The Canadian Imperial Bank of Commerce has turned employee e-mails into a potent legal weapon in an acrimonious court battle with a team of top executives who left the bank last year to form a competing investment firm.
In a lawsuit filed in the Ontario Superior Court, CIBC alleged that six former senior executives, including its one-time vice-chairman David Kassie, improperly recruited bank employees and took confidential bank data to their new company, Genuity Capital Markets.
Such lawsuits are common when company employees are raided by competitors, in order to slow the pace of potential defections. What is less common, however, is for businesses to paw through employee e-mails and publish them in court documents. Many of the e-mails revealed in the CIBC court documents offer an embarrassing portrait of greed and corporate rebellion, with executives boasting about the "tons of moula" they would make by moving to Genuity.
The revealing e-mails are a stark reminder to employees in the digital age that messages they zap into the Internet ether can come back to haunt them.
E-mails have been powerful smoking guns in a variety of corporate scandals in recent years, giving such prosecutors as New York State Attorney-General Eliot Spitzer powerful ammunition to discipline analysts, investment bankers and corporate executives for acting against the interests of their clients.
Legal experts said the CIBC's use of the e-mails in the Genuity case marks one of the first times that a Canadian employer has used such communications against former employees in a public court battle.
"A lot of people on the Street are going to have a few sleepless nights, going through loads of e-mail to delete them when they hear about this case," said Don Johnston, a technology and privacy specialist at Toronto law firm Aird & Berlis. "But what is so terrifying to people is that they can't really delete their e-mails. They could be stored in any number of places."
CIBC was able to tap into messages sent by BlackBerrys that the former executives apparently believed were protected by a private system of e-mail communications known as PINning, which involves personal identification numbers or PINs.
The bank's ability to read and publish the BlackBerry e-mails is expected to send chills through the legions of investment bankers and lawyers who conduct all kinds of communications through the ubiquitous portable e-mail devices.
"You mean they broke into the PIN messages, how did they do that?" gasped one Bay Street lawyer and frequent BlackBerry PIN user who declined to be identified.
The CIBC isn't saying how it accessed the BlackBerry messages, but states in its lawsuit that the executives "seemed to have believed [they]did not create any record of their e-mails on the [Bank's]central computer systems."
Some BlackBerry devices enable users to engage in direct communications outside a central mail server when PIN numbers are exchanged.
Technical experts, however, said systems are available that allow employers to store or download employees' BlackBerry e-mails when the devices are employed to tap into the office e-mail server to retrieve regular e-mails.
"Employees need to be reminded that whether you are using BlackBerrys or web-based e-mail addresses to send mail, their employers still have access to the traffic," said Michael Geist, a University of Ottawa professor who specializes in technology law.
The defendants
The CIBC lawsuit names six former CIBC World Market employees who are now all Genuity partners, along with four companies: Genuity Capital Markets, 2053960 Ontario Corp., Genuity Financial Group and Kassie Capital Corp.
David Kassie
Bay Street's best-paid deal maker during his 25-year career at CIBC World Markets, Mr. Kassie was pushed out of the CEO slot in February, as bank head John Hunkin moved the dealer into lower-risk activities. An ardent sports fan and one-time basketball player on McGill University's varsity team, he founded Genuity in June.
Daniel Daviau
The head of CIBC World Market's technology, telecom and media banking team joined the firm in 1991 after a stint in corporate and tax law. In the tech boom, he advised on enormous deals for companies such as JDS Uniphase, and he co-headed the dealer's investment banking team for three years prior to departing in May.
Philip Evershed
A senior civil servant in the Mulroney government, Mr. Evershed joined CIBC World Markets in 1993. He led the merger and acquisition team from 2001 until his departure in June. He was also co-head of the investment banking group, and as such, had relationships with most of the bank's major clients.
Earl Rotman
A former corporate lawyer and veteran of Gordon Capital, Mr. Rotman joined CIBC World Markets in 2001, and left I late December. He ran the "diversified industries" group as the dealer's vice-chairman, which meant roles in many deals, and spearheaded the attempt to export income trusts into the U.S. market.
John Esteireiro
The head trader at CIBC World Markets since 2002, he's a veteran of HSBC Securities and Gordon Capital. Prior to quitting in late December, he was regarded as one of the top stock jockeys on Bay Street, and trusted with using the house's capital to help institutional clients buy and sell.
Marie Cordero
As an information technology specialist at CIBC World Markets, Ms. Cordero helped maintain a confidential database called Quantum that contained every piece of information on the dealer's corporate clients. Before Ms. Cordero left for Genuity in late December, she attempted to copy a few CDs. CIBC alleges those discs contained information from Quantum; Ms. Cordero says she was just storing data for her successor.
The electronic communications relay
The Canadian Imperial Bank of Commerce has turned employee electronic communications into a potent legal weapon in a battle with former executives who left the bank last year to form a competing investment firm. The bank has retrieved copies of messages sent via BlackBerry, e-mail and instant messaging. Here's how each communication form works.
