Sigma Lithium’s former co-CEO fired for trading in blackout period

Vancouver-based Sigma Lithium, which did not reply to questions about the dismissal, gave no reason to investors when announcing the exit of Calvyn Gardner, who was co-CEO with his wife Ana Cabral-Gardner until January 2023.

Gardner’s ouster touched off a series of lawsuits in Brazil and the United States, along with a broader management shakeup, revealing boardroom turmoil at the lithium miner as it tries to sell itself to car firms and big battery industry players.

Gardner and Cabral-Gardner, who are getting divorced, did not respond to requests for comment.

Previously unreported legal correspondence show the company told Gardner’s lawyers in a July letter that he was dismissed over share sales in January. His lawyers acknowledged those trades in a letter to Sigma in August, but said he had been unaware of the firm’s restrictions on what they described as “routine” trading.

Public data from Canada’s System for Electronic Disclosure by Insiders (SEDI) shows that Gardner sold 500,000 shares for about $13.3 million between Jan. 11 and 12, ahead of Sigma’s planned annual report.

It is not a crime to trade during a blackout period, two legal experts told Reuters, but any trades based on material nonpublic information would be considered a violation under North American securities law.

The company said in its July 31 letter to Gardner’s lawyers that he “possessed and may have used” privileged information “relating to the company’s ongoing M&A process” in the trades. In their Aug. 4 reply, his lawyers denied he had traded using any non-public material information.

Sigma, which is listed in Toronto and New York, did not respond to questions about its restrictions on insider trading.

The Canadian Securities Administrators did not reply to a request for comment on whether Gardner’s trades could be a securities violation and whether they were under investigation.

A US Securities and Exchange Commission spokesperson declined to comment.

Blackout periods for trading by insiders are a common corporate restriction ahead of quarterly results, when executives and board members are most likely to have nonpublic information that could affect share prices.

Stephen Cohen, head of the regulatory practice at Sidley Austin LLP, said corporate discipline can vary for insider trading during blackout periods. Minor violations can lead to a warning, while trading with material nonpublic information is often a fireable offense, he said.

Gardner’s lawyers accused Sigma in the correspondence of acting disproportionately and in “bad faith” when it fired him. They cited the fact that another Sigma insider, Vicente Lobo Cruz, traded during a blackout period and went unpunished.

Cruz, who is co-chair of the Sigma board’s technical committee, sold 184,190 shares on Aug. 5, 2022, two weeks ahead of Sigma’s quarterly results, according to SEDI data.

Cruz did not reply to a request for comment. Reuters could not determine if Cruz was investigated or punished by Sigma.

Two people with knowledge of the situation said tension had been mounting last year between the co-CEOs, and Cabral-Gardner seized on her husband’s trading as justification to convince Sigma’s board members to fire Gardner.

After leaving Sigma, Gardner filed at least four lawsuits against his wife in Brazilian courts seeking to revert her decisions involving their shared assets. One of them included his lawyers’ correspondence with Sigma about his dismissal over the January trading.

In August, Sigma sued Gardner in New York, for allegedly misappropriating documents from the firm. Gardner has not commented on the case.