SEC ANNOUNCES FORMER MANAGING DIRECTOR OF NASDAQ ORDERED TO DISGORGE INSIDER TRADING PROFITS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23156 / December 12, 2014

Securities and Exchange Commission v. Donald L. Johnson, et al., Civil Action No. 11-CV-3618 (VM) (S.D.N.Y.)

Court Orders Former Managing Director of the NASDAQ Stock Market to Disgorge More Than $898,000 in Insider Trading Profits

The Securities and Exchange Commission announced today that on November 12, 2014, the Honorable Victor Marrero of the United States District Court for the Southern District of New York entered a final judgment against defendant Donald L. Johnson, formerly a Managing Director of The NASDAQ Stock Market ("NASDAQ"), ordering Johnson to disgorge insider trading profits of $755,066.20, together with prejudgment interest thereon in the amount of $143,041.72, for a total payment of $898,107.92. Johnson consented to the entry of the final judgment. The Court previously had entered a judgment permanently enjoining Johnson for violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, representing the full injunctive relief sought by the SEC in the same civil action.

In its Complaint, filed in May 2011, the SEC had alleged that Johnson had unlawfully traded in advance of nine announcements of material nonpublic information involving NASDAQ-listed companies from August 2006 to July 2009. According to the SEC's Complaint, Johnson took advantage of both favorable and unfavorable information that was entrusted to him in confidence by NASDAQ and its listed companies, shorting stocks on several occasions and establishing long positions in other instances. The SEC alleged that Johnson reaped illicit profits in excess of $755,000 from his illegal trading.

On May 26, 2011, Johnson pleaded guilty to a federal criminal charge of securities fraud in a parallel criminal action arising out of certain of the conduct underlying the SEC's action. On August 12, 2011, Johnson was sentenced to forty-two months in prison and ordered to forfeit $755,066.

Following the entry of the final judgment against Johnson, which provided for payment of full disgorgement with prejudgment interest, the SEC voluntarily dismissed its relief defendant claim against Johnson's wife, Dalila Lopez. This concludes the SEC's civil action against Johnson.

The SEC acknowledges the assistance of the Fraud Section of the U.S. Justice Department's Criminal Division and the U.S. Postal Inspection Service. The SEC also acknowledges FINRA and NASDAQ for their assistance in this matter.

SEC CHARGES FORMER COO WITH INSIDER TRADING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23142 / November 25, 2014

Securities and Exchange Commission v. D. Michael Donnelly, Civil Action No. 4:14-cv-01970 (E.D. Mo., November 25, 2014)

SEC Charges Former Solutia Executive with Insider Trading

The Securities and Exchange Commission today charged D. Michael Donnelly, the former Chief Operating Officer of Solutia, Inc., with insider trading in the stock of Solutia based on material non-public information regarding Eastman Chemical Company’s offer to acquire Solutia.  On the morning of January 27, 2012, Solutia and Eastman announced that Eastman would acquire Solutia at an implied value of $27.65 per share for Solutia investors.  At the end of trading on January 27, 2012, Solutia’s stock price closed at $27.51 per share, approximately 41 percent higher than the previous day’s close.

According to the SEC’s complaint filed in the U.S. District Court for the Eastern District of Missouri, Donnelly knew of Eastman’s interest in acquiring Solutia and learned on November 18, 2011, that Eastman would be submitting an improved offer.  The complaint alleges that between November 18, 2011, and November 22, 2011, Donnelly made multiple purchases of Solutia stock totaling 8,130 shares in brokerage accounts in the names of his children.  The complaint also alleges that between February 2, 2012, and February 8, 2012, Donnelly sold all 8,130 shares of Solutia stock for a profit of $104,391.  The complaint alleges that Donnelly misappropriated this information for his own personal benefit and breached the duty of trust and confidence that he owed to Solutia and its shareholders.

Without admitting or denying the SEC’s allegations, Donnelly agreed to settle the case against him.  The settlement is pending final approval by the court.  Specifically, Donnelly consented to the entry of a final judgment permanently enjoining him from violations of Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; requiring him to pay disgorgement of $104,391, the amount of his ill-gotten gains, plus prejudgment interest of $8,371.71, and a civil penalty of $104,391; and prohibiting him from serving as an officer and director of a public company.

SEC ANNOUNCES ARREST OF MAN FOR ROLE IN INSIDER TRADING CASE INVOLVING A TIP

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23131 / November 14, 2014

USA v. Robert H. Bray, Case No. 1:14-MJ-5119-JGD in the United States District Court for the District of Massachusetts

USA v. John Patrick O'Neill, Case No. 1:14-cr-10317-WGY in the United States District Court for the District of Massachusetts

Securities and Exchange Commission v. J. Patrick O'Neill and Robert H. Bray, Civil Action No. 1:14-cv-13381 (District of Massachusetts, Complaint filed August 18, 2014)

Boston-Area Defendant in SEC Insider Trading Case Faces Criminal Charges

The Securities and Exchange Commission announced that on November 12, 2014, Robert H. Bray ("Bray") was arrested by the Federal Bureau of Investigation and charged by a criminal complaint with participating in an insider trading conspiracy for trading in the stock of Wainwright Bank & Trust Company ("Wainwright") based on a tip he received from a friend.