BlackBerry
User sends message from BlackBerry device.
The handheld device compresses and encrypts the message and sends it over a wireless network.
The message must pass through a firewall at the user's company.
It passes onto company computers where it is decrypted and compressed by the BlackBerry server (BES).
BES sends the message to the user's e-mail box and copies it into the sent folder, unless that function is disabled.
The user's e-mail program routes the message to the recipient, who may never know it came from a handheld.
Sender creates message in a program like Outlook Express, which sends it to the company's e-mail server.
The server contacts the recipient server using standard Internet protocol and transmits message.
Recipient's e-mail client sends name and password to retrieve message from the local server.
Instant messaging
Conversation initiated on desktop PC connected to the Internet.
Message travels through proxy server, which converts the message into appropriate Internet protocol.
Recipient receives message through a second proxy server, which delivers it to the desktop PC.
-*****
A rival firm takes shape
From: Daniel Daviau < daviaud@rogers.com>
To: Phil Evershed - Home
< phil.evershed@rogers.blackberry.net>;
David Kassie < davidkassie@sympactico.ca>
CC: Rotman, Earl < Earl.Rotman@cibc.ca>
Sent: Sun Oct 24 20:38:07 2004
Subject: employee spread sheet
Attached is a list of employees who have at least verbally confirmed to date and their economic deal. I appreciate there are a number of others we are in discussion on but not yet locked up. Let me know if you have any comments - please specifically sign off on the employee start date, benefit start date and salary start date.
Thanks, Dan
| EMPLOYEE | DATE THEY LEFT CIBC | POSITION | EMPLOYEE START DATE | ANNUAL SALARY | UNITS IN GENUITY FINANCIAL GROUP |
| David Kassie | Oct. 1, '04 | Partner | Nov. 1, '04 | $150,000 | 4,000 |
| Philip Evershed | Nov. 1, '04 | Partner | Nov. 1, '04 | $150,000 | 2,000 |
| Daniel Daviau | Nov. 1, '04 | Partner | Nov. 1, '04 | $150,000 | 2,000 |
| Calin Rovinescu | Oct. 1, '04 | Partner | Nov. 1, '04 | $150,000 | 400 |
| Andrea Horan | Oct. 1, '04 | Partner | Nov. 1, '04 | $60,000 | 50 |
| Earl Rotman | Dec. 16, '04 | Partner | Jan. 3, '05 | $150,000 | 2,000 |
| David Morrison | Dec. 16, '04 | Partner | Jan. 3, '05 | $150,000 | 200 |
| John Esteireiro | Dec. 16, '04 | Partner | Jan. 3, '05 | $150,000 | 200 |
From: Daniel Daviau < daviaud@rogers.com>
To: Earl I. Rotman
Sent:: Nov. 25, 2004 12:01 PM
Subject: Merkur getting together with kassie and I on Monday 10 am.
-****
From: Earl Rotman
To: Daniel J. Daviau
Sent: Nov. 25, 2004 12:04 PM
Subject Merkur getting together with kassie and I. He's done. Don't f--- it up.
-****
From: Andrea Horan
To: Andrea Horan; < daviaud@rogers.com>; < david.kassie@genuitycm.com> ; Phil Evershed ; Steve Garmaise
Sent: Friday, November 19, 2004 4:46 PM
Subject: (deleted)
We (David and I) had a good meeting with (deleted) this afternoon and he seems keen on the idea of joining. It appears as if they only (and yet significant) hurdle is the money he has left behind at CIBC in the form of deferred comp, which I gather is close to $750K. He is thnking of retiring in the next three years and is trying to get his head around whether he would be further ahead joining Genuity for the next three years or just passing the next three years at CIBC and then collecting his comp. He suggested some mechanism that would essentially amount to free options to make him whole (yikes). I have told him that I will follow up with him when I return to the office on November 29. If any of you have any thoughts on this, feel free to speak up. (Dan, in an effort to close the deal I offered him your Vegas loot. Hope that's ok).
Andrea Horan
Genuity Capital Markets
-****
From: Rotman, Earl
To: < arohringer@goodmancarr.com>
Sent: Thursday, September 30, 2004 12:22 AM
Subject: Re: The saga goes on
Interesting conversations tonight: Morrison and Ron Schwartz suggested that Kassie is being to piggish in the amount of equity he (the founders) are keeping. They both implied they knew about me....
-****
From: Evershed, Phil
To: DoForno, Valerie
Sent: Tuesday, September 14, 2004 10:45 AM
Subject: Re: Do
Yes-thx
Sent from my BlackBerry Wireless Handheld
-****
Original Message
From: DoForno, Valerie
To: Evershed, Phil < Phil.Evershed@cibc.ca>
Sent: Tue Sep 14 10:42:23 2004
Subject: Re: Do
You want me to delete all emails from dan?
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