IRREGULAR OPTIONS TRADING IN FRONT OF H.J. HEINZ CO. ACQUSITION LEADS TO ASSET FREEZE

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Feb. 15, 2013 — The Securities and Exchange Commission today obtained an emergency court order to freeze assets in a Zurich, Switzerland-based trading account that was used to reap more than $1.7 million from trading in advance of yesterday’s public announcement about the acquisition of H.J. Heinz Company.

The SEC’s immediate action ensures that potentially illegal profits cannot be siphoned out of this account while the agency’s investigation of the suspicious trading continues.

In a complaint filed in federal court in Manhattan, the SEC alleges that prior to any public awareness that Berkshire Hathaway and 3G Capital had agreed to acquire H.J. Heinz Company in a deal valued at $28 billion, unknown traders took risky bets that Heinz’s stock price would increase. The traders purchased call options the very day before the public announcement. After the announcement, Heinz’s stock rose nearly 20 percent and trading volume increased more than 1,700 percent from the prior day, placing these traders in a position to profit substantially.

"Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be improperly acting on confidential nonpublic information," said Daniel M. Hawke, Chief of the Division of Enforcement’s Market Abuse Unit.

Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office, added, "Despite the obvious logistical challenges of investigating trades involving offshore accounts, we moved swiftly to locate and freeze the assets of these suspicious traders, who now have to make an appearance in court to explain their trading if they want their assets unfrozen."

The SEC alleges that the unknown traders were in possession of material nonpublic information about the impending acquisition when they purchased out-of-the-money Heinz call options the day before the announcement. The timing and size of the trades were highly suspicious because the account through which the traders purchased the options had no history of trading Heinz securities in the last six months. Overall trading activity in Heinz call options several days before the announcement had been minimal.

The emergency court order obtained by the SEC freezes the traders’ assets and prohibits them from destroying any evidence. The SEC’s complaint charges the unknown traders with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In addition to the emergency relief, the SEC is seeking a final judgment ordering the traders to disgorge their ill-gotten gains with interest, pay financial penalties, and be permanently barred from future violations.

The SEC’s expedited investigation is being conducted by Market Abuse Unit members Megan Bergstrom, David S. Brown, and Diana Tani in the Los Angeles Regional Office with substantial assistance from Charles Riely, Market Abuse Unit member in the New York Regional Office who will handle the SEC’s litigation. The SEC appreciates the assistance of the Options Regulatory Surveillance Authority (ORSA).

SEC ALLEGES INSIDER TRADING DURING IBM ACQUISITION OF SPSS INC.

Credit:  Wikimedia Commons.

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Dec. 26, 2012 — The Securities and Exchange Commission today announced additional charges in an insider trading case against two brokers who traded on nonpublic information ahead of IBM Corporation’s acquisition of SPSS Inc.

In an amended complaint filed in federal court in Manhattan, the SEC is now charging research analyst Trent Martin, who was the brokers’ source of confidential information in an insider trading scheme that yielded more than $1 million in illicit profits. Martin worked at a brokerage firm in Connecticut and specialized in Australian equity investments, and he learned nonpublic information about the impending IBM-SPSS transaction from an attorney friend who was working on the deal. Rather than maintaining the confidence of the information, Martin used the information for his own benefit, purchasing SPSS securities and subsequently tipping his roommate Thomas C. Conradt, who traded and tipped his friend and fellow retail broker David J. Weishaus. Martin was specifically named as their source in instant messages between Conradt and Weishaus about their illegal trading.

The SEC charged Conradt and Weishaus with insider trading on November 29. Martin, who fled the U.S. to Australia soon after learning about the SEC’s investigation, currently lives in Hong Kong.

"Martin is a licensed professional who knowingly disregarded insider trading laws to enrich himself, and then fled the United States when he learned of our investigation," said Daniel M. Hawke, Director of the SEC’s Philadelphia Regional Office. "Martin could run but he could not hide, as the long arm of the SEC will extend to those who flee the United States hoping to avoid the consequences of their unlawful conduct."

The SEC alleges that Martin’s attorney friend expected him to maintain information in confidence and refrain from illegal trading or disclosing it to others. The attorney sought moral support, reassurance, and advice when he privately told Martin about his new assignment working on the IBM-SPSS acquisition. The lawyer disclosed to Martin such details as the anticipated transaction price and the identities of the acquiring and target companies while he was describing the magnitude of the assignment.

