Terms have been announced after the settlement was approved by the U.S. District Court for the Southern District of New York on January 11.
Phillip Macdonald, a self-employed lawyer from North York, Ontario, agreed to the settlement without admitting or denying any wrongdoing in relation to allegations in a complaint which was filed in court back in June 2009.
The complaint alleged that he engaged with two Canadian business associates in tipping and trading in securities of companies ahead of public announcements about business combinations. One of the business combinations involved a tender offer.
The two business associates named in the case are Martin Gollan and Michael Goodman. Both men are employed in the scrap metal industry and live in North York, Ont., and Thornhill, Ont. respectively.
The commission’s complaint contains the following allegations:
Between January 2005 and June 2005, Goodman’s wife, while employed as an administrative assistant with Merrill Lynch Canada Inc., learned the identities of a number of companies involved in contemplated, but unannounced business combinations.
When they were discussing what was happening at her job, Goodman’s wife sometimes mentioned the information to Goodman, expecting that he would keep it confidential. Goodman instead, allegedly misappropriated the information by disclosing it to Macdonald, and Gollan, the complaint alleged.
On the basis of that information, Macdonald and Gollan allegedly purchased securities of Creo Inc., Masonite International Corp., Eon Labs Inc., Performance Food Group Co., Great Lakes Chemical Corp., Shopko Stores Inc., Electronics Boutique Holdings Corp. and Commercial Federal Corp.
Court documents say Merrill was an adviser and rendered a fairness opinion to Creo of Burnaby, B.C. when it was acquired by Eastman Kodak Co. (NYSE: EK, Stock Forum) in January 2005. Merrill also rendered a fairness opinion to Eon in connection with a 2005 tender offer from Novartis International AG (NYSE: NVS, Stock Forum) in February 2005.
Merrill also advised Commercial Federal, Electronics Boutiques, Shopko, Great Lakes, Masonite, and Performance Food Group when they were either bought out or merged with another party.
As a result of their alleged illegal trading, Macdonald made over $900,000 in ill-gotten gains, and Gollan made $90,000.
However, the final judgement found Goodman liable for disgorgement of the trading profits of Macdonald and Gollan in the amount of $1.02 million, plus prejudgement interest of $251,301, but it waives payment of those amounts and does not impose a civil penalty.
Payment was waived after Goodman presented documents to the Commission, indicating that he was unable to pay.
The Commission had earlier said it would seek a final judgement ordering Macdonald and Gollan to disgorge all of the alleged ill-gotten gains, with prejudgement interest, and impose financial penalties and enjoin Macdonald from future violations of U.S. securities laws.
Gollan was ordered to pay $91,976 to the Commission in a settlement reached on January 11th, 2010.