October 27, 2009 / 11:05 PM / in 8 years

Canadian pleads guilty to insider trading

NEW YORK (Reuters) - A Canadian man on Tuesday pleaded guilty to U.S. and Canadian criminal charges stemming from a 14-year insider trading scheme, a day after his alleged accomplice apparently committed suicide.

Stanko Grmovsek, who U.S. prosecutors said is 40, pleaded guilty to conspiracy to commit securities fraud by insider trading, in an afternoon hearing before U.S. District Judge Naomi Reice Buchwald in Manhattan.

Earlier Tuesday, Grmovsek appeared in a Toronto court to plead guilty to Canadian criminal charges in the case, the Ontario Securities Commission said.

Regulators had accused the Woodbridge, Ontario, resident of generating nearly $10 million of illegal profits by trading on inside information on as many as 40 pending corporate merger and acquisition transactions.

“I engaged in a process of insider trading over a number of years,” Grmovsek told Judge Buchwald. “I gained profits from such activity, which I split with my associate.”

He faces a possible 37 to 46 months in prison under federal sentencing guidelines on the U.S. plea.

The U.S. Securities and Exchange Commission separately

filed a civil lawsuit on Tuesday, a day after Grmovsek’s alleged accomplice, Bay Street lawyer Gil Cornblum, killed himself, according to a report in The Globe & Mail newspaper.

A Toronto Police spokeswoman on Tuesday said a body had been found Monday morning in Toronto’s Don Valley.

Cornblum’s wife, Marilyn, said in a statement to the Globe & Mail that her husband had been battling severe depression.

Marilyn Cornblum could not immediately be reached on Tuesday for comment.

The SEC said Grmovsek is unemployed, and briefly practiced corporate and securities law in Canada in the mid-1990s.

It accused him of trading on the basis of information that Cornblum learned while working at major law firms.

According to the SEC lawsuit, Grmovsek traded in U.S.- and Canadian-listed stocks including Ciena Corp, Glamis Gold Ltd, Office Depot Inc and Wells Fargo & Co, and then split the illicit profits with Cornblum.

It said some trades took place between 1994 and 1998, when Cornblum was “articling” in a Toronto law firm and later worked in the New York office of Sullivan & Cromwell LLP.

Other trades took place between 2004 and 2008 when Cornblum worked in the Toronto office of Dorsey & Whitney LLP. He was a partner there when Dorsey fired him in May 2008, the SEC said.

Grmovsek and Cornblum had become close friends in the early 1990s, when they were classmates at the Osgoode Hall School of Law at York University in Toronto, the SEC said.

SEC spokesman Erik Hotmire declined to comment. A Dorsey spokesman declined to comment. An outside spokesman for Sullivan & Cromwell had no immediate comment.

The SEC case is SEC v. Grmovsek, U.S. District Court, Southern District of New York, No. 09-9029.

Editing by Steve Orlofsky

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