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December 10, 2005
Insider Trading Scandal Deepens For Martin

Canadian Prime Minister Paul Martin may face more questions about personal ethics in the exploding scandal surrounding the alleged insider trading involving the Finance Minister's office and the announcement of monetary policy two weeks ago. Blogger MK Braaten has done some investigative reporting on the winners the day the policy got announced -- and found out that one of the biggest traded its shares at 3400% its normal volume in the hours prior to the announcement:

According to, the day before the Goodale income trust announcement, the trading volume of Medisys Income Trust was 226,500, with a value of $2,604,750, average trade was $37,750, and a total of 68 transactions. According to, this stock was listed as trading at “Unusual Volumes“. Click here for the report.

The volume of shares traded for Paul Martin linked Medisys Income Trust shares the day before the Income Trust announcement is way to high to be a ‘co-incidence’. The volume increased 3400% from the prior day, and the following day, dropped back down about the same amount.

Its said that Paul Martins personal doctor started a medical company called Medisys Income Trust, a chain of private health care clinics located across Canada.

The day before the Goodale income trust announcement, the volume of Medisys shares traded for the day went from 5,714 on November 21, to 203,953 on Novemeber 22. On November 23, the shares traded dropped back down to 6,220.

Amazingly, the sale of shares at thirty-four times their normal rate came just two days after a negative assessment from a respected stock analyst, Jennings Capital. Angry in GWN picks up on this:

In fact, in 2005, from a peak $15.21 in the summer, Medisys was on a downward trend, dropping 30% of its value until late November, earning another negative report on November 21, just two days before the income trust announcement.

I can only assume no one from Ralph Goodale's office called Jennings Capital Inc.

Whoever decided to ignore that negative report and picked up an astonishing 200,000 shares really picked exactly the right time.

I bet Dr. Elman will have a big smile on his face when Paul Martin comes for his next visit.

Indeed. When Jennings Capital issued its report, Medisys traded at $10.80. After the big trades -- in only 68 transactions, by the way -- the price had risen to $11.02, and as of last Friday had come up to $13.25. That represents a profit of somewhere north of $400,000. It seems as though someone knew that Ralph Goodale would issue a report favorable for income trusts and got into the market just ahead of most everyone else.

Read Angry and MK Braaten at the above links for more on this issue. In the meanwhile, the National Post reports that Goodale had a meeting with investment directors and discussed income trusts hours before he announced the new policy, a meeting which Goodale didn't reveal:

Finance Minister Ralph Goodale had an hour-long meeting with senior representatives of Canada's investment community at which the issue of income trusts were discussed only hours before his decision on the issue was announced, CanWest News Service has learned. ...

``There was a very vague, very general discussion,'' Embury said, adding that it dealt with the association's planned submission on the income trusts issue. ``They left the meeting no wiser than when they came through the door.'' ...

Conservative finance critic Monte Solberg expressed surprise when told of the meeting.

``The minister should be completely candid and release a list of all the people he had meetings with that week on the income trust issue,'' Solberg said. ``One of the things that I find frustrating is that it's only after information drifts out that they admit that they met with this group or that group, or that somebody got some kind of a phone call.

``This doesn't do anything to instil confidence in the minister or the minister's office,'' Solberg said, adding that his party will continue to ``push'' for an investigation into the issue by the Ontario Securities Commission or the RCMP into the issue.

I don't know about anyone else, but I find the assertion that senior representatives of the investment community had a meeting with the Canadian finance minister and wound up no wiser about investments a hilarious explanation. Is Ralph that incompetent that an hour of his time gains no one any insight into Canadian markets? Obviously, though, someone got wise that day. For a stock that normally trades in the low four figures on a daily basis, having over 200,000 shares transacted in just 68 purchases shows either an amazing coincidence or, more likely, a handful of individual investors got advance warning that Goodale would favor the exact kind of income trust that Paul Martin's personal friends had founded.

This story has legs, especially since there seems now to be a connection to Martin and his friends. Will the RCMP and/or the OSC start an investigation into the manipulation of the income-trust market? We'll not hold our breath ...

Sphere It Digg! View blog reactions
Posted by Ed Morrissey at December 10, 2005 3:02 PM

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