Statement of Allegations: In the Matter of Andrew Oestreich
IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, c. S.5, as amended
- and -
IN THE MATTER OF
ANDREW OESTREICH
THE ONTARIO SECURITIES COMMISSION
Staff of the Ontario Securities Commission make the following allegations:
Background
1. AiT Advanced Information Technologies Inc. (now 3M Canada Company) (“AiT” or the “Company”) was a reporting issuer in Ontario and was located in Ottawa. The Company designed, developed and marketed issuance systems that automated the production of secure identification and travel documents such as passports and inspection and border control systems used to confirm the identity of travellers.
2. On May 23, 2002, AiT announced that it had entered into a merger transaction (the “Merger Transaction”) with 3M Canada Company (“3M”).
The Respondent
3. In approximately 1994, Oestreich was hired by AiT. From September 2001 to May 2002, Oestreich was the Vice President of Sales and Marketing and an officer of AiT.
4. Oestreich is a resident of Toronto.
5. In his position as Vice President of Sales and Marketing at AiT, Oestreich was a member of the executive management team (the “EMT”) and was privy to and possessed confidential material information about general business matters and strategic alternatives that AiT was pursuing. The EMT met periodically with Bernard Jude Ashe (“Ashe”), the President and Chief Executive Officer of AiT, to discuss these issues.
6. Oestreich continued to work with 3M-AiT until July 2003 when he left the Company.
Decision to Sell AiT
7. AiT had incurred a significant loss for the fiscal year ended September 30, 2001.
8. By late 2001, Oestreich was aware that the Company needed financing and that AiT had been unable to raise adequate equity financing. Oestreich was also aware that the Company had announced its desire to seek a strategic partner to continue development of its VeriMe product line.
9. In late 2001, officials of 3M Canada Company (“3M”) met with representatives of AiT. Initially, these meetings were focused on investigating whether a better working relationship could be established between the two companies on the basis of complementary product lines.
10. On January 25, 2002 Ashe recommended to AiT’s Strategic Committee that the Company engage a mergers and acquisitions advisor (“M&A Advisor”) to assist the Company in finding a strategic buyer for the Company. The Strategic Committee, whose mandate was to review and discuss matters of strategic importance, approved the recommendation . On February 6, 2002, prior to seeking the approval for the recommendation to engage an M&A Advisor from the board of directors of AiT (“Board of Directors” or the “Board”) , Ashe convened a special offsite meeting of the EMT, including Oestreich, in order to brief the EMT on the Strategic Committee’s decision and to solicit management’s opinions on the sale of the Company. At this meeting, the majority of the EMT, including Oestreich, supported the proposal to seek a strategic buyer.
11. On February 19, 2002, Ashe presented the Strategic Committee’s recommendation to the Board of Directors and the Board authorized management to retain an M&A Advisor.
12. By February 26, 2002, Oestreich was aware of the recommendation of the Strategic Committee to engage an M&A Advisor to find a strategic buyer for the Company and that the Board of Directors of AiT had authorized management to retain such an advisor.
Insider Trading by Oestreich
13. On February 26, 2002, Oestreich instructed his wife to place an order to purchase a total of 1,000 shares of AiT at a time when he had knowledge of the events described above. The order was filled on February 26 and 27, 2002.
14. On February 28, 2002, Oestreich was advised that Ashe was to attend a dinner meeting that day with a representative of 3M in Ottawa.
15. On March 1, 2002, Oestreich placed orders to purchase a total of 9,000 shares of AiT at a time when he had knowledge of all of the events described above. The orders were filled on March 1 and March 5, 2002.
16. At the dinner meeting held on February 28, 2002 between Ashe and a representative of 3M, 3M expressed an interest in acquiring AiT. At a meeting of EMT held on or about March 5, 2002, Ashe informed the EMT, including Oestreich, of 3M’s expression of interest in acquiring AiT.
17. Particulars of the shares of AiT purchased by Oestreich are as follows:
|
Date Order Placed |
# of AiT Shares |
Purchase Price |
Selling Price |
|
February 26, 2002 |
700 |
$1.30 |
$2.88 |
|
February 27, 2002 |
300 |
$1.30 |
$2.88 |
|
March 1, 2002 |
5000 (1000)
(4000) |
$1.27 |
$2.88 |
|
March 1, 2002 |
4000 (1900) |
$1.25 |
$2.88 |
18. On April 15, 2002, Oestreich filed an Insider Report reflecting the purchase of AiT shares described above.
19. At the time Oestreich purchased these shares, he was in a special relationship with AiT and e ach of these trades was made at a time when Oestreich had knowledge of material facts as set out above which had not been generally disclosed to the public , contrary to subsection 76(1) of the Act .
20. On May 23, 2002, AiT and 3M signed the final merger agreement. On the same date, AiT issued a press release announcing that it had entered into a merger transaction (the “Merger Transaction”) with 3M.
21. On July 15, 2002, the Merger Transaction was approved by the shareholders of AiT at a special meeting called for that purpose.
22. All shares were remitted to the Company for redemption on July 17, 2002. At that time, Oestreich realized a profit of approximately $15,925.
23. On July 19, 2002 AiT announced that it had concluded the Merger Transaction and, in effect, AiT became a wholly-owned subsidiary of 3M.
24. Such additional allegations as Staff may submit and the Commission may permit.
DATED AT TORONTO this 12 th day of May, 2006.