SEC CHARGES FRIENDS WITH INSIDER TRADING REGARDING COOPER TIRE COMPANY ACQUISITION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

04/02/2015 12:30 PM EDT

The Securities and Exchange Commission charged two longtime friends who illegally profited from insider trading on news of a proposed acquisition of Cooper Tire and Rubber Company by Apollo Tyres Ltd.

In a complaint filed in U.S. district court in Connecticut, the SEC filed fraud charges against Amit Kanodia, of Brookline, Massachusetts, an entrepreneur and private equity investor, and Iftikar Ahmed, of Greenwich, Connecticut, a general partner at a venture capital firm.  The SEC named Rakitfi Holdings LLC, a company owned by Ahmed, and Lincoln Charitable Foundation, a supposed charity operated by Kanodia, as relief defendants.  The SEC is seeking to have the defendants return their allegedly ill-gotten gains with interest and pay civil monetary penalties.

The U.S. Attorney’s Office for the District of Massachusetts announced parallel criminal charges against Kanodia and Ahmed.

The SEC alleges that by April 2013, India-based Apollo Tyres was engaged in serious negotiations to acquire Cooper Tire, of Findlay, Ohio.  Although the acquisition was never completed, the complaint alleges that Cooper Tire’s stock price jumped 41 percent when the acquisition was announced in June 2013.  The SEC alleges that Kanodia tipped Ahmed and another friend prior to the acquisition announcement after learning of the deal from his wife, then the general counsel at Apollo who was intimately involved in Apollo’s efforts to acquire Cooper Tire.

According to the SEC’s complaint, Kanodia shared the highly confidential information with Ahmed who began buying significant amounts of Cooper Tire stock and options.  Once news of the deal was public, Ahmed immediately liquidated his Cooper Tire holdings, reaping more than $1.1 million of ill-gotten profits, according to the complaint.  Ahmed later paid Kanodia a kickback by transferring $220,000 to Lincoln Charitable Foundation, a supposed charity that Kanodia controlled and used to mask the kickback, the complaint alleges.

A second close friend of Kanodia, identified in the complaint as Tippee 1, also profited by trading on the confidential information provided by Kanodia and paid a portion of his illicit gains to Kanodia using the same supposed charity, the SEC’s complaint further alleges.

“We allege that Kanodia gave inside information to two close friends who then kicked back a portion of their insider trading profits to a supposed charity that Kanodia controlled,” said Joseph G. Sansone, Co-Deputy Chief of the SEC Enforcement Division’s Market Abuse Unit.  “Despite Kanodia’s attempts at concealment, the SEC staff was able to uncover and unravel the scheme.”

The SEC’s complaint charges Kanodia and Ahmed with violating federal anti-fraud laws and a related SEC ant-fraud rule. Rakitfi Holdings and Lincoln Charitable Foundation are named as relief defendants in the SEC’s complaint for the purpose of recovering ill-gotten gains from the trading.

The SEC’s investigation, which is continuing, has been conducted by Jay A. Scoggins and Jeffrey E. Oraker of the Market Abuse Unit in the Denver Regional Office with assistance from Patrick A. McCluskey of the Market Abuse Unit in the Philadelphia Regional Office.  The case has been supervised by Daniel M. Hawke, Chief of the Market Abuse Unit, and Mr. Sansone, and the litigation will be led by Nicholas P. Heinke and Mark L. Williams of the Denver Regional Office.  The SEC appreciates the assistance of the U.S. Attorney’s Office in Boston, the U.S. Attorney’s Office in Connecticut, the Federal Bureau of Investigations, and FINRA, the Financial Industry Regulatory Authority.

2 MORE CHARGED BY SEC WITH INSIDER TRADING IN SPSS INC. ACQUISITION BY IBM CASE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

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.

FORMER BMY EXECUTIVE SETTLES CHARGES OF INSIDER TRADING WITH SEC

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Former Bristol-Myers Executive Agrees to Settle Insider Trading Charges

The Securities and Exchange Commission announced today that the Honorable Susan D. Wigenton of the United States District Court for the District of New Jersey entered a judgment approving a $324,777 settlement between the Commission and Robert D. Ramnarine, a former executive at Bristol-Myers Squibb Co., in a case that arose from allegations of insider trading in the securities of three companies that Bristol had targeted for acquisitions between 2010 and 2012.

In its action against Ramnarine, SEC v. Robert D. Ramnarine, 2:12-cv-04837 (D.N.J.), filed on August 2, 2012, the Commission alleged that Ramnarine, a former executive in Bristol's treasury department, misappropriated material nonpublic information relating to Bristol's involvement in evaluating possible acquisitions of ZymoGenetics, Inc., Pharmasset, Inc. and Amylin Pharmaceuticals, Inc. and then traded in stock options of these potential target companies' securities in personal brokerage accounts. Prior to buying Pharmasset call options, the Commission alleged that Ramnarine sought to conceal his unlawful conduct by conducting internet research, using his Bristol computer, to determine whether his option trading would be detected by regulators. In particular, the Commission alleged that Ramnarine ran internet searches using Bristol's computer network for phrases including "can stock option be traced to purchaser," "how to detect can stock option be traced to purchase inside trading," and "illegal insider trading options trace." According to the Commission's complaint, Ramnarine realized ill-gotten gains of at least $311,361 by trading stock options of ZymoGenetics, Pharmasset and Amylin in advance of announcements that those companies would be acquired.

The judgment entered in the Commission's action permanently enjoins Ramnarine from violating 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, and permanently enjoins Ramnarine from acting as an officer or director of any issuer that has any class of securities registered pursuant to Section 12 of the Exchange Act. The judgment also requires Ramnarine to disgorge $311,361, plus prejudgment interest of $13,061, and requires that funds in a brokerage account controlled by Ramnarine that were frozen by previous order of the Court be transferred to the Commission. Pursuant to the judgment, the Commission may later move the Court to impose a civil penalty against Ramnarine.

The U.S. Attorney's Office for the District of New Jersey filed a parallel criminal action against Ramnarine on August 1, 2012 based on the same facts, U.S. v. Ramnarine, 3:13-cr-00387 (D.N.J.), and on June 10, 2013, Ramnarine pleaded guilty to securities fraud before the Honorable Anne E. Thompson of the United States District Court for the District of New Jersey. Sentencing is scheduled for September 26, 2013.

The Commission acknowledges the assistance of the U.S. Attorney's Office for the District of New Jersey, the Federal Bureau of Investigation, and the Options Regulatory Surveillance Authority.

The Commission's investigation was conducted by Market Abuse Unit staff Paul T. Chryssikos, Senior Counsel, and John S. Rymas, Investigator, in the Philadelphia Regional Office. Daniel M. Hawke, Chief of the Market Abuse Unit, supervised the investigation. Regional Trial Counsel, G. Jeffrey Boujoukos and Senior Trial Counsel, John V. Donnelly, handled the litigation.