Suit charges Mega execs with insider trading
By Staff -- Playthings, 9/26/2008 12:30:00 PM
TORONTO—Lawrence and Jeffrey Rosen, the former principals of Rose Art Industries, announced Monday the filing of a lawsuit in a Canadian court accusing Mega Brands’ top brass of insider trading, a claim recently refuted by an internal Mega Brands investigation.
The suit accuses six Mega Brands executives—Marc Bertrand, CEO; Victor J. Bertrand Sr. chairman of Mega’s board; Vic Bertrand, chief operating officer; Alain Tanguay, chief financial officer; Brahm Segal, general counsel; and Sylvain Duval, executive vice president—of having collectively sold 1,604,500 company shares in December 2005 and/or the fall of 2006 with knowledge of confidential information that, if generally known, might reasonably be expected to have materially affected the value of Mega Brands shares.
The suit claims that the first of two series of alleged insider trades occurred shortly after Mega Brands execs learned that a child had died from ingesting several magnets from one of the company’s Magnetix construction toys, but before that death was made public. The second allegation says a series of trades occurred in the fall of 2006 after company leaders became aware of “serious distribution failures” on the part of Mega Brands following its integration with Rose Art, yet before the financial result of these problems were made public nearly a year later, in November 2007.
The Rosens’ move followed a recommendation by a special committee of independent members of Mega Brands’ board of directors that no action should be taken by the company in response to the insider trading allegations after what Mega Brands spokesperson Harold Chizick told the Toronto Star was a seven month investigation. Mega Brands’ board of directors unanimously approved the committee’s recommendation. That decision was announced on September 16.
If found guilty of violating the insider trading provisions of section 134(1) of the Securities Act and section 131(4) of the Canada Business Corporations Act, the executives named in the suit would be liable to account to Mega Brands for profits derived from their insider trading.
The Rosens sold Rose Art Industries Inc. to Mega Brands in 2005 for $350 million. Earlier this year, Mega Brands said it was looking to sell Rose Art and the rest of its stationery and activities business. That announcement followed by a day a press release from the Rosens declaring their interest in reacquiring Rose Art for an undisclosed sum.