The Commission previously charged Bray and J. Patrick O'Neill ("O'Neill") with insider trading in a civil action filed on August 18, 2014. The criminal charges are based on the same conduct underlying the SEC's action. The SEC's complaint alleged that O'Neill, a former senior vice president at Eastern Bank Corporation, learned through his job responsibilities that his employer was planning to acquire Wainwright. According to the SEC's complaint, O'Neill tipped Bray, a friend and fellow golfer with whom he socialized at a local country club. In the two weeks preceding a public announcement about the planned acquisition, Bray sold his shares in other stocks to accumulate funds he used to purchase 31,000 shares of Wainwright. After the public announcement of the acquisition caused Wainwright's stock price to increase nearly 100 percent, Bray sold all of his shares during the next few months for nearly $300,000 in illicit profits.

The Commission also announced that on October 31, 2014, the United States Attorney's Office for the District of Massachusetts filed a criminal Information against O'Neill. The criminal Information charges O'Neill with one count of conspiracy to commit securities fraud. O'Neill was initially charged by a criminal complaint when he was arrested in August 2014.

The SEC's action, which is pending, seeks injunctions against each of the defendants from further violations of the charged provisions of the federal securities laws, disgorgement of ill-gotten gains, and civil penalties.

SEC ANNOUNCES INSIDER TRADING CHARGES AGAINST NEW JERSEY MAN IN MONEY IN A SHOE-BOX CASE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

10/24/2014 01:35 PM EDT

The Securities and Exchange Commission today announced insider trading charges against a New Jersey man who generated nearly $700,000 in illicit profits trading in the securities of two pharmaceutical companies that were about to be acquired.  The SEC charged his source of nonpublic information earlier this month.

The SEC alleges that David Post of Livingston, N.J., was tipped with confidential details about the impending deals by his former business school classmate who was tasked with evaluating potential acquisitions in his financial analyst job at a major pharmaceutical company.  Post and his friend, Zachary Zwerko, used prepaid “burner” cell phones to exchange coded text messages in advance of Post’s trading.  They also used a dummy e-mail account they could both access to draft an e-mail message in code and leave it in the draft folder for the other to read and then delete.  In exchange for the illegal tips, Post paid Zwerko $7,000 at a Halloween party following his profitable trading in 2012, and gave him $50,000 in a shoebox when Zwerko visited his home after additional insider trading occurred earlier this year.

The U.S. Attorney’s Office for the Southern District of New York announced parallel insider trading cases against Post today and against Zwerko earlier this month.

“Post and Zwerko tried to keep law enforcement authorities in the dark by using prepaid cell phones and a dummy e-mail account to communicate inside information, and Post doled out the kickbacks inside his own home,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office.  “But in the end, the SEC staff’s investigative expertise helped in bringing yet another audacious insider trading scheme to light.”

According to the SEC’s amended complaint filed in U.S. District Court for the Southern District of New York, Post traded on the basis of confidential details about two acquisition targets of the pharmaceutical company where Zwerko then worked.  The insider trading first occurred in 2012 when Zwerko learned his employer was among several other pharmaceutical companies in a competitive bidding process for Ardea Biosciences Inc.  In the several weeks leading up to Ardea’s public announcement, Post received regular updates from Zwerko about the status of confidential negotiations and purchased $227,000 worth of Ardea securities – the most he had ever invested in a single company.  Post had never before purchased Ardea securities.  After Ardea publicly announced that it had accepted an acquisition bid and its stock price rose by 51 percent, Post sold all of his shares and reaped profits of approximately $105,000.

The SEC further alleges that Zwerko tipped Post with confidential details about his employer’s nonpublic negotiations to acquire Idenix Pharmaceuticals Inc. earlier this year.  Although not directly involved in the deal, Zwerko accessed confidential files in the company’s database during the negotiations and gleaned additional nonpublic information in his communications with others at the company.  Post, who had never before purchased Idenix securities, made purchases totaling $219,000 from May 21 to June 6.  After a public announcement was made on June 9, Post sold his Idenix securities for a profit of approximately $579,000.

The SEC’s amended complaint charges Zwerko and Post with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  The complaint seeks permanent injunctive relief, disgorgement with prejudgment interest on a joint and several liability basis, and financial penalties.

The SEC’s investigation, which is continuing, has been conducted by Dominick D. Barbieri, Neil Hendelman, and Charles D. Riely.  The SEC’s litigation will be led by Mr. Barbieri.  The case has been supervised by Sanjay Wadhwa.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, Federal Bureau of Investigation, and Financial Industry Regulatory Authority.

SEC CHARGES HEDGE FUND MANAGER WITH INSIDER TRADING USING MATERIAL, NONPUBLIC INFORMATION IN ADVANCE OF NEWS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23118 / October 24, 2014

Securities and Exchange Commission v. Stephen E. Slawson, Civil Action No. Number1:14-cv-3421

SEC Charges New Jersey-Based Hedge Fund Manager with Insider Trading in Carter's Stock

The Securities and Exchange Commission today filed insider trading charges against a New Jersey-based hedge fund manager who allegedly used material, nonpublic information to trade in advance of market-moving news concerning Carter's Inc.

