Thursday October 14, 5:43 pm Eastern Time
FOCUS-Corel CEO charged by securities regulator
(Adds details throughout. Figures in U.S. dollars unless
indicated)
By Susan Taylor
OTTAWA Oct 14 (Reuters) - The high-profile chief executive
of Canadian software maker Corel Corp. (Toronto:COR.TO - news)(NasdaqNM:CORL - news), Michael Cowpland, was charged on
Thursday with three counts of violating securities law.
The Ontario Securities Commission said it has also charged Cowpland's personal holding company, M.C.J.C. Holdings Inc., with one count
of violating the Ontario Securities Act.
The charges will be heard at the Ontario Court of Justice in Toronto on November 22. If found guilty, Cowpland could face up to two years
in jail, a fine of up to C$1 million, and/or payment of three times any profits made.
The commission also issued a temporary cease trade order against Cowpland and his holding company, which prohibits them from trading in
Corel stock for 15 days. A hearing to extend the order is scheduled for October 28 at the OSC.
The charges relate to Cowpland's sale of shares in 1997, just one month before Corel reported a surprising $32 million third-quarter loss,
which sent the stock into a 40 percent decline to a low of C$5.35 in September. Cowpland sold his shares when they were trading between
C$8.20 and C$8.80.
Cowpland, who has said he sold the shares to pay off personal loans, has maintained the investigation is routine and that he will be
vindicated.
''I am looking forward to finally having a chance to clear my name by responding to these matters, which are now more than two years old,''
said Cowpland in a statement.
Corel would not answer questions on the charges, stating that it was a private matter between the OSC and Cowpland. ''This is the only
comment we have,'' said Stuart McCarthy, Corel vice president of public relations.
Some analysts are now asking if Cowpland's future at the word processing and graphics software firm could be in doubt.
''It really undermines management. This is the sort of thing that I wouldn't be surprised to have the board call for his resignation,'' said one
analyst, who asked not to be named.
''The board's going to have to ask whether this guy is a good enough leader that it's worth having this kind of egg on their face.''
One charge, of tipping, alleges that Cowpland informed his holding company that Corel would fall short of 1997 third-quarter forecast sales
by a significant margin. That information was was not publicly known in mid-August.
A second charge, of insider trading, alleges Cowpland sold 2.4 million shares of Corel for C$20.4 million in mid-August 1997, using that
knowledge.
A third charge alleges that on May 20, 1998, Cowpland made misleading or false statements to the commission.
''These are not trivial charges,'' said Duncan Stewart, fund manager at Tera Capital in Toronto. ''Making the allegations is easy, proving
them is, in all cases, unless people are genuine dunderheads, almost impossible. Very few people write memos to themselves saying: 'Did
insider trading today.' and then mail them to the OSC.''
A trading halt on the Nasdaq and Toronto exchanges was not lifted after the announcement, leaving the stock to end at C$9.45 on Toronto
and $6-1/2 on Nasdaq. Analysts suggest the stock may take a beating in trade on Friday.
''I'm sure the market will react negatively because it doesn't like to see things like this -- especially from CEOs,'' said Jean W. Orr, analyst at
Nutmeg Securities Inc. in Connecticut. ''From a company standpoint, I doubt that it's particularly negative or significant.''
($1=$1.48 Canadian)
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