Montreal Pierre Karl Péladeau's media company has lost its suit against former Groupe Vidéotron Ltée chief executive officer Claude Chagnon in which it was alleged he profited from illegal insider trading.
In a Quebec Superior Court decision, Mr. Justice Brian Riordan ruled this week that Quebecor Media Inc. and its cable subsidiary Vidéotron failed to demonstrate conclusively that Mr. Chagnon broke securities laws in connection with privileged information he had about a possible takeover offer from Toronto-based Rogers Communications Inc.Quebecor Media and Vidéotron had alleged that Mr. Chagnon profited from insider knowledge when he received 1.2 million Vidéotron stock options worth $26 per share as part of his compensation package on Jan. 19, 2000, while in possession of privileged information concerning takeover talks with Rogers.
The suit – launched in 2002 – alleged that, had the public known about the Rogers offer, the price of the options would have been $42, the value of the share-swap bid that Rogers eventually proposed.
Ultimately, it was Quebecor that beat out Rogers in the battle over Vidéotron with a richer, all-cash offer in the fall of 2000.
The suit alleged that Mr. Chagnon improperly pocketed $23.2-million, the difference between Quebecor's $45 per share offer for Vidéotron and the $26-a-share purchase price of his stock options.
Mr. Chagnon's lawyers argued that the terms of his compensation package were set in the weeks preceding informal takeover talks between Mr. Chagnon's father – André Chagnon, who was then CEO – and Rogers CEO Ted Rogers on Jan. 10, 2000.
A formal takeover offer from Rogers was filed on Jan. 25, 2000.
Mr. Justice Riordan also rejected Quebecor Media's and Vidéotron's allegations that Claude Chagnon failed to meet his obligations to shareholders.
After Quebecor, with the hefty financial backing of the Caisse de dépôt et placement du Québec, beat out the Rogers bid with its $5.4-billion offer and took over Vidéotron, the founding Chagnon family received about $1.8-billion for its stake.
Reached at his home in Vaudreuil, Que., near Montreal, Claude Chagnon, 54, said he feels vindicated. “Obviously, there is a sense of relief. It's all well and good to be certain in one's mind that one has acted correctly, but there was always that element of uncertainty because this matter was before the courts,” he said.
Quebecor officials were not immediately available to comment or indicate whether the decision will be appealed.