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Bay Street in Toronto, like Wall Street in New York, was a symbol of a nation’s elite financial system. Most law firms known as “Bay Street firms” were physically located on downtown Bay Street, but not all of them were; the label was based less on geography than on size, power, and prestige. Bay Street firms handled all the biggest corporate deals, paid eye–popping salaries, and often had well–connected ex–politicians working for them as “rainmakers,” helping to bring in those big deals.

The men and women preceding Gil at the podium were all Bay Street or Wall Street lawyers at the peak of the profession: Heather Zordel (of Cassels Brock & Blackwell), Charlie MacCready (of Heenan Blaikie), Steven Molo (of Wall Street’s Shearman & Sterling), Geoff Shaw (of Cassels Brock & Blackwell), Tom Swigerts (of Gil’s firm, Dorsey & Whitney), Brian Koscak (of Cassels Brock & Blackwell), Greg Hogan (of Cassels Brock & Blackwell), Philippe Tardif (of Borden Ladner Gervais), Lisa Damiani (of Davies Ward Phillips & Vineberg — we will encounter this firm again later), and Mark Gelowitz (of Osler, Hoskin & Harcourt). Gil was scheduled to be the second–last speaker, followed by Sean Farrell (of McMillan Binch Mendelsohn).

In light of later events, it is tempting to speculate about Gil’s thoughts as he sat through the lectures and PowerPoint presentations that preceded his own.

What did Gil think when Heather Zordel explained that the purpose of insider–trading restrictions was to “ensure that everyone has equal access to material information on which to base trades or hold decisions and an equal opportunity to act?”

Did Gil react when Charlie MacCready, lecturing on “Canadian Securities Regulators,” talked about how the government used “market surveillance activities” such as “trading analysis to identify breaches of the trading rules, including illegal insider trading and patterns of trading manipulation”?

Was Gil paying any attention when Steven Molo took the podium to talk about the “U.S. White Collar Enforcement Environment,” describing the “growing intensity of the enforcement environment — more investigations, greater number of individuals prosecuted, larger fines, additional penalties”? Did Gil hear Molo’s warning that in the United States corporate lawyers would now face a “triple threat” from the Department of Justice, the Securities and Enforcement Commission, and each state’s attorney general?

When Tim Swigert, another Dorsey & Whitney lawyer, spoke about “Best Practices for Managing Investigations and Enforcement,” did Gil hear his colleague describe the “sophisticated surveillance systems to monitor all trading activity in real time”? Swigert explained how an investigation could lead to a finding of guilt (in civil court) for stock market frauds such as insider trading or tipping. That finding could lead to penalties of up to $1 million per offence, plus repayment of illegal profits, plus payment of the costs of the investigation and trial, plus a criminal conviction and prison.

Was Gil listening at all?

° ° °

When it was his turn to walk to the front of the Four Seasons conference room to take the podium to speak, Gil stood in front of a screen showing his PowerPoint presentation. The first screen showed the title of his lecture: “Overview of U.S. Securities Regulations Cross–Border Transactions.”

Gil spoke knowledgeably about all of the various U.S. federal securities laws that regulated the U.S. stock markets, the most important being the Securities Exchange Act of 1934. It had been passed by President Franklin D. Roosevelt during the Great Depression in response to the Wall Street crash of 1929. The 1934 act made insider trading illegal in the United States for the first time. (Before Roosevelt’s presidency, insider trading in the United States was common and only mildly controversial; the Massachusetts Supreme Court would describe insider trading as a “perk” in the case ofGoodwin v. Agassiz). The 1934 act also created the Securities and Enforcement Commission. Gil described the functions of the sec, including its widely feared Division of Enforcement — responsible for market–fraud investigations, civil actions, and referrals to the FBI.

Gil also spoke to the crowd of 45 top corporate lawyers about other U.S. laws, such as the Insider Trading Sanctions Act of 1984 and the Insider Trading and Securities Fraud Enforcement Act of 1988. Like the prior lectures, his subject matter was too technical and complicated for most non–lawyers to understand. Lawyers trained in fields other than corporate law (like me, an ex–litigator) would also have found most of Gil’s lecture baffling.

So let’s get to the point.

The crime oftippingis when someone who works for a corporation steals information about it and gives the stolen information to an outsider, so that the outsider can make a profit or avoid a loss on a stock market.

The crime ofinsider tradingis when someone who works for a corporation steals information about it and uses the secret information to make a profit or avoid a loss on a stock market.

By 2007, tipping and insider trading had been illegal in both the United States and Canada for decades, and the penalties had grown harsher and harsher over time. An inside trader who got caught could be punished in civil court (seizure of property) and/or criminal court (prison). As Martha Stewart showed, certain inside traders could also end up being judged by a third kind of court, the court of scandalized public opinion, with possibly the harshest punishments of all.

So we have met a young, successful lawyer named Gil Cornblum, who was at a conference in Toronto where other lawyers lectured to him about market fraud in general and insider trading in particular. We have watched Gil step up to the podium to speak to the assembled Bay Street and Wall Street lawyers on various topics, including U.S. insider trading laws.

A detail is missing. The reader should know that Gil had more than a professional interest in stock market fraud. He had a big secret, shared with only one person. Nobody at the Intensive Course in Securities Law and Practice knew it. Nobody at Dorsey & Whitney, or at any other law firm, knew it. Nobody at his temple knew it. Gil’s parents, brother, and wife did not know it. Only Stan Grmovsek knew it.

Only Stanko Jose Grmovsek (pronounced “gur–mov–seck”) understood the pressure and stress that attacked Gil every day. Stan was the only person in the universe who knew that Gil did not just lecture about insider trading — no, no, the truth was that Gil did it himself, on a massive scale. He had made between 100 and 150 illegal insider transactions over 14 years, both in the United States and in Canada, on both Wall Street and Bay Street. Again and again and again, he broke the lawyer’s oath of loyalty and integrity.