Dorsey firm caught up in SEC trading investigation

The Minneapolis law firm of Dorsey & Whitney on Thursday revealed the existence of an insider trading investigation by the Securities and Exchange Commission (SEC) involving one of its top Canadian lawyers, whom the firm has fired.

Dorsey released a statement saying that it is cooperating fully with the SEC "regarding possible insider-trading activity on certain merger and acquisition transactions on which the firm served as legal counsel."

Dorsey also said that it has "no reason to believe any other lawyer or staff member is implicated in these events."

An SEC spokesman declined to confirm or deny whether there is an investigation involving Dorsey or the firm's attorneys.

The Ontario Securities Commission has begun a parallel investigation of a Dorsey lawyer and investors, according to a report Thursday in the Toronto Globe and Mail.

The commission is looking into three separate mergers of gold-producing companies in Canada over the past two years. Dorsey represented one of the parties in each of the mergers.

According to the commission, a Toronto business consultant, his sister and his brother-in-law traded in the companies shortly before the mergers were announced, and gained about $1 million when stock prices soared on news of the deals.

Shared jurisdiction

At least one of the companies in each merger is traded in the United States, giving joint jurisdiction to the SEC and the Ontario Securities Commission.

Dorsey said it learned of the SEC inquiry April 24 and promptly began its own investigation. As a result of that inquiry, the firm fired Cornblum, a partner in its Toronto office, on Thursday. Cornblum could not be reached for comment.

Cornblum's biography, which was removed from Dorsey's website by Thursday afternoon, said that he was a member of the corporate and mergers and acquisitions practice groups. The biography said he did public and private securities offerings and advised clients in a variety of industries, including mining.

"Dorsey & Whitney has clear and firm policies regarding the protection of clients' confidential information," said Tom Tinkham, the firm's chief administrative partner. "We take these policies very seriously and enforce them strictly at all levels of the organization."

Dorsey, with 650 attorneys and $367 million in revenue last year, regularly ranks among the top five U.S. law firms in the value of the deals it helps negotiate each year. Last year the firm ranked 12th in terms of global merger and acquisition deals.