Finkelstein to testify why he read law firm’s internal documents

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A lawyer for former Bay Street lawyer Mitchell Finkelstein suggested Tuesday that his client will take the witness stand in his own defence to explain why he accessed internal documents at his law firm about pending takeover deals being worked on by his colleagues.

Lawyer Gordon Capern told an Ontario Securities Commission hearing panel that Mr. Finkelstein will explain he read the documents in his firm's computer system to find precedents he could use in other cases he was working on, telling the panel "you will hear from him what he was doing."

His comment offered the first suggestion Mr. Finkelstein will testify at the hearing, which started Monday and is scheduled to continue until December.

Mr. Finkelstein, a high-profile former partner in the mergers and acquisitions practice at Davies Ward Phillips & Vineberg LLP, is accused of tipping his long-time friend Paul Azeff about six takeover deals being worked on by his firm, including some deals the OSC alleged he learned about by reading other lawyers' documents on the firm's open computer system. He left Davies in 2010.

Mr. Azeff is a former investment adviser with CIBC World Markets Inc. in Montreal and is accused of illegal insider trading based on Mr. Finkelstein's tips, and also passing along the information to a network of clients, friends and family members. His business partner, Korin Bobrow, is also accused of insider trading and tipping.

The men all deny the allegations, which have not been proven.

On Tuesday, Mr. Capern cross-examined the OSC's first witness, Davies' general counsel Mark Connelly, who worked with Mr. Finkelstein on merger deals between 2004 and 2007 when the alleged tipping and trading occurred.

Mr. Connelly acknowledged that many other lawyers at Davies besides Mr. Finkelstein accessed files related to the takeover deals even though they were not working on the transactions. He said he hoped they were accessing them "for precedential purposes," but said he could not speculate why lawyers were reading them.

"You didn't assume they were engaged in insider tipping?" Mr. Capern asked. "No, I didn't assume," Mr. Connelly replied.

Mr. Connelly previously testified Davies had an open culture at the time and did not always put documents behind firewalls on merger deals.

Mr. Capern also asked about records gathered by Davies and provided to the OSC, leaving the impression that part of the defence strategy is to call into question the accuracy or completeness of key documents.

For example, he asked Mr. Connelly whether it was possible documents viewed by Mr. Finkelstein on takeover deals had been later amended or "overwritten," so the versions provided to the OSC are not the same versions he read at the time. Mr. Connelly said it is possible in some cases, but said lawyers will typically create a later version of most documents rather than go back and overwrite an old version.

Mr. Connelly also said Davies did not have the technology in place in 2004 to keep records of all the calls made by lawyers from their work phones. He said Davies did have phone bills from Bell Canada listing long-distance phone calls, but no internal log of calls.

Also Tuesday, OSC forensic accountant Sherry Brown testified that Mr. Azeff "minimized" his friendship with Mr. Finkelstein when interviewed by OSC staff, but their e-mails suggested they were close friends. Ms. Brown said the e-mails showed the two families socialized together and exchanged photos of their children. Mr. Azeff and Mr. Finkelstein also e-mailed jokes and talked about their joint participation in a March Madness basketball pool.

OSC commissioner Alan Lenczner questioned whether it was necessary to continue reviewing their e-mails when it was already established that they were close friends. While Mr. Capern responded that Mr. Finkelstein has never denied they were close friends, Mr. Azeff's lawyer, Tyler Hodgson, told Mr. Lenczner that "the nature of their relationship is very much at issue in this hearing."