Stephen Slawson, who lives in Lebanon, N.J., and was co-founder and former manager to a hedge fund named TCMP3 Partners L.P., becomes the eighth individual that the SEC has charged in connection with the agency's investigation into insider trading and other misconduct involving the securities of the Atlanta-based marketer of children's clothing.

According to the SEC's complaint filed in federal court in the Northern District of Georgia, Slawson conducted insider trading on at least eight occasions in the hedge fund's accounts or personal accounts belonging to him or other family members. Slawson was initially tipped with nonpublic information about Carter's by a hedge fund investment consultant named Dennis Rosenberg, who received the inside information from a Carter's executive. Slawson later communicated directly with that executive: Eric Martin, who at the time was vice president and director of investor relations.

The SEC alleges that based on the illegal tips that Slawson received from Rosenberg and Martin, his insider trading in Carter's stock generated more than $500,000 in profits or avoided losses.

The SEC's complaint alleges that Slawson violated the antifraud provisions of the federal securities laws: Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks a permanent injunction, disgorgement with prejudgment interest and civil monetary penalties pursuant to Section 21A of the Exchange Act.

Previously, the U.S. Attorney's Office for the Northern District of Georgia announced that a grand jury had indicted Slawson and charged him with one count of conspiracy to commit securities fraud and wire fraud, 25 counts of securities fraud, and nine counts of wire fraud, based on substantially similar conduct as alleged in the SEC's complaint. He is awaiting a trial in the criminal case.

The SEC, whose investigation continues into insider trading of Carter's stock, appreciates the assistance of the U.S. Attorney's Office for the Northern District of Georgia and the Financial Industry Regulatory Authority.

SEC ANNOUNCES SETTLEMENT WITH BROTHER OF RAJ RAJARATNAM

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission today announced that former hedge fund manager Rajarengan “Rengan” Rajaratnam has agreed to pay more than $840,000 and accept securities industry bars in order to settle the agency’s insider trading case against him.

The SEC filed civil charges in March 2013 against Rengan Rajaratnam for his role in the widespread insider trading scheme conducted by his brother Raj Rajaratnam and hedge fund advisory firm Galleon Management.  The insider trading occurred in securities of more than 15 companies for illicit gains totaling nearly $100 million.  The SEC has now obtained court judgments or settlements in Galleon-related enforcement actions against 35 defendants, resulting in approximately $165 million in monetary sanctions.

“We are pleased to have reached a favorable proposed resolution of our insider trading charges against Rengan Rajaratnam,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement.  “The settlement ensures he’s out of the industry and paying a serious price for breaking the law.”

Rengan Rajaratnam, who became a portfolio manager at Galleon after co-founding hedge fund advisory firm Sedna Capital Management, neither admitted nor denied the SEC’s allegations in agreeing to the settlement that is subject to court approval.  The proposed final judgment would permanently enjoin Rengan Rajaratnam from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and require him to pay $372,264.42 in disgorgement, $96,714.27 in prejudgment interest, and a $372,264.42 penalty.  Under the settlement, he also would be barred from association with any investment adviser, broker, dealer, municipal securities dealer, or transfer agent with the right to apply for reentry after five years.

The SEC’s investigation was conducted by John Henderson, Matthew Watkins, Diego Brucculeri, and James D’Avino in the New York Regional Office.  The case has been supervised by Sanjay Wadhwa, Senior Associate Director of the New York office, and Joseph Sansone, Deputy Chief of the Enforcement Division’s Market Abuse Unit.

SEC INVESTOR BULLETIN ON ENFORCEMENT DIVISION INVESTIGATIONS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to provide investors with a general overview of how the SEC’s Division of Enforcement conducts investigations.

The SEC’s Division of Enforcement (Enforcement) works on hundreds of investigations each year.  Many investigations originate from complaints or tips that the SEC receives from the public.  The purpose of an SEC investigation is to determine whether any persons or entities violated the federal securities laws.  Common violations include misrepresenting important information about potential investments, manipulating the market prices of securities, stealing customers’ funds or securities, insider trading, and selling unregistered securities.

SEC investigations are generally conducted on a confidential basis to maximize their effectiveness and protect the privacy of those involved.  Because SEC investigations are generally nonpublic, Enforcement will not confirm or deny the existence of an investigation unless the SEC brings charges against a person or entity involved.  Enforcement also will not provide updates on the status of any pending SEC investigation.

SEC investigations are civil, not criminal.  The SEC can charge individuals and entities for violating the federal securities laws and seek remedies such as monetary penalties, disgorgement of ill-gotten gains, injunctions, and restrictions on an individual’s ability to work in the securities industry or to serve as an officer or director of a public company, but the SEC cannot put people in jail.  Enforcement may refer potential criminal cases to criminal law enforcement authorities for investigation or coordinate SEC investigations with criminal investigations involving the same conduct.  If a person is convicted of a criminal violation of the securities laws, a court may sentence that person to serve time in jail.

