TORONTO (Reuters) - A Canadian judge said on Friday he’s likely to sentence a man who pleaded guilty to a series of illegal insider trades stretching back to 1994 to 39 months in prison and impose penalties that would leave him penniless.
His remarks came during a hearing in which defense lawyers and prosecutes submitted a joint recommendation for sentencing in one of the biggest Canadian insider trading cases ever.
Their submission would require Stan Grmovsek, who ran the scheme with his best friend, to pay nearly $1.5 million to the U.S. Securities and Exchange Commission and C$1.28 million ($1.2 million) to the Ontario Securities Commission, Canada’s major securities regulator.
“It is my intention to impose that sentence,” Toronto Judge Robert Bigelow told a small courtroom after hearing arguments from the defense and prosecution. Bigelow will announce his decision on sentencing in early January.
Grmovsek may have to serve even more jail time depending on the sentence and conditions that a U.S. court imposes on him at a later date.
Grmovsek pleaded guilty last week, admitting to three counts of insider trading for a scam that ran 14 years and netted a total of about C$10 million. Grmovsek and his partner, Gil Cornblum, traded on confidential information on 46 deals, some of them major mergers and acquisitions.
Cornblum, a law-school buddy who was best man at Grmovsek’s wedding, jumped to his death from a Toronto highway bridge last week. It was his third attempt at suicide.
“I hazard to guess we will not see an insider trading case of this magnitude again,” said John Corelli, deputy director of the Crown Law Office, criminal division, at Ontario’s Ministry of the Attorney General.
“Those who follow this case will question how level the playing field is in capital markets,” he added, pointing to the two men’s long-standing abuse of the system.
Still, Corelli, as well as defense lawyer Joseph Groia and even the presiding judge, commended Grmovsek and Cornblum for cooperating in the case, which involved them laundering their ill-gotten gains through U.S. casinos and offshore bank accounts.
Grmovsek’s guilty plea came just weeks after the biggest hedge-fund insider-trading case in history came to light, involving the Galleon Group as well as executives at several blue chip U.S. firms.
The Canadian duo was caught after the Financial Industry Regulatory Authority (FINRA), an independent regulator of brokerage firms in the United States, noticed Grmovsek’s unusual and lucrative trading in relation to two major merger deals.
Grmovsek and Cornblum, both lawyers, made close to $1 million in January 2008 by buying shares in Terex Corp before it announced the acquisition of ASV Inc.
They made $612,294 a month later when they traded on news obtained by Cornblum that Possis Medical Inc was being acquired by Medrad Inc, court documents show.
“Mr Grmovsek will at the end of this be essentially destitute,” Groia said, echoing the recommendation for a 39-month sentence, which is somewhere near the middle of typical sentences for insider trading of three to five years.
A clean-cut Grmovsek made no comment during the hearing.
A U.S. court will hear sentencing submissions against Grmovsek on November 23, where his lawyers will ask that the Canadian sentence be considered to cover his transgressions in the United States and in Canada.