According to the SEC’s complaint, Martin attempted to purchase SPSS common stock on the very first business day after learning the nonpublic information from his friend. His first three orders were cancelled because he did not have sufficient funds in the account to make the purchases, but he later wired $50,000 from his checking account into his brokerage account to purchase SPSS shares.

The SEC’s complaint alleges that Martin, Conradt and Weishaus violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest and financial penalties, and a permanent injunction against the brokers.

The SEC’s investigation, which is continuing, is being conducted by Mary P. Hansen, A. Kristina Littman, and John S. Rymas in the SEC’s Philadelphia Regional Office. G. Jeffrey Boujoukos and Catherine E. Pappas in the Philadelphia office are handling the litigation.

The SEC acknowledges the assistance of the Options Regulatory Surveillance Authority (ORSA), the New Zealand Securities Commission, and the Australia Securities and Investments Commission. The SEC also acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.

INSURANCE EXECUTIVE CHARGED WITH INSIDER TRADING

Photo:  NYSE.  Credit:  Wikimedia Commons

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

SEC Charges Denver-Based Insurance Executive With Insider Trading
On October 26, 2012, the Securities and Exchange Commission charged an insurance company CEO with insider trading based on confidential information he obtained in advance of a private investment firm acquiring a significant stake in a Denver-based oil and gas company.

The SEC alleges that Michael Van Gilder learned from a Delta Petroleum Corporation insider that Beverly Hills-based Tracinda – which has previously owned large portions of companies such as MGM Resorts International, General Motors, and Ford Motor Company – was planning to acquire a 35 percent stake in Delta Petroleum for $684 million. Van Gilder subsequently purchased Delta Petroleum stock and highly speculative options contracts. He tipped several others, encouraging them to do the same, including a pair of relatives via an e-mail with the subject line "Xmas present." After Tracinda's investment was publicly announced, Delta Petroleum's stock price shot up by almost 20 percent. Van Gilder and his tippees made more than $161,000 in illegal trading profits.

The U.S. Attorney's Office for the District of Colorado today announced a parallel criminal action against Van Gilder.

According to the SEC's complaint filed in federal court in Denver, Van Gilder is the CEO of Van Gilder Insurance Company. He obtained the confidential information about Tracinda's proposed investment and loaded up on Delta Petroleum stock and options in November and December 2007. He then tipped his broker, a co-worker, and relatives.

The SEC alleges that a mere two minutes after speaking to his source at Delta Petroleum on December 22, Van Gilder e-mailed two relatives with the "Xmas present" subject line and stated, "my present (just kidding) is that I can't stress enough the opportunity right now to buy Delta Petroleum." That same day, Van Gilder contacted his broker and arranged to purchase more Delta stock and options for himself. Following the public announcement, Van Gilder reaped approximately $109,000 in illegal profits and his broker, co-worker, and a relative made approximately $52,000.

The SEC's complaint charges Van Gilder with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and seeks a final judgment ordering him to disgorge his and his tippees' ill-gotten gains and pay prejudgment interest and a financial penalty, and permanently enjoining him from future violations of these provisions of the federal securities laws.

SEC CHARGES FORMER INVESTMENT BANK ANALYST WITH TIPPING COLLEGE FRIEND ABOUT IMPENDING MERGERS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Sept. 27, 2012 — The Securities and Exchange Commission today charged a former analyst at a Boston-based investment bank with illegally tipping a close friend with confidential information about clients involved in impending mergers and acquisitions.

The SEC alleges that Jauyo "Jason" Lee, who worked in the San Francisco office of Leerink Swann LLC, gleaned sensitive nonpublic information about the deals from unsuspecting co-workers involved with those clients and by reviewing various internal documents about the transactions, which involved medical device companies. Lee tipped his longtime college friend Victor Chen of Sunnyvale, Calif., with the confidential information, and Chen traded heavily on the basis of the nonpublic details that Lee had a duty to protect. Chen made more than $600,000 in illicit profits, which was a 237 percent return on his initial investment. Bank records reveal a pattern of large cash withdrawals by Lee followed by large cash deposits by Chen, who then used the money for the insider trading.