Enforcement decides whether to initiate an investigation based on many factors, including the magnitude and nature of the possible violations, the number of victims affected by the misconduct, the amount of potential or actual harm to investors from the misconduct, and whether misstated or omitted facts would have impacted investors’ investment decisions.  Enforcement also considers whether the conduct is ongoing or whether it occurred too long ago to pursue the full range of available remedies.  Enforcement may be more likely to initiate an investigation if the matter:

Requires immediate action to protect investors;
Relates to conduct that may threaten the fairness or liquidity of the securities markets;
Involves individuals with a history of misconduct;
Involves a subject matter the SEC or Enforcement has designated as a priority;
Fulfills a programmatic goal of the SEC and Enforcement; or
Concerns an industry practice that may be widespread and should be addressed.
Enforcement receives information about possible violations from many sources, including market surveillance activities, investor tips and complaints, whistleblower submissions, other divisions and offices of the SEC, self-regulatory organizations and other securities industry sources, and media reports.  If Enforcement opens an investigation, it may request documents and interview witnesses on a voluntary basis.  If authorized with a formal order of investigation, Enforcement can issue subpoenas requiring the production of documents and witness testimony.  Enforcement develops the facts in an SEC investigation primarily through interviewing witnesses under oath and analyzing documents and data (e.g., emails, brokerage records, and trading data).

The securities laws are complex and SEC investigations often last months or even years.  At any point during an investigation, Enforcement may decide to close the investigation without recommending any enforcement action.

If Enforcement makes a preliminary determination to recommend enforcement action, it may elect to provide individuals or entities who would be charged in the action with a Wells notice explaining the proposed charges against them and informing them that they can make a voluntary submission setting forth their interests and position.  If Enforcement believes (based on the evidence it has compiled and after considering a Wells submission or deciding not to issue a Wells notice) that enforcement action should be taken, Enforcement seeks authorization from the Commission for the SEC to file a civil lawsuit, to commence an administrative proceeding, or, in certain circumstances, to issue a report of investigation.  Any enforcement action that the SEC initiates is based on Commission authorization.

In some situations, Enforcement may continue to investigate other involved parties or related conduct even after the SEC files an enforcement action.  Information about filed enforcement actions is provided in litigation releases and administrative orders posted on the SEC’s website.

SEC OBTAINS JUDGEMENT AGAINST DEFENDANTS IN SECURITIES FRAUD CASE

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23114 / October 15, 2014

Securities and Exchange Commission v. Stephen D. Ferrone, et al., Civil Action No. 1:11-cv-05223, USDC, N.D.Ill.

SEC Obtains Summary Judgment Against Defendants in Securities Fraud Involving Biopharmaceutical Company

The Securities and Exchange Commission announced that on October 10, 2014, the Honorable Elaine E. Bucklo of the United States District Court for the Northern District of Illinois granted the SEC's motion for summary judgment and for partial summary judgment, respectively, against Defendants Douglas McClain, Sr. ("McClain Sr."), of Fair Oaks, Texas, and Douglas McClain Jr. ("McClain Jr."), formerly of Savannah, Georgia. The Court found that McClain Sr. violated the antifraud provisions of the federal securities laws by making misrepresentations and omissions and that McClain Sr. and McClain Jr. engaged in insider trading.

The SEC filed this action against the defendants in August 2011, alleging that McClain Sr., McClain Jr., Immunosyn Corporation ("Immunosyn") Argyll Biotechnologies, LLC ("Argyll"), Stephen D. Ferrone, and James T. Miceli ("Miceli") committed securities fraud in connection with materially misleading statements during 2006-2010 regarding the status of regulatory approvals for Immunosyn's sole product, a drug derived from goat blood referred to as "SF-1019." The SEC also charged Argyll, McClain, Jr., McClain, Sr., Miceli, Argyll Equities, LLC ("Argyll Equities"), and Padmore Holdings, Ltd. with insider trading.

The SEC's complaint, filed in federal court in Chicago, alleged, among other things, that the defendants misleadingly stated in public filings with the SEC and in oral presentations that Argyll, Immunosyn's controlling shareholder, planned to commence the regulatory approval process for human clinical trials for SF-1019 in the U.S. or that regulatory approval was underway. The complaint alleges that these statements misled investors because the statements omitted to disclose that the U.S. Food and Drug Administration ("FDA") had already twice issued clinical holds on drug applications for SF-1019, which prohibited clinical trials involving SF-1019 from occurring.

After completion of discovery, the SEC moved for summary judgment, and for partial summary judgment, respectively, against McClain Sr. and McClain Jr. In granting the SEC's motion for summary judgment, the Court found that McClain Sr. committed securities fraud by taking money from investors and failing to deliver Immunosyn shares and by telling investors that Immunosyn would secure approval for SF-1019 from the FDA in about a year and that the U.S. Department of Defense had purchased SF-1019. The Court also found that McClain Sr. and McClain Jr. engaged in insider trading by selling their Immunosyn stock based on the material, non-public information that the FDA had issued clinical holds on drug applications for SF-1019. The Court found that McClain Sr. and McClain Jr. violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5.

The Court will determine the appropriate remedies against McClain Sr. and McClain Jr. at a later date.

FORMER WELLS FARGO EMPLOYEE ACCUSED BY SEC OF ALTERING A DOCUMENT

 FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission announced an enforcement action against a former Wells Fargo Advisors compliance officer who allegedly altered a document before it was provided to the SEC during an investigation.

