistance from the Ontario Securities Commis- sion in its investigation. Meanwhile, the OSC is con- tinuing its own probe into an- other Toronto lawyer's alleged involvement in insider trading. It named Mitchell Finkelstein, a former partner at Davies Ward Phillips & Vineberg LLP, in a statement of allegations filed on Nov. 11. In it, the OSC accused Finkel- stein of actively seeking out in- formation on corporate transac- tions through his work at Davies and passing on tips to a former fraternity brother, Paul Azeff, who was a trader at CIBC. The two were undergraduate students together at the Uni- versity of Western Ontario. The OSC alleges the "illegal insider tipping and trading scheme" lasted between November 2004 and May 2007 and included deals in which Finkelstein wasn't acting for the client. None of the allegations have been proven. The OSC has allotted time on Feb. 22 to hear a motion on dis- closure issues. LT

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