One of the best anecdotes about COREL Corp. chief executive Michael COWPLAND that doesn't also involve his flamboyant wife, Marlen, concerns the time he accidentally drove his Corvette off the road one winter morning on his way to the office. Speeding down a hill just west of Ottawa, the car hit a patch of ice, spun around and hurtled nose-first off the right shoulder towards a fence constructed of three steel cables stretched between wooden posts. Somehow, the car's front end slipped under the guard wires and continued to plow forward. Cowpland ducked just in time to avoid decapitation as the cables ripped up the hood of the car and tore off the windshield and roof.
For a moment, Cowpland figured he was dead. When he realized he was unscathed, he crawled out of the wreckage, waited for the police and hitched a ride to work. He arrived late for a meeting, yet never uttered a word about the accident to his staff. When a colleague asked what had taken him so long, he smiled and shrugged. "I had a bit of car trouble."
The Corel CEO, easily one of Canada's most audacious and controversial entrepreneurs, likes to tell that story because it reinforces his image as a daredevil businessman who stays cool and confident under pressure. Publicly, at least, he assumed the same unruffled posture last week after the Ontario Securities Commission slapped him with three counts related to insider trading in his company's shares - charges that could, if proven, cost him his job, his company and a sizable portion of his estimated $75 million net worth.
Minutes after the charges were announced, the Ottawa-based software company issued a statement in which Cowpland categorically denied any wrongdoing and said he was "looking forward to finally having a chance to clear my name." Then, he drove home and had dinner with his wife and the lawyer he has retained to defend him against the OSC's charges, Michael Edelson, who lives five minutes from Cowpland's $10-million mansion in Ottawa's exclusive Rockcliffe district. As usual in the Cowpland household, the meal was accompanied by a chilled bottle of Dom Perignon champagne.
The next morning, Cowpland was back at his desk by 9, answering his own phone (he has no secretary). "We had a good time last night and got a plan of attack going," he told Maclean's. He added that he has no intention of stepping aside while the case is before the courts and fully expects to be exonerated. In the meantime, he said, he's looking forward to the release of a major new software product at the annual Comdex trade show in Las Vegas, where Cowpland is booked as a keynote speaker. "We're going full blast today - business as usual," he said. He called the insider-trading charges a "side issue" and said his biggest frustration is that it has taken two years to get to this point. It could be several more years before a trial is held, assuming the case goes that far. "These things tend to move ahead at a pretty slow pace. But as far as the company is concerned, we don't intend to let it get in the road of our Web-speed schedule."
Whether he admits it or not, however, Cowpland is facing the biggest crisis of his business career, a 26-year roller-coaster ride during which he has founded two of this country's best-known high-tech firms, MITEL Corp. and Corel. Certainly Cowpland seems not to have expected last week's charges. In June, 1998, a few weeks after his only meeting with OSC investigators to date, he told Maclean's that, as far as he knew, the commission had finished its inquiry into his stock trading the previous summer: "I think they've realized there's nothing to it."
He was wrong. In fact, documents filed by the OSC in the Ontario Court of Justice allege that Cowpland not only engaged in illegal trading, but also made a number of untrue or misleading statements to OSC staff during the meeting he attended on May 20 last year. According to the commission, Cowpland knew in August, 1997, that Corel was about to report a big quarterly loss, informed his personal holding company of that fact and then authorized the sale of 2.4 million shares - a quarter of his stake in the company - for $20.4 million. By the time the quarterly results became public six weeks later, Corel shares had lost 35 per cent of their value, suggesting that Cowpland's take from the share sale was $7.2 million higher than had he waited for the announcement. If convicted, Cowpland could face a fine equal to three times that amount for insider trading, plus two additional fines of up to $1 million each for tipping off his holding company and providing false information. In addition, the latter two counts each carry a potential jail term of two years less a day.
For now, Edelson isn't saying how he intends to fight the charges - in part because neither he nor his client knows the nature of the evidence the OSC has compiled against him. Nor do they know the identity of any of the OSC's witnesses, some of whom are almost certain to be former Corel employees. In the year following the share sale, Corel replaced its auditors, its main law firm, its chief financial officer and several other high-ranking executives. "We have had absolutely no disclosure by the OSC at this point, so we can't say quantitatively or qualitatively what the case is like," said Edelson, one of Ottawa's most experienced and high-profile criminal lawyers. (In 1988, he defended Margaret Trudeau Kemper, ex-wife of the former prime minister, on a marijuana possession charge. The charge was later stayed.)
Cowpland has always insisted that he sold the shares when he did only because he wanted to repay some debts. That explanation appears good enough for many Corel shareholders: the company's stock lost only about eight per cent of its value after the charges were laid, a surprisingly solid showing given the seriousness of the case. Many Corel supporters, in fact, were betting that last week's OSC announcement represented a buying opportunity. Those investors may be right, but even if the Corel CEO ultimately wins this fight, the battle could drag on for years - a prospect than even an eternal optimist like Cowpland can't be looking forward to.
In Canada, insider trading cases are rare. The key ones of the past decade:
Herb Doman and the Bennett Brothers: Eleven years ago, Doman called Russell Bennett, brother of former B.C. premier Bill Bennett, with a tip that a U.S. forest products giant was about to walk away from a bid to buy Doman Industries Ltd. One Bennett told another, and both sold Doman stock before the news was made public and the share price tanked. The three were found guilty of insider trading in 1996. After appeals, the B.C. Securities Commission last week finally ordered the men to pay $1 million for the cost of prosecution. They are banned from trading in the province for 10 years.
Terry Alexander: The Vancouver venture capitalist was fined $1.2 million for insider trading in shares of Arakis Energy Corp.
Michael DeGroote: The former chief executive of Laidlaw Inc. and business associates agreed to pay the OSC $23 million - the largest insider trading fine ever levied in Canada. The DeGroote group had been accused of short-selling shares of the Burlington, Ont.-based transportation and disposal conglom- erate upon learning that some of the company's dump sites were toxic. DeGroote now lives in Bermuda.
David Fingold: The Slater Industries Ltd. executive allegedly used inside information in the sale of $27.8 million worth of family-held shares of Cineplex Odeon Corp. Fingold was acquitted after arguing that the OSC had taken too long to lay charges.
Maclean's October 25, 1999