The Securities and Exchange Commission today announced it has charged two additional brokers with trading on inside information ahead of the $1.2 billion acquisition of SPSS Inc. in 2009 by IBM Corporation.
The SEC alleged that former brokers Benjamin Durant III and Daryl M. Payton illegally traded on a tip about the acquisition from Thomas C. Conradt, a friend and fellow broker in the New York office of a Connecticut-based broker-dealer. The SEC complaint, filed in federal court in Manhattan, seeks return of alleged ill-gotten trading gains of approximately $300,000, with interest, financial penalties, and permanent injunctions.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Durant and Payton.
The SEC previously charged that Conradt and David J. Weishaus, another fellow broker and tippee, traded on confidential information that Conradt received from his roommate, Trent Martin, a research analyst who misappropriated it from an attorney working on the transaction. Martin, Conradt, and Weishaus settled with the SEC and pled guilty last year to related criminal charges in the matter.
“Durant and Payton were licensed professionals who knowingly disregarded insider trading laws to enrich themselves at the expense of investors,” said Sharon B. Binger, director of the SEC’s Philadelphia Regional Office. “The SEC is committed to taking action against those who undermine the public’s confidence in the markets by engaging in insider trading.”
According to the SEC’s complaint, in a private meeting with Martin, his attorney friend revealed nonpublic information about the acquisition, including the names of the companies and the anticipated transaction price. The lawyer expected Martin to keep the information in confidence and refrain from trading on it but instead, Martin traded and tipped Conradt, who traded and tipped Durant and Payton, among others. The SEC further alleges that on the day that IBM’s acquisition of SPSS was publicly announced, Durant, Payton, and others met at a Manhattan hotel room and discussed what to do if law enforcement officials contacted them about their trading in SPSS securities.
The SEC’s continuing investigation is being conducted by Scott A. Thompson, A. Kristina Littman, and John S. Rymas. G. Jeffrey Boujoukos and Catherine E. Pappas are handling the litigation. All are with the SEC’s Philadelphia Regional Office.
The SEC acknowledges the assistance of the Options Regulatory Surveillance Authority (ORSA), the U.S. Attorney’s Office for the Southern District of New York, and the Federal Bureau of Investigation.