Alberta security tribunal begins ex Matrikon CEO hearing
Nizar Somji's counsel argues no direct evidence of insider trading allegations.
CALGARY: Alberta Security Commission lawyers sought to convince a tribunal Aug. 13 that an Edmonton businessman tipped off family members ahead of news that made his company’s stock price rise, but Nizar Somji’s counsel argues there’s no direct evidence to support those insider trading allegations.
Somji was CEO of Matrikon Inc., a company that provided software and information technology services to industrial customers, such as oil and gas and mining firms, before it was acquired two years ago.
The ASC’s enforcement branch says Somji’s brother-in-law made nearly $29,000 in profit by purchasing shares of Matrikon weeks before it announced a new multimillion-dollar contract with Norwegian energy firm Statoil and record quarterly results in January 2010.
“We expect that the evidence will show that this trading was unusual and uncharacteristic of the (family) for a number of reasons, which will become apparent as the evidence unfolds,” said ASC staff counsel Deanna Steblyk at a hearing.
She told the panel that Somji, his sister Sholina Shomji-Healing and brother-in-law Kenneth Healing were all vacationing in Scottsdale, Ariz., at the time and would have been socializing with each other.
“From the totality of the evidence, we will ask you to draw the inference that the most reasonable explanation for this uncharacteristic trading by the Healings was that they had knowledge of undisclosed material information, mainly the Statoil contract and the first-quarter results, and that Mr. Somji was the source of that knowledge.”
The ASC also says Healing purchased stock before the announcement that Matrikon was being bought by technology giant Honeywell for $145 million in May 2010 and made more than $36,000 in profit when he sold the shares.
“We expect the evidence to show that this bit of a buying spree commenced within minutes of the conclusion of a phone call between Mr. Somji’s cell phone and the Healing’s home phone on a Sunday evening,” said Steblyk.
Somji’s lawyer, Joseph Groia, said his client `enjoyed an ”unblemished reputation“ in Alberta’s business community” before the allegations came to light earlier this year.
“His reputation has suffered as a result of these allegations – allegations that we say are unfounded both in fact and law.”
Groia said there’s no direct evidence that Somji gave his relatives a heads-up before the news broke.
“You will not hear evidence from any witness that there was what we call in the vernacular, ‘a tip’,” He said.
Groia said testimony from Somji will show “that telephone call was a perfectly innocent conversation between a brother and a sister about their mother” and there’s no evidence there was any discussion of Matrikon’s business.
He said Healing actively bought up and sold down his position in Matrikon throughout an eight-year period, including more than a dozen times throughout 2009 before he is alleged to have been tipped off about the Statoil deal and quarterly results.
“I say that that is fundamentally different than suggesting that you can just conclude from the happenstance of the timing there’s something suspicious about those trades,” he said.
Groia also said the amount traded – less than $100,000 – was relatively small in relation to Healing’s net worth of around $3 million. Healing had the ability to invest more heavily and make a bigger profit, but didn’t, he said.
He said Healing showed no consciousness of guilt, and was more likely to discuss sports and politics with his brother-in-law than business.
“It’s just not enough, in my respectful submission, for the staff to say they traded, an announcement came out, therefore there must have been a tip.”
In an earlier settlement, Healing agreed to pay a total of $65,000 to the ASC, though he never testified that he acted on a tip from Somji.
For three years, Healing can only trade in securities or exchange contracts in one personal bank account through a broker, who has been given a copy of the settlement agreement.
He can trade in one Registered Retirement Savings Plan, one Locked-In Retirement Account and one Tax Free Savings Account, so long as it’s also through a broker familiar with the agreement.
Healing can also invest in companies whose shares aren’t publicly listed.
The ASC has dropped its case against Shomji-Healing, Healing’s wife and Somji’s sister. Groia said Healing did all the investing on behalf of his wife.