Insider trader's offshore bank accounts frozen

TORONTO -- Ontario's stock market watchdog considered investigating three other people in the investment industry for allegedly giving tips to a close friend of Andrew Rankin, a former investment banker who is on trial accused of illegal insider trading.

But Ontario Securities Commission investigator Yvonne Lo said yesterday that the regulator could not develop sufficient proof that the tips the three other men allegedly provided to Daniel Duic involved undisclosed confidential information.

Ms. Lo was testifying at the trial of Mr. Rankin, who has pleaded not guilty to 10 counts of illegal insider trading. He has entered the same plea on 10 counts of leaking secret information to Mr. Duic about corporate deals involving clients of his former employer, RBC Dominion Securities Inc.

Mr. Rankin, now 40, is at the centre of what is considered the largest illegal insider trading case so far in Canada. The scandal, which involved trading in offshore accounts, shook the reputation of the country's largest investment bank and its parent, Royal Bank of Canada.

Mr. Duic reached a settlement with the OSC last year over allegations that he made illegal trades over a 16-month period beginning in October, 1999. He agreed to pay back $1.9-million in illicit gains in connection with trades of stock in Canadian Pacific Ltd. and Moffat Communications Inc., and become a key witness in the prosecution of Mr. Rankin.

Ontario Superior Court was told earlier this week that Mr. Duic, in private testimony to the OSC, said he made a profit of about $7-million from tips he got from Mr. Rankin, and three other individuals in the investment industry. That amount included more than $6-million made from 55 tips that he allegedly got from Mr. Rankin.

Ms. Lo said that her team froze Mr. Duic's three offshore accounts in Switzerland, Luxembourg and the Bahamas that contained a total of $3.1-million. That amount was used to pay his settlement with the regulator, while the balance went to Canada Revenue and to benefit Ontario investors, she acknowledged.

"Mr. Duic did not get any of the money," she said.

Under questioning by OSC lawyer Michael Code, Ms. Lo said the regulator could not find any "unusual trading" among some 125 people or "insiders" who knew of the major restructuring at Canadian Pacific before it was announced to the public.

An examination of telephone records also found "no connection" between those people and Mr. Duic, Ms. Lo added.

Ms. Lo said the shares of Canadian Pacific, Donohue Inc. and Alliance Forest Products Inc. -- among the 10 companies at the heart of the OSC probe -- saw runups in their stock prices ahead of major announcements.

The price jumps also coincided with rumours of takeovers and speculation in the media about pending takeover deals or restructurings, she said.

Ms. Lo told the court that Mr. Rankin was generally a conservative investor in his own portfolio at RBC, but acknowledged there was an instance where he did flip a stock for a substantial gain.

Mr. Rankin bought 6,000 shares in Chicago Title Corp. for $339,000 on Aug. 3, 1999, and sold it two days later for a $100,000 profit. The money he plowed into this one stock was half of the market value of $685,000 in his account at the end of the month. The trial resumes next week.