"Lee worked in an industry where safeguarding nonpublic information is essential, yet he exploited his access to confidential merger and acquisition details to give his friend an unfair trading advantage," said Merri Jo Gillette, Director of the SEC’s Chicago Regional Office.

According to the SEC’s complaint filed in U.S. District Court for the Northern District of California, Lee was first privy to information about Leerink’s client Syneron Medical Ltd., which was negotiating an acquisition of Candela Corporation in 2009. He later learned that Leerink’s client Somanetics Corporation was in the process of being acquired by Covidien plc. in 2010. As Lee collected nonpublic details about each of the deals, he communicated with Chen repeatedly and exchanged dozens of phone calls and text messages. Some of the calls took place from Lee’s office telephone at Leerink. Lee had a duty to preserve the confidentiality of the information that he received in the course of his employment at Leerink.

The SEC alleges that in the days leading up to the public announcements of each of these deals, Chen made sizeable purchases of stock and call options in Candela and Somanetics and made unusual trades in the securities of each of these acquisition targets. Chen had never previously bought securities in these companies, yet he suddenly spent a significant portion of his available cash to buy the Candela and Somanetics securities. Chen proceeded to sell most of his Candela and Somanetics holdings once public announcements were made about the transactions. Because Chen made some of his trades in his sister Jennifer Chen’s account, the SEC’s complaint also names her as a relief defendant for the purposes of recovering the illegal profits in her account.

The SEC alleges that Lee and Chen violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest, financial penalties, and permanent injunctions against Lee and Chen.

The SEC’s investigation was conducted in the Chicago Regional Office by Kara M. Washington and John E. Kustusch and supervised by Peter Chan and Steven L. Klawans. The litigation is being handled by Steven C. Seeger. The SEC thanks the Financial Industry Regulatory Authority’s (FINRA) Office of Fraud Detection and Market Intelligence as well as the Options Regulatory Surveillance Authority for their assistance in this matter.

SEC ALLEGES BROKER COMMITTED INSIDER TRADING IN BURGER KING STOCK

 

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Sept. 20, 2012 – The Securities and Exchange Commission today obtained an emergency court order to freeze the assets of a stockbroker who used nonpublic information from a customer and engaged in insider trading ahead of Burger King’s announcement that it was being acquired by a New York private equity firm.

Photo Credit: U.S. Marshals Service

The SEC alleges that Waldyr Da Silva Prado Neto, a citizen of Brazil who was working for Wells Fargo in Miami, learned about the impending acquisition from a brokerage customer who invested at least $50 million in a fund managed by private equity firm 3G Capital Partners Ltd. and used to acquire Burger King in 2010. Prado misused the confidential information to illegally trade in Burger King stock for $175,000 in illicit profits, and he tipped others living in Brazil and elsewhere who also traded on the nonpublic information.

The SEC obtained the asset freeze in U.S. District Court for the Southern District of New York. The agency took the emergency action to prevent Prado from transferring his assets outside of U.S. jurisdiction. Prado recently abandoned his most current job at Morgan Stanley Smith Barney, put his Miami home up for sale, and began transferring all of his assets out of the country.

"Prado’s e-mails and other communications may have been sent from Brazil and may have been in Portuguese, but our commitment to prosecute illegal insider trading in U.S. markets knows no geographic or language barrier," said Sanjay Wadhwa, Deputy Chief of the SEC Enforcement Division’s Market Abuse Unit and Associate Director of the New York Regional Office.

According to the SEC’s complaint, Prado’s insider trading in Burger King stock occurred from May 17 to Sept. 1, 2010. At the time, Prado was the representative on the account used by the customer to transfer his investment to 3G Capital. The customer had been with Prado for more than 10 years and often shared his confidential financial information with the understanding that it was to remain confidential. Prado had repeated contact with the customer by phone and e-mail as well as in person in Brazil during the time period that Prado traded Burger King securities.

The SEC alleges that Prado began his illegal trading while on a business trip to Brazil, during which he sent an e-mail to a friend that – translated from Portuguese – read, "I’m in Brazil with information that cannot be sent by email. You can’t miss it…." Prado later told his friend on a phone call that night that he heard 3G Capital was going to take Burger King private. The friend, a hedge fund manager in Miami, warned Prado that he should not trade on this information and should not encourage any of his customers to trade either.

According to the SEC’s complaint, Prado went on to tip at least four of his customers who eventually traded in Burger King stock based on nonpublic information about the impending acquisition. For example, just minutes after Prado sent the May 17 e-mail to his friend in Miami, he sent an e-mail to one of those customers which, again translated from Portuguese, read, " … if you are around call me at the hotel … I have some info…You have to hear this." A 10-minute phone conversation followed, and the customer purchased out-of-the-money Burger King call options during the next two days. In August 2010 Prado was on another business trip to Brazil, the same customer sent Prado an e-mail which translated to, "[i]s the sandwich deal going to happen?" Prado replied, "Vai sim," which means, "Yes it’s going to happen." He continued, "[e]verything is 100% under control. I was embarrassed to ask about timing. The last ‘vol’ got in the way." Following these e-mails, the customer – identified as Tippee A in the SEC’s complaint – made additional purchases in Burger King call options. The customer’s total insider trading profits amounted to more than $1.68 million.

The SEC’s complaint against Prado seeks a permanent injunction from violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder, disgorgement with prejudgment interest and monetary penalties.

The SEC’s investigation, which is continuing, has been conducted by Megan Bergstrom, David Brown, and Diana Tani in Los Angeles, and Charles D. Riely in New York, who are members of the SEC Enforcement Division’s Market Abuse Unit. The investigation was supervised by Unit Chief Daniel M. Hawke and Deputy Chief Sanjay Wadhwa. The SEC appreciates the assistance of the Comissão de Valores Mobliliários (Securities and Exchange Commission of Brazil), Options Regulatory Surveillance Authority, and Financial Industry Regulatory Authority (FINRA).

SEC CHARGED A BRISTOL-MYERS SQUIBB EXECUTIVE WITH INSIDER TRADING

FROM: U.S. SECURITES AND EXCHANGE COMMISSION

Washington, D.C., Aug. 2, 2012

– The Securities and Exchange Commission today charged an executive at Bristol-Myers Squibb with insider trading on confidential information about companies being targeted for potential acquisitions. His illegal trading took place as recently as just weeks ago.

The SEC alleges that Robert D. Ramnarine, who lives in East Brunswick, N.J., made more than $300,000 in illegal profits by misusing nonpublic information he obtained while helping Bristol-Myers Squibb evaluate whether to acquire three other pharmaceutical companies. He used multiple personal brokerage accounts to illegally trade in stock options of these potential target companies. Prior to some trading, Ramnarine conducted Internet research from his Bristol computer to determine whether he could be detected by regulators. He searched for such phrases as "can stock option be traced to purchaser" and "illegal insider trading options trace" and viewed such articles as "Ways to Avoid Insider Trading." Ramnarine even viewed a press release on the SEC’s website announcing an enforcement action arising from illegal trading in call options in advance of an acquisition announcement.

"Ramnarine tried to educate himself about how the SEC investigates insider trading so he could avoid detection, but apparently he ignored countless successful SEC enforcement actions against similarly ill-motivated individuals who paid a heavy price for their illegal trading," said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit. "Executives at pharmaceutical companies or in any industry should know better than to abuse confidential, market-moving information, and our charges against Ramnarine should serve notice that when you violate insider trading laws, no matter how you scheme, you will be caught."

The SEC is seeking a court order to freeze Ramnarine’s brokerage account assets. In a parallel criminal action, the U.S. Attorney’s Office for the District of New Jersey announced the arrest of Ramnarine today.

According to the SEC’s complaint filed in federal court in New Jersey, Ramnarine is an executive in the treasury department at Bristol-Myers Squibb. He conducted his insider trading schemes from August 2010 to July 2012, illegally trading in stock options of Pharmasset Inc., Amylin Pharmaceuticals Inc., and ZymoGenetics Inc. in advance of announcements that those companies would be acquired.

The SEC alleges that just as Bristol was finalizing its agreement with ZymoGenetics in late August 2010, Ramnarine started to buy out-of-the-money call options. A call option is a security that derives its value from the underlying common stock of the issuer and gives the purchaser the right to buy the underlying stock at a specific price within a specified period of time. Typically, investors will purchase call options when they believe the stock of the underlying securities is going up. Ramnarine made $30,551 in illegal profits by trading ZymoGenetics call options in advance of a Sept. 7, 2010 public announcement that Bristol-Myers Squibb was acquiring ZymoGenetics.

The SEC further alleges that in advance of a Nov. 21, 2011 announcement that Pharmasset would be acquired by Gilead Sciences Inc., Ramnarine bought Pharmasset call options based on material, nonpublic information that he obtained from participating in Bristol-Myers Squibb’s evaluation of a possible acquisition of Pharmasset. This was part of an auction process conducted by Pharmasset and its investment bankers during the weeks before the Gilead-Pharmasset announcement. Ramnarine made $225,026 in illegal profits when he sold the calls immediately after the public announcement of Pharmasset’s sale.

According to the SEC’s complaint, Ramnarine very recently sold or "wrote" put options and purchased call options in advance of a June 29, 2012 announcement by Bristol-Myers Squibb that it would acquire Amylin. A put option is a security that derives its value from the underlying common stock. When investors sell or "write" puts, they obligate themselves to sell the underlying security at a certain price before the expiration date. Investors usually write puts when they believe the price of the underlying stock price is moving up. Ramnarine’s trades were based on material nonpublic information that he obtained by working on financing and capital structure matters as part of Bristol’s due diligence process leading up to the acquisition announcement. Ramnarine made $55,784 in illegal profits by trading Amylin put and call options in advance of the public announcement.

The SEC alleges that Ramnarine violated Section 17(a) of the Securities Act of 1933 and Sections 10(b) and (14)(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest, a financial penalty, an officer-and-director bar, a permanent injunction, and an order freezing the assets in Ramnarine’s brokerage accounts.

The SEC’s investigation, which is continuing, has been conducted by Market Abuse Unit staff Mary P. Hansen, Paul T. Chryssikos, and John S. Rymas in the Philadelphia Regional Office. Supervising the investigation are Daniel M. Hawke, Deputy Unit Chief Sanjay Wadhwa, and Elaine C. Greenberg, Associate Regional Director in the Philadelphia office. G. Jeffrey Boujoukos and John V. Donnelly are handling the litigation.

The SEC has coordinated its action with the U.S. Attorney’s Office for the District of New Jersey, and also appreciates the assistance of the Options Regulatory Surveillance Authority and Federal Bureau of Investigation.

OWNER OF RESEARCH FIRM CHARGED BY SEC WITH INSIDER TRADING

Photo Credit:  Wikimedia. 
FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., June 26, 2012 — The Securities and Exchange Commission today charged Tai Nguyen, the owner of the California-based equity research firm Insight Research, with insider trading. The charges stem from the SEC’s ongoing investigation of insider trading involving so-called “expert networks” that provide specialized information to investment firms.

The SEC alleges that from 2006 through 2009, Nguyen frequently traded in the securities of Abaxis, Inc. based on inside information he received from a close relative employed at Abaxis. Nguyen repeatedly traded for himself in advance of the company’s quarterly earnings announcements while in possession of key data in those announcements, reaping tens of thousands of dollars in illicit profits. Nguyen also passed that same information to hedge fund clients of Insight Research, who used the inside information to make millions of dollars in profits from trading Abaxis securities.

“Nguyen claimed expertise in researching and analyzing technology companies, but his special edge was his willingness to break the law,” said Sanjay Wadhwa, Associate Director of the SEC’s New York Regional Office and Deputy Chief of the Market Abuse Unit. “Like many other so-called ‘experts’ who trafficked in inside information, Nguyen now finds himself the subject of an enforcement action.”

The SEC has charged 23 defendants in enforcement actions arising out of its expert networks investigation, which has uncovered widespread insider trading at several hedge funds and other investment advisory firms. The insider trading alleged by the SEC has yielded illicit gains of more than $117 million, chiefly in shares of technology companies, including Apple, Dell, Fairchild Semiconductor, and Marvell Technology.

According to the SEC’s complaint, filed in federal court in Manhattan, Nguyen regularly obtained material nonpublic information about Abaxis Inc.’s quarterly earnings — including revenues, gross profit margins and earnings per share — from a relative who worked in Abaxis’s finance department. Nguyen used the information to trade Abaxis securities in his own account and reaped approximately $145,000 in illicit trading profits from 2006 through 2009.

In addition to trading in his own account, the SEC alleges that Nguyen passed the inside information to New York-based Barai Capital Management and Boston-based Sonar Capital Management, both of which were clients of Nguyen’s firm, Insight Research. The two hedge fund managers — who collectively were paying Insight Research tens of thousands of dollars each month — traded Abaxis securities based on the inside information that Nguyen provided and reaped more than $7.2 million in illicit gains for their hedge funds.

The SEC’s complaint charges Nguyen with violating the anti-fraud provisions of U.S. securities laws and seeks a final judgment ordering him to disgorge his ill-gotten gains, with interest, and pay financial penalties, and permanently barring him from future violations.

The SEC’s investigation is continuing. Daniel Marcus and Joseph Sansone, members of the SEC’s Market Abuse Unit in New York, conducted the investigation, along with Matthew Watkins, Neil Hendelman, Diego Brucculeri, and James D’Avino of the New York Regional Office. The SEC thanks the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation for their assistance in the matter.

CIVIL ACTION FILED AGAINST THREE CONSOLE ENERGY, INC., EMPLOYEES FOR INSIDER TRADING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
June 1, 2012
The Securities and Exchange Commission announced today that on June 1, 2012, it filed a civil action against three former employees of CONSOL Energy, Inc. (“CONSOL”) for illegal insider trading in CONSOL securities in advance of the company’s public announcement, on March 15, 2010, that it entered into an agreement to acquire the Appalachian Exploration and Production business of Dominion Resources, Inc. (“Dominion”). The Commission alleges that on March 9, 2010, both Charles E. Mazur Jr., CONSOL’s former Director of Corporate Strategy, and Joseph A. Cerenzia, CONSOL’s former Director of Public Relations, received a confidential email stating that the acquisition of Dominion was going to be announced prior to the opening of the market on March 15, 2010. Both individuals traded CONSOL securities after learning of the pending acquisition announcement. James S. Poland, CONSOL’s former General Manager of Engineering, conducted an environmental survey in connection with the of the Dominion acquisition. Poland also traded CONSOL stock after receiving nonpublic information about the acquisition and when it would be announced.

The Commission’s complaint alleges that Mazur violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5(a) and (c) thereunder, and alleges that Poland and Cerenzia violated of Sections 17(a)(1) and (3) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder, and seeks permanent injunctions, disgorgement, prejudgment interest and civil penalties.

The defendants agreed to settle the Commission’s charges, without admitting or denying the allegations in the Commission’s complaint. Under the settlements, the defendants consented to Final Judgments that will permanently enjoin Mazur from violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and permanently enjoin Poland and Cerenzia from violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Mazur agreed to pay approximately $97,171 in disgorgement, prejudgment interest, and civil penalties. Poland agreed to pay approximately $19,600 in disgorgement, prejudgment interest, and civil penalties. Cerenzia agreed to pay approximately $15,453 in disgorgement, prejudgment interest, and civil penalties. The settlements are subject to court approval.

SEC CHARGES FORMER OIL COMPANY EXECUTIVE WITH INSIDER TRADING

Photo:  NYSE.  Credit:  Wikimedia
FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
May 11, 2012
The Securities and Exchange Commission today announced charges against a former executive at a Bakersfield, Calif.-based oil and gas production company for insider trading in his company’s stock using confidential information received while he was the CEO and chairman of the board.

The Commission alleges that Frank Lynn Blystone received e-mail updates prior to his March 5, 2010, retirement from Tri-Valley Corporation that contained confidential information about the company’s ongoing efforts to raise capital and problems it had encountered in a securities offering. Based on the non-public information he received, Blystone liquidated stock he held in a brokerage account shortly before a Tri-Valley announcement on April 6, 2010, that it had entered into an agreement with six institutional investors to sell its securities at a deep discount from the prevailing market price. Blystone avoided losses of approximately $36,000 when the company’s stock price fell 38 percent after the announcement.

Blystone has agreed to pay $75,000 to settle the Commission’s charges without admitting or denying the allegations.

According to the Commission’s complaint filed in the U.S. District Court for the Eastern District of California, based on the confidential information he received, Blystone concluded that the terms of a contemplated securities offering by Tri-Valley would be onerous. He foresaw that either the company’s securities would be sold at a discount to the market price or additional securities would be issued if the price of the stock fell, which would dilute the value of Tri-Valley’s stock. After leaving the company, Blystone’s concerns about Tri-Valley’s securities offering were reinforced when he learned of plans to sell two oil drilling leases in what he characterized in an e-mail to a friend as a “fire sale.” Therefore, Blystone liquidated 50,100 shares of Tri-Valley stock that he held in a brokerage account. He sold 90 percent of those shares on April 5, the day before Tri-Valley’s public announcement.

The complaint charges Blystone with violating Section 17(a)(1) and (3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5(a) and (c) thereunder. Blystone agreed to pay disgorgement of $36,267, prejudgment interest of $2,493, and a penalty of $36,267. He also agreed to the entry of a final judgment permanently enjoining him from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 and barring him from serving as an officer or director of a public company. The settlement is subject to court approval.

MONTANA PARALEGAL AND FATHER CHARGED IN INSIDER TRADING SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Montana-Based Paralegal and Her Father in Insider Trading Scheme
Washington, D.C., May 7, 2012 — The Securities and Exchange Commission today charged a former paralegal at a Kalispell, Mont.-based semiconductor company and her father with insider trading on confidential information about the 2009 acquisition of the company.

The SEC alleges that Angela Milliard wired money to her boyfriend’s brokerage account so she could illegally trade on nonpublic details she learned while working as a legal assistant on Semitool Inc.’s then-secret deal with a Silicon Valley company. She also tipped her father Kenneth Milliard with the confidential information. He then traded on the nonpublic information and tipped his sons, who also made trades. The morning the acquisition was announced, the Milliards sold their shares for illicit profits of more than $67,000.

Angela and Kenneth Milliard have agreed to settle the SEC’s charges by paying more than $175,000.  “Angela Milliard exploited her access to confidential merger and acquisition information to illicitly enrich herself and her family,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office. “As a member of a legal department entrusted with sensitive deal documents, she had a duty to safeguard that information, not trade on it.”

According to the SEC’s complaint filed in federal court in Montana, Angela Milliard first gained access to confidential deal information in October 2009, when she learned that Semitool and the acquiring company – Applied Materials Inc. – had entered into advanced merger negotiations. After learning that the tender offer was to happen in mid-November at a nearly 30 percent premium over Semitool’s then-trading price, she wired money to her boyfriend’s brokerage account and used it to surreptitiously buy shares of Semitool.
The SEC alleges that Angela Milliard tipped her father, who also purchased Semitool shares and encouraged his sons to do the same, which they did. They reaped their illegal insider trading profits following the public announcement of the merger on Nov. 17, 2009.

The Milliards settled the SEC’s charges without admitting or denying the allegations. Angela Milliard agreed to pay full disgorgement of her trading profits totaling $20,355 plus prejudgment interest of $1,614.60 and a penalty of $54,022.11. Kenneth Milliard agreed to pay full disgorgement of his and his sons’ trading profits totaling $47,805 plus prejudgment interest of $3,765.19 and a penalty of $47,805.11.
The SEC’s investigation was conducted by Jennifer J. Lee and Jina L. Choi of the San Francisco Regional Office.

TWO FINANCIAL ADVISERS CHARGED BY SEC WITH INSIDER TRADING WITH CONFIDENTIAL MERGER INFORMATION

The excerpt below is from the SEC website:
March 14, 2012
The Securities and Exchange Commission announced that, on March 13, 2012, it charged two financial advisors and three others in their circle of family and friends with insider trading for more than $1.8 million in illicit profits based on confidential information about a Philadelphia-based insurance holding company’s merger negotiations with a Japanese firm.

The SEC’s complaint, filed in U.S. District Court for the Eastern District of Pennsylvania, charges Timothy J. McGee, of Malvern, Pa., Michael W. Zirinsky, of Schwenksville, Pa., Robert Zirinsky, of Quakertown, Pa. and Hong Kong residents Paulo Lam and Marianna sze wan Ho with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also names as relief defendants Michael Zirinsky’s wife Kellie F. Zirinsky, sister Jillynn Zirinsky, mother Geraldine A. Zirinsky, and grandmother Mary L. Zirinsky for the purpose of recovering illegal profits in their trading accounts. Lam and Ho have each agreed to settle the SEC’s charges and pay approximately $1.2 million and $140,000 respectively.

The SEC’s complaint alleges that McGee and Michael Zirinsky, who are registered representatives at Ameriprise Financial Services, illegally traded in the stock of Philadelphia Consolidated Holding Corp. (PHLY) based on nonpublic information about the company’s impending merger with Tokio Marine Holdings. The complaint alleges that McGee misappropriated the inside information from a PHLY senior executive who was confiding in him through their relationship at Alcoholics Anonymous (AA) about pressures he was confronting at work. McGee then purchased PHLY stock in advance of the merger announcement on July 23, 2008, and made a $292,128 profit when the stock price jumped 64 percent that day.

The complaint further alleges that McGee tipped Michael Zirinsky, who purchased PHLY stock in his own trading account as well as those of his wife, sister, mother, and grandmother. Zirinsky tipped his father Robert Zirinsky and his friend Paulo Lam, who in turn tipped another friend whose wife Marianna sze wan Ho also traded on the nonpublic information. The complaint alleges that the Zirinsky family collectively obtained illegal profits of $562,673 through their insider trading. Lam made an illicit profit of $837,975 and Ho profited by $110,580.

The complaint seeks a final judgment ordering disgorgement of ill-gotten gains together with prejudgment interest from the defendants and relief defendants, and permanent injunctions and penalties against the defendants.

Lam and Ho have each consented, without admitting or denying the SEC’s allegations, to the entry of a final judgment permanently enjoining them from violating Section 10(b) of the Exchange Act and Rule 10b-5. Lam agreed to pay $837,975 in disgorgement, $123,649 in prejudgment interest, and a penalty of $251,392. Ho has agreed to pay $110,580 in disgorgement, $16,317 in prejudgment interest, and a penalty of $16,587. The settlements are subject to court approval.

The SEC’s investigation was conducted by Philadelphia Regional Office enforcement staff Brendan P. McGlynn, Patricia A. Paw and Daniel L. Koster. The SEC’s litigation will be led by Scott A. Thompson, Nuriye C. Uygur, and G. Jeffrey Boujoukos.

MANAGEMENT CONSULTANT CHARGED WITH INSIDER TRADING IN NBTY INC STOCK

The following excerpt is from the SEC website: 
On March 15, 2012, the Securities and Exchange Commission charged a Chicago-based management consultant with insider trading based on confidential information about his client’s impending takeover of a Long Island-based vitamin company.

Sherif Mityas, a partner and vice-president at a global management consulting firm has agreed to pay more than $78,000 to settle the SEC’s charges. The proposed settlement is subject to the approval of Chief Judge Carol B. Amon of the U.S. District Court for the Eastern District of New York. In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York today announced the unsealing of criminal charges against Mityas.

The SEC’s complaint, filed in federal court in Brooklyn, alleges that Mityas and others at his were retained by Washington, D.C.-based private equity firm The Carlyle Group to provide strategic advice related to the acquisition of NBTY Inc. That same month, Mityas purchased NBTY stock and subsequently tipped a relative who also bought NBTY shares. After Carlyle publicly announced its acquisition of NBTY, Mityas and his relative sold their NBTY stock for a combined profit of nearly $38,000.

According to the SEC’s complaint, Mityas’s firm was retained by Carlyle in May 2010. Only five days after being told during a May 17 conference call that NBTY was Carlyle’s acquisition target, Mityas moved $50,000 from a bank account he shared with a relative into a brokerage account they shared. On May 27, he transferred $49,000 from that brokerage account to a different relative’s brokerage account that he controlled as custodian and then used those funds to purchase 1,300 shares of NBTY at a cost of more than $44,000. On July 7, based on a tip from Mityas, yet another relative bought 440 shares of NBTY stock. That same relative also bought an additional 210 shares on July 14. Carlyle’s acquisition of NBTY was publicly announced the following day. Mityas sold all of his shares only three hours after the announcement was made, for an illegal profit of $25,896. The relative held the shares purchased on July 7 and 14 through the completion of the merger, and sold all of the shares on October 1 for an illicit profit of $12,035.
The SEC’s complaint charges Mityas with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The settlement, which is subject to court approval, would require Mityas to pay disgorgement of his and his relative’s ill-gotten gains totaling $37,931, plus prejudgment interest of $2,375.39, and a penalty of $37,931. The settlement also would bar Mityas from serving as an officer or director of a public company and permanently enjoin him from future violations of these provisions of the federal securities laws.