Stock scammer sentenced to 39 months

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This article was published 08/01/2010 (6033 days ago), so information in it may no longer be current.

TORONTO — Appearing comfortable and relaxed, Stanko Grmovsek made a brief statement to a Toronto courtroom expressing remorse for his role as mastermind of one of the biggest insider-trading cases in Canadian history before being led away in handcuffs.

On Thursday, an Ontario judge sentenced Grmovsek, a 40-year-old former lawyer, to 39 months in prison after he pleaded guilty to charges of fraud, insider trading and money laundering in a scheme that ran for 14 years, netting profits of about $9 million US.

Prosecutors painted a picture of a man so addicted to illegal insider trading that he once interrupted a session with a marriage counsellor to make a phone call to his broker.

The case was the result of a joint investigation by the Royal Canadian Mounted Police, the Ontario Securities Commission, the U.S. Securities and Exchange Commission and the U.S. Federal Bureau of Investigation.

Grmovsek’s co-accused, Gil Cornblum, committed suicide in October, shortly before he was to be arrested. He was found beneath a bridge in Toronto and died later in hospital.

The pair met while studying law at Osgoode Hall Law School in Toronto in the early 1990s. Soon after graduating, they hatched a plan to profit from knowledge of undisclosed corporate transactions.

Surreptitiously gathering tips from documents left in photocopiers and on the desks of other lawyers, Cornblum would pass details to Grmovsek, who early on abandoned law to trade stocks full time from his home in the Toronto suburb of Woodbridge.

To cover his tracks, Grmovsek conducted most of his trades through a welter of offshore accounts under the names of his father, his former wife, school friends and even his neighbour.

The profits were then transferred to casinos in Las Vegas and the Bahamas for laundering.

While at Osgoode, Grmovsvek worked on the school newspaper where he was an outspoken columnist, attracting controversy with his strong conservative views, recalled Mark Coakley, a former classmate who is working on a book about the affair called In: An International Insider-Trading Tragedy.

Grmovsek described himself to prosecutors as a gambling enthusiast, skillful at counting cards, who frequently made money at casinos.

One of his first big stock-market wins happened early in his university career when he parlayed a $30,000 student loan into a $300,000 nest egg.

Grmovsek admitted to trading on information on 46 acquisitions and other transactions involving such companies as Yamana Gold Inc., Virginia Gold Mines, Goldcorp Inc., Desert Sun Mining, Wells Fargo & Co., Ameritech Corp., Newcourt Credit and Gateway Casinos Income Fund.

Typically, when a company announces it is being acquired, its shares rise while those of the purchaser decline.

First at Sullivan & Cromwell in the United States and later at Dorsey & Whitney in Toronto, Cornblum used a practice he called “spelunking” to gather information, which involved showing up at work in the early hours of the morning and wandering the halls and offices of other lawyers in search of documents inadvertently left on desks and in photocopiers.

— Canwest News Service