M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Monday, November 2, 2009

Bad Lawyers

This is a story with sad endings all around.  Last week, the SEC charged Canadian lawyer, Stanko Grmovsek with insider trading.  Here's the SEC's complaint.  The complaint alleges that Grmovsek was involved in a 14 year long conspiracy with his friend, Gil Cornblum, another Canadian lawyer, netting over $10 million in illicit profits.  Cornblum passed along confidential information regarding pending transactions to Grmovsek.  Cornblum was an associate at Sullivan & Cromwell and then a partner at Dorsey & Whitney (of O'Hagan fame!).   According to the complaint, while at Sullivan:

Comblum was not in Sullivan's mergers and acquisitions group. He worked in the general corporate practice area. He obtained information about M&A transactions involving Sullivan clients in one of three ways: (1) through discussions with other Sullivan attorneys at lunch or in the hallways; (2) by viewing memoranda or deal documents left outside offices, in fax rooms, or in copy centers; and (3) by accessing electronic documents' in files on Sullivan's document management system, often using passwords intended for use by the word processing department. 

At times during this period, Grmovsek would make wake-up calls from Toronto to Cornblum in New York at 4:00 or 5:00 a.m. to ensure that Cornblum arrived at Sullivan's offices to search for information prior to the arrival of other employees. For about four or five months during 1997, Grmovsek also lived with Cornblum in New York while attending film school. Cornblum provided material, non-public information to Grmovsek during phone calls or during discussions at night while Grmovsek was living with him.

While Cornblum was a partner at Dorsey & Whitney:

Comblum worked on the transactions involving three [...] U.S. issuers and obtained information about the other transactions in one of three ways: (1) through searches of files contained in NetDocuments, Dorsey's electronic database system; (:2) from conversations with other attorneys about their matters; and (3) through conflict checks.

From 2005 through 2006, Comblum provided information to Grmovsek during calls made from Gnnovsek's cell phone to Comblum's office phone. Beginning in 2006, Comblum began using pay phones to communicate with Gnnovsek in an effort to conceal their contacts. In addition, during 2006 and 2007 Gnnovsek was a frequent visitor to Comblum's office prior to weekly lunch dates. Comblum provided informnnation to Gnnovsek during these phone calls and lunch meetings.

Last week, Grmovsek pled guilty to insider trading and Cornblum committed suicide.




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