According to the SEC’s order instituting an administrative proceeding against Judy K. Wolf, she was responsible for identifying potentially suspicious trading by Wells Fargo personnel or the firm’s customers and clients and then analyzing whether the trades may have been based on material nonpublic information.  Wolf created a document in September 2010 to summarize her review of a particular Wells Fargo broker’s trading, and she closed her review with no findings.  The SEC Enforcement Division alleges that Wolf altered that document in December 2012 after the SEC charged the broker with insider trading.  By altering the document, Wolf made it appear that she performed a more thorough review in 2010 than she actually had.  After Wells Fargo provided the document to the SEC as part of its continuing investigation, SEC enforcement staff spotted the alteration and questioned Wolf specifically about the document.  At first she unequivocally denied altering the document after September 2010, but in later testimony she testified that she had done so.

The SEC previously charged Wells Fargo in the case, and the firm agreed to pay $5 million to settle these and other violations of the securities laws.  Prior to the enforcement action, Wells Fargo placed Wolf on administrative leave and ultimately terminated her employment.

“We allege that Wolf intentionally altered a trading review document after she knew that the SEC had charged a Wells Fargo employee with insider trading based on facts related to her review,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit.  “Regardless of her motivation, her conduct was inconsistent with what the SEC expects of compliance professionals and what the law requires.”

The SEC Enforcement Division alleges that Wolf, who lives in St. Louis, willfully aided and abetted and caused Wells Fargo to violate Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-4(j) as well as Rule 204(a) under the Investment Advisers Act of 1940.  

The SEC Enforcement Division’s investigation was conducted by Megan Bergstrom and David S. Brown of the Market Abuse Unit.  The case was supervised by Mr. Hawke, Robert A. Cohen, and Diana Tani.  The litigation will be led by Donald Searles.

LAW FIRM IT EMPLOYEE CHARGED WITH INSIDER TRADING AHEAD OF MERGER ANNOUNCEMENTS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

SEC Charges IT Employee at Law Firm With Insider Trading Ahead of Merger Announcements

09/16/2014 01:40 PM EDT

The Securities and Exchange Commission today charged an employee in an international law firm’s IT department with insider trading ahead of several mergers and acquisitions involving firm clients being advised on the deals.

The SEC alleges that Dimitry Braverman, a senior information technology professional at Wilson Sonsini Goodrich & Rosati, had access to nonpublic information in the firm’s client-related databases and garnered more than $300,000 in illicit profits by trading in advance of merger announcements.  Braverman began by insider trading in accounts in his own name, but shifted course when a lawyer at his firm was charged by the SEC and criminal authorities in an entirely separate insider trading scheme.  After immediately liquidating the remaining securities that he had purchased on the basis of nonpublic information, Braverman waited about 18 months and then continued his insider trading in a brokerage account held in the name of a relative living in Russia.  His concealment efforts failed, however, when SEC investigators were able to dissect a suspicious pattern of trades and trace them back to Braverman.

“Insider trading by employees of law firms and other professional organizations is an important enforcement focus for us,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit.  “We’ve enhanced our detection capabilities and we’re refining our investigative approaches to enable us to more easily identify those who abuse their positions of trust and confidence.”

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Braverman.

According to the SEC’s complaint filed in federal court in Manhattan, Braverman began his scheme in 2010 by using nonpublic information to trade the stock or stock options in one of the companies involved in an upcoming merger or acquisition.  He typically sold his stock or exercised his options shortly after the deals were made public.  In advance of two deals, Braverman tipped his brother, who consequently made approximately $1,800 in profits.

The SEC alleges that Braverman conducted insider trading in four companies prior to the separate insider trading charges against the Wilson Sonsini lawyer in 2011, and four more companies after he opened a brokerage account in late 2012 in the name of Vitaly Pupynin, a relative who that summer had visited Braverman’s home in San Mateo, Calif., during a trip to the U.S. from Russia.  The e-mail address associated with the account was same one that Braverman had used twice before to open other brokerage accounts.  However, Braverman later created a new e-mail address using Pupynin’s first name and changed the e-mail address associated with the brokerage account to that address instead.  After Pupynin left the U.S. in October 2012, Braverman used the account to continue insider trading and profiting on the basis of material nonpublic information that he obtained.  Braverman continued his insider trading through 2013.

“Believing he could conceal his trades by hiding them in a relative’s account, Braverman abused Wilson Sonsini’s trust by repeatedly using confidential information about the law firm’s clients to reap insider trading profits,” said Joseph G. Sansone, Co-Deputy Chief of the SEC Enforcement Division’s Market Abuse Unit.  “SEC staff methodically identified the trades and traced a trail of evidence back to Braverman, who must now face the consequences of his actions.”          

The SEC’s complaint charges Braverman with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 as well as Section 14(e) of the Exchange Act and Rule 14e-3.  Pupynin is named as a relief defendant in the SEC’s complaint for the purposes of recovering Braverman’s ill-gotten gains in the trading account held in Pupynin’s name.

The SEC’s investigation, which is continuing, has been conducted by Charu A. Chandrasekhar and John Rymas of the Market Abuse Unit and Jordan Baker and Thomas P. Smith Jr. of the New York Regional Office.  The case has been supervised by Mr. Hawke and Mr. Sansone, and the litigation will be led by Preethi Krishnamurthy and Ms. Chandrasekhar.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, Federal Bureau of Investigation, Financial Industry Regulatory Authority, and Options Regulatory Surveillance Authority.

SEC CHARGES RESIDENTIAL REAL ESTATE DEVELOPERS WITH INSIDER TRADING BASED ON TIP FROM ACCOUNTANT

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission charged two residential real estate developers with insider trading in the stock of a restaurant company based on a tip from their accountant in advance of a tender offer announcement.

The SEC alleges that accountant Donald S. Toth disregarded his fiduciary duty to a client when he illicitly purchased stock in O'Charley's Inc. — which operates or franchises restaurants under the brands O'Charley's, Ninety Nine Restaurant, and Stoney River Legendary Steaks - after the client revealed to him in a tax-planning meeting that Fidelity National Financial was planning to purchase the company. Toth contacted his financial advisor within the hour after this meeting with the O'Charley's board member and began making plans to purchase 5,000 shares of O'Charley's stock. Toth also tipped two other clients, including Blair G. Schlossberg. Schlossberg tipped his business partner Moshe Manoah and they jointly invested in O'Charley's stock using a brokerage account held in the name of Manoah's wife.

According to the SEC's complaint filed in federal court in Tampa, Fla. against Schlossberg and Manoah, when the tender offer was publicly announced approximately two months later, the price of O'Charley's stock closed 42 percent higher than the previous trading day. Schlossberg and Manoah's insider trading activity garnered illegal profits of more than $90,000.

The two have agreed to pay a combined total of more than $190,000 to settle the SEC's charges.

Schlossberg and Manoah are charged with violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3. Without admitting or denying the allegations, they consented to the entry of judgments permanently enjoining them from violating these provisions of the securities laws. The settlements are subject to court approval.

Schlossberg, who lives in Holmes Beach, Fla., agreed to pay disgorgement of $46,358.50 in trading profits plus prejudgment interest of $2,981.02 and a penalty of $46,358.50 for a total of $95,698.02.

Manoah, who lives in Davie, Fla., agreed to pay disgorgement of $46,358.50 in trading profits plus prejudgment interest of $2,981.02 and a penalty of $46,358.50 for a total of $95,698.02.

The SEC's investigation was conducted by Elizabeth P. Skola with assistance from Aaron W. Lipson and Robert Schroeder in the Atlanta Regional Office. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

SEC CHARGES MAN OF TRADING AHEAD OF NEWS ANNOUNCEMENTS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23074 / August 26, 2014

Securities and Exchange Commission v. Michael Anthony Dupre Lucarelli, Civil Action No. 14-Civ-6933 (NRB) (S.D.N.Y.)

The U.S. Securities and Exchange Commission charged a director of market intelligence at a Manhattan-based investor relations firm with insider trading ahead of impending news announcements by more than a dozen clients. The charges were filed against Michael Anthony Dupre Lucarelli, who garnered nearly $1 million in illicit profits.

An SEC investigation and ongoing forensic analysis of Lucarelli's work computers uncovered that he repeatedly accessed clients' draft press releases stored on his firm's computer network prior to public announcements. The SEC alleges that Lucarelli, who had no legitimate work-related reason to access the draft press releases, routinely purchased stock or call options in advance of favorable news and sold short or bought put options ahead of unfavorable news.

In a parallel action, the U.S. Attorney's Office for the Southern District of New York today announced criminal charges against Lucarelli.

According to the SEC's complaint filed in federal court in Manhattan, Lucarelli traded in securities belonging to companies that his firm was advising in advance of announcing their earnings or other significant events such as a merger or clinical drug trial result. Lucarelli began taking a position in a client's securities in the days immediately preceding the announcement, although in a few instances he began making his purchases weeks in advance. Lucarelli started divesting himself of his position immediately after the announcement in order to reap instant profits.

The SEC further alleges that Lucarelli attempted to hide his illicit behavior by lying to brokerage firms where he set up his trading accounts. Lucarelli purposely omitted listing his investor relations firm employment on account-opening applications and instead falsely stated that he was self-employed or retired.

The SEC's complaint charges Lucarelli, who lives in Manhattan, with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Section 14(e) of the Exchange Act and Rule 14e-3.

SEC CHARGES ACCOUNTING FIRM PARTNER FOR INSIDER TRADING BASED ON CONFIDENTIAL INFORMATION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission today announced charges against an accounting firm partner in Atlanta for insider trading in the stock of a restaurant company based on confidential information he learned from a client on the board of directors who came to him for tax advice in advance of a tender offer announcement.

SEC investigators also identified and charged three other traders who traded illegally on tips from the accountant.  The traders were discovered by comparing trading records from stock exchanges with names on the accountant’s client list.

The SEC alleges that Donald S. Toth disregarded his fiduciary duty to a client when he illicitly purchased stock in O’Charley’s Inc. – which operates or franchises restaurants under the brands O’Charley’s, Ninety Nine Restaurant, and Stoney River Legendary Steaks – after the client revealed to him in a tax-planning meeting that Fidelity National Financial was planning to purchase the company.  Toth contacted his financial advisor within the hour after this meeting with the O’Charley’s board member and began making plans to purchase 5,000 shares of O’Charley’s stock.  Toth also tipped two other clients, James A. Nash and Blair G. Schlossberg.  Nash purchased 10,000 shares and tipped others who separately traded.  Schlossberg tipped his business partner Moshe Manoah and they jointly invested in O’Charley’s stock using a brokerage account held in the name of Manoah’s wife. 

According to the SEC’s complaints filed against Toth, Nash, Schlossberg, and Manoah, when the tender offer was publicly announced approximately two months later, the price of O’Charley’s stock closed 42 percent higher than the previous trading day.  The insider trading activity garnered illegal profits of more than $160,000. 

The four have agreed to pay a combined total of more than $420,000 to settle the SEC’s charges.

“As an accountant, Toth had a duty to keep confidential the information shared by his client for tax-planning purposes, but instead he misused it for personal investments and provided the details to other clients for their misuse,” said William P. Hicks, associate director of enforcement in the SEC’s Atlanta Regional Office. 

The SEC’s complaints were filed against Toth and Nash yesterday in federal court in Atlanta and against Schlossberg and Manoah today in federal court in Tampa, Fla.  They are charged with violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3.  Without admitting or denying the allegations, they consented to the entry of judgments permanently enjoining them from violating these provisions of the securities laws.  The settlements are subject to court approval.

Toth, who lives in Atlanta, agreed to pay disgorgement of $19,036.00 in trading profits plus prejudgment interest of $1,224.09 and a penalty of $103,935.50 for a total of $124,195.59.

Nash, who lives in Buford, Ga., agreed to pay disgorgement of $52,500.00 – which represents his own trading profits and those of others who he tipped – plus prejudgment interest of $3,375.96 and a penalty of $52,500.00 for a total of $108.375.96.

Schlossberg, who lives in Holmes Beach, Fla., agreed to pay disgorgement of $46,358.50 in trading profits plus prejudgment interest of $2,981.02 and a penalty of $46,358.50 for a total of $95,698.02.

Manoah, who lives in Davie, Fla., agreed to pay disgorgement of $46,358.50 in trading profits plus prejudgment interest of $2,981.02 and a penalty of $46,358.50 for a total of $95,698.02.

The SEC’s investigation was conducted by Elizabeth P. Skola with assistance from Aaron W. Lipson and Robert Schroeder in the Atlanta Regional Office.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

FORMER BANK EXEC. AND FRIEND CHARGED BY SEC WITH INSIDER TRADING IN ADVANCE OF ACQUISITION

FROM:  THE SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission today charged a former bank executive in Massachusetts and his friend with insider trading in advance of the bank’s acquisition of another financial institution.

The SEC alleges that Patrick O’Neill, then a senior vice president at Eastern Bank, learned through his job responsibilities that his employer was planning to acquire Wainwright Bank & Trust Company.  O’Neill tipped Robert H. Bray, a fellow golfer with whom he socialized at a local country club.  In the two weeks preceding a public announcement about the planned acquisition, Bray sold his shares in other stocks to accumulate funds he used to purchase Wainwright securities.  Bray had never previously purchased Wainwright stock.  After the public announcement of the acquisition caused Wainwright’s stock price to increase nearly 100 percent, Bray sold all of his shares during the next few months for nearly $300,000 in illicit profits.

According to the SEC’s complaint filed in federal court in Boston, regulators began requesting information from Eastern Bank and others about trading in Wainwright stock a few months after the trades occurred, and O’Neill quit his job at Eastern Bank rather than respond to such inquiries.  O’Neill and Bray each were subpoenaed to testify in the SEC’s investigation but asserted their Fifth Amendment privileges against self-incrimination for every question asked of them, including whether they know one another.

“Country clubs or similar venues may give people a false sense of security that leads them to think they can get away with trading on unlawful stock tips,” said Paul G. Levenson, director of the SEC’s Boston Regional Office. “But as in any social setting, people who trade securities based on confidential information they receive are taking a huge risk that their illegal tipping and trading will be identified by the SEC.”

In a parallel action, the U.S. Attorney’s Office for the District of Massachusetts today announced criminal charges against O’Neill.

The SEC’s complaint charges O’Neill, who lives in Belmont, Mass., and Bray, who lives in Cambridge, Mass., with violating the antifraud provisions of the federal securities laws and the SEC’s antifraud rule.  The complaint seeks disgorgement of ill-gotten gains plus interest and financial penalties as well as permanent injunctions against future violations of the antifraud provisions.

The SEC’s investigation was conducted by J. Lauchlan Wash of the Boston Regional Office and David London and Michele Perillo of the Enforcement Division’s Market Abuse Unit.  The SEC’s litigation will be led by Mr. London and Mr. Wash.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Massachusetts, the Boston field office of the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.

SEC CHARGES INVESTOR RELATIONS FIRM PARTNER WITH INSIDER TRADING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

On July 22, 2014, the Securities and Exchange Commission charged a partner at a New York-based investor relations firm with insider trading on confidential information he learned about two clients while he helped prepare their press releases.

The SEC alleges that Kevin McGrath sold his shares in Misonix Inc. upon learning that the company was set to announce disappointing financial results. The SEC further alleges that McGrath bought stock in Clean Diesel Technologies Inc. when he learned about the company's impending announcement of positive news, and he profited when its stock price increased nearly 100 percent. McGrath's illicit profits and avoided losses from insider trading in both companies totaled $11,776.

McGrath, who lives in Brooklyn, N.Y., and works at Cameron Associates, agreed to settle the charges by paying disgorgement of $11,776, prejudgment interest of $1,492, and a penalty of $11,776, for a total of $25,044.

The settlement also includes a "conduct-based injunction" that permanently requires McGrath to abstain from trading in the stock of any issuer for which he or his firm has performed any investor relations services within a one-year period. His present or any future firm is required to provide written notice to a client upon any intent to sell shares received as compensation for services performed, and must receive written authorization for the sale from the management of that company.

According to the SEC's complaint filed in federal court in Manhattan, McGrath purchased Misonix shares in April 2009. He later performed work on a press release in which Misonix was set to announce disappointing quarterly results. McGrath ascertained the company's target date to release the negative news, and sold all of his Misonix shares shortly before the press release was issued on May 11, 2009. By doing so, McGrath avoided losses of $5,400 when Misonix's share price subsequently dropped 22 percent.

The SEC alleges that McGrath also performed work on a press release in which Clean Diesel was announcing approximately $2 million in orders it received for certain products. Merely minutes after finding out on May 24, 2011, that the press release was bound for issuance the following day, McGrath purchased 1,000 shares of Clean Diesel. The stock price rose 95 percent upon the positive news, and McGrath sold all of his Clean Diesel shares on May 27 for illicit profits of $6,376.

The SEC's complaint charges McGrath with violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Without admitting or denying the allegations, McGrath agreed to be permanently enjoined from future violations of these provisions of the federal securities laws. The settlement is subject to court approval.

FORMER BANCO SANTANDER, S.A. OFFICIAL PAYS PENALTY TO SETTLE INSIDER TRADING CASE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Spanish Trader Agrees to Pay Disgorgement and a Penalty to Settle Insider Trading Case

The Securities and Exchange Commission announced that Cedric Cañas Maillard, a Spanish citizen and former high-ranking official at Madrid-based Banco Santander, S.A., has agreed to pay almost $2 million to settle charges that he traded on inside information in advance of a public announcement about a proposed acquisition for which the Spanish investment bank was acting as an adviser.

The SEC’s Complaint, filed in July 2013, alleged that Cañas, who served as an executive advisor to Banco Santander’s CEO, learned confidentially that the investment bank had been asked by one of the world’s largest mining companies, BHP Billiton, to advise and help underwrite its proposed acquisition of Potash Corporation, one of the world’s largest producers of fertilizer minerals. In the days leading up to a public announcement of BHP’s bid, Cañas purchased Potash contracts-for-difference (CFDs), which were highly leveraged securities not traded in the U.S. but based on the price of U.S. exchange-listed Potash stock. The CFDs mirrored the movement and pricing of that stock. Cañas also tipped his close personal friend Julio Marín Ugedo about the potential acquisition and advised him to purchase Potash stock.

The SEC’s Complaint alleged that Cañas purchased 30,000 Potash CFDs from August 9 to August 13, 2010 based on material, non-public information he learned about BHP’s offer to acquire Potash. Marín purchased 1,393 shares of Potash common stock based on material, non-public information through two Spain-based brokerage accounts. Cañas liquidated his entire CFD position in Potash following the August 17, 2010 public announcement for an illicit profit of $917,239, and Marín sold his stock for net trading profits of $43,566.

The settlement was approved yesterday by Judge Valerie E. Caproni of the United States District Court for the Southern District of New York.

Cañas agreed to the entry of a final judgment ordering him to pay $960,806, the amount of the trading profits reaped by both Cañas and Marín, and a $960,806 civil penalty. Without admitting or denying the SEC’s allegations, he agreed to be permanently enjoined from future violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder.

The SEC’s litigation continues with respect to Marín.

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.

FINAL JUDGMENTS ENTERED IN INSIDER TRADING CASE INVOLVING MERGERS, DRUG APPROVAL, EARNINGS REPORTS

FROM:  US. SECURITIES AND EXCHANGE COMMISSION 

Court Enters Final Judgments by Consent Against Michael Pendolino, Lawrence D. Grum, and Michael L. Castelli

The Securities and Exchange Commission announced that on June 12, 2014, in SEC v. Lazorchak et al., Civ. Act. No. 12-07164 KSH-PS, the Honorable Katharine S. Hayden, United States District Court Judge for the District of New Jersey, entered final judgments by consent against Defendants Michael Pendolino (Pendolino), of Nashua, New Hampshire; Lawrence D. Grum (Grum), of Livingston, New Jersey; and Michael L. Castelli (Castelli), of Morris Plains, New Jersey. The judgments permanently enjoin Pendolino, Grum, and Castelli from future violations of antifraud provisions of the federal securities laws and order them to pay disgorgement and prejudgment interest.

The SEC's complaint, filed on November 19, 2012, alleged an insider-trading scheme spanning five years and involving illegal tipping by insiders at three public companies: Celgene Corp. (Celgene), Sanofi-Aventis Corporation (Sanofi); and (3) Stryker Corp. (Stryker), and at least eleven material events, including mergers, a drug approval application, and quarterly earnings information. The SEC further alleged that the insiders tipped material nonpublic information about each of these corporate events to Grum and Castelli who, in turn, traded on the basis of, and tipped that information to others. As alleged, the Celgene insider also tipped material nonpublic information about two of the events to his high school friend, Pendolino, who traded on the basis of, and tipped that information to others.

The judgments permanently enjoin Pendolino, