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Michener LLP in 1985 and gone less than two years later. By 1990, he'd been arrested and charged with more than 50 counts of forgery, theft, conspiracy, and fraud in a scheme to help Hong Kong businessmen immigrate to Canada ille- gally. Lang Michener and some of its senior partners were also charged with failing to promptly warn the Law Society of Upper Canada about Pilzmaker's trans- gressions. Just prior to going to court, Pilzmaker killed himself in a hotel room. In 1991, one of Manitoba's top tax lawyers, Richard Shead, a managing partner with the Winnipeg law firm Buchwald Asper Gallagher Henteleff, was arrested and later convicted for helping a client defraud people of their life savings in phony real estate transactions. Shead was convicted of 10 counts of fraud and sentenced to five years in prison. Julius Melnitzer, a London, Ont., law- yer, was brilliant in the courtroom and had a stable of powerful clients, including some of the province's biggest landlords. Thanks to a tip from an observant middle manager at a bank, the police discovered Melnitzer had printed up more than $100 million worth of stock certificates bear- ing blue-chip names like Exxon Corp. and used them to secure around $67 million in loans from several banks. He also bilked several friends out of more than $14 million by getting them to invest in a bogus property deal in Singapore. In 1992, Melnitzer pleaded guilty to 43 counts of fraud. He was sentenced to nine years in jail but was out on day parole after a couple of years and full parole in 1995. Melnitzer is now a well-known and respected Canadian legal affairs writer. And now Grmovsek and Cornblum can be added to the list, although their crime was more enduring. How it worked, according to the agreed statement of facts in the case, was that Cornblum was the mole, Grmovsek the trader on the outside. Grmovsek practised law until 1997 but dropped out, then dabbled in film school and gambling. He married and had a typi- cal home life, while making his money on Cornblum's tips. Cornblum, meanwhile, pursued the well-worn career path of a corporate lawyer, articling in Toronto at Fraser Milner Casgrain LLP, then joining the New York firm of Sullivan & Cromwell LLP, before moving to Schulte Roth & Zabel LLP, also in New York. He returned to Toronto in 1999, worked at Meighen Demers LLP before opening the Toronto office of Dorsey & Whitney two years later. The insider-trading scheme he and Grmovsek ran stretched over two separate periods, from 1994 to 1999 and 2004 to 2008. Cornblum collected information of pending corporate transactions from the files of his law firm. He invariably went to work very early, wandering the halls, look- ing at other lawyers' work or documents left in fax or photocopy rooms, on desks, and elsewhere, seeking clues about merg- ers. This is called "spelunking." In fact, his profits to buy an $879,000 house in Toronto. Grmovsek, meanwhile, moved north of Toronto and bought himself a $614,900 home. Somehow, though, over the next few years, the men lost much of their nest egg through bad investments. In 2001, Cornblum joined Dorsey & Whitney in its Toronto office, eventually becoming an equity partner and earning a healthy salary. He later told investiga- tors, "I was a pretty decent lawyer, a family man. I lived within my means." At Dorsey & Whitney, he worked on advising invest- ment dealers about regulatory practices in the U.S. and on corporate finance. By 2004, however, Cornblum found his "life cracking open" after some career setbacks, his wife's diagnosis "In the early time period, I don't believe there was any substantial likelihood they would have been caught by market surveillance or a regulator. They were very sophisticated in how they did it. . . ." — securities lawyer Joe Groia Grmovsek used to give Cornblum 4 a.m. wake-up calls to make sure Cornblum would be in the office early enough to freely pilfer. Cornblum also accessed elec- tronic files and picked up information from conversations with other lawyers. The information he culled would then be relayed to Grmovsek in Toronto who made stock purchases using accounts he had set up in the Bahamas and Cayman Islands. Accounts were disguised with names like "I Need Money" or "Through God All Things Are Possible" to hide any connection to the two schemers. Some of their 46 transactions included Office Depot Inc.'s proposed takeover of Staples Inc., Onex Corp.'s takeover of Labatt Brewing Co. Ltd., and Norwest Corp.'s buyout of Wells Fargo & Co. By the late 1990s, they'd amassed more than US$6 million from their trading. It was stress-inducing work, however. Cornblum found all of the snooping "pain- ful and debilitating" — so much so he left New York and returned to Toronto in 1999, and put a halt to providing Grmovsek with information. Nevertheless, he used with breast cancer, and what he claimed was Grmovsek's push to start making money through insider trading again. So Cornblum resumed his purloining. The two men often met at Cornblum's office or ate lunch together in downtown Toronto to plot strategy. They spoke near- ly every day and on weekends, sometimes using pay phones. And once again they began to make millions of dollars. They also began to get sloppy. "In the early time period, I don't believe there was any sub- stantial likelihood they would have been caught by market surveillance or a regu- lator," says Toronto securities lawyer Joe Groia, who represented Grmovsek after he confessed. "They were very sophisti- cated in how they did it, in small tranches and engaged in a myriad of associated trading. So if there is a proposed transac- tion in gold stock, they would buy other gold companies' stock. In the later stages, however, they took leave of their senses and began to trade in significant volumes and significant thinly traded stocks. So it was almost inevitable they were going to get caught." www. C ANADIAN Law ye rmag.com M ARCH 2010 33