Quebec’s securities watchdog has filed insider trading charges against a former executive of pension fund giant Caisse de depot et placement du Quebec and two others, alleging they disclosed or acted on the based on confidential information on the developments of the food distributor Groupe Colabor Inc.
The Autorité des marchés financiers (AMF) announced Wednesday that it has initiated criminal proceedings against the former vice-president of the Caisse Justin Méthot as well as against Jean-François Neault and Claude Gariépy, two former senior executives of Colabor.
Mr. Méthot and Mr. Neault were accused of communicating inside information about Colabor while Mr. Gariépy was accused of tampering with inside information, the AMF said in a statement.
An investigation by AMF investigators revealed that Mr. Méthot had learned of the departure of Lionel Ettedgui, then CEO of Colabor, before it was publicly announced on August 19, 2019, and that he had transmitted the information to Mr. Neault, the watchdog said. Mr. Neault in turn sent the tip to “several other people”, including Mr. Gariépy, before the official announcement, said the AMF.
“Claude Gariépy sold all of the Colabor shares he held as soon as he learned of the information, which enabled him to avoid a loss linked to the decline in the company’s shares following the announcement” , specifies the AMF. Mr. Gariépy was Chief Executive Officer of Colabor until March 2018. He was replaced by Mr. Ettedgui.
News of the AMF investigation into Mr. Méthot and other executives has been known since April and has alarmed some political leaders in Quebec City, with Liberal Party finance critic Carlos Leitao saying it is “disturbing” for an organization that has the Caisse’s credibility and reputation. The pension fund is among the most powerful institutions in Quebec and held assets of $420 billion at the end of 2021.
The investigation also cost Mr. Neault his job. Innergex, which hired Mr. Neault as its chief financial officer after he left Colabor, said in April that Mr. Neault was fired after the company learned of the AMF investigation from the media.
Innergex chief executive Michel Letellier told The Globe and Mail in an interview last spring that he had been told that a confidentiality order imposed by the regulator prohibited Mr. Neault from to discuss the investigation with other persons under investigation as well as with his employer.
Much of what was known about the securities regulator’s investigation comes from court documents, namely its requests to the Superior Court of Quebec to retain cellphones and other items seized during searches, including at the Caisse’s head office in Montreal, as it works on its investigation. The AMF also obtained search warrants but the documents it filed in support of its request were sealed by the court.
Mr. Méthot released a statement in April saying he had done nothing wrong. “Neither the Caisse nor I have any knowledge of or involvement in the alleged transactions,” Mr. Méthot said in his statement. “Consequently, neither the Caisse nor I benefited directly or indirectly from these transactions.
A public relations spokesman for Mr. Méthot, Patrick Howe, said Wednesday that Mr. Méthot is bound by a confidentiality agreement with the AMF and “cannot go further” than his April statement. “He can’t talk about the case,” Mr Howe said.
Stikeman Elliott, lawyer Stephanie Lapierre, who represents Mr. Neault, declined to comment on Wednesday. The Globe could not reach Mr. Gariépy.
Catherine Robitaille, spokeswoman for Quebec Finance Minister Eric Girard, declined to comment, saying the matter was before the courts. The Ministry of Finance exercises legislative control over the Caisse.
Fund spokeswoman Kate Monfette said the manager of the pension fund itself had never been questioned by the AMF, nor had its transactions been made, and added that Mr. Méthot had not been employed by the pension fund for two years. She declined to comment when contacted on Wednesday.
Mr. Méthot was a 16-year veteran of the Caisse who was vice-president responsible for investments in Quebec companies before leaving the organization in April 2020, according to his LinkedIn profile. In his statement, he said he had always carried out his duties with professionalism, rigor and “irreproachable ethics”, including when it came to handling highly sensitive information.
The Caisse is a shareholder of Colabor, with an unspecified interest of at least 5%, according to Colabor’s annual management circular filed in March. Under a subscription agreement entered into between the Caisse and the company in 2013, the pension fund has the right to propose a director for election to the Colabor board as long as it remains equal to or greater than this threshold of 5%.
The AMF said it was among the provincial securities regulators with the best enforcement records, but it failed to secure a conviction or sanction of any kind in its previous major insider trading case. In 2018, a judge stayed insider trading charges against David Baazov, the former chief executive of gaming company Amaya, and two other men, saying the AMF had shown a “lack of thoroughness ” in the pursuit of the case.
The AMF lost due to what the judge characterized as a breach of its duties and obligations to provide timely disclosure of evidence and to adequately protect solicitor-client privilege. This in turn compromised the integrity of the judicial process, the judge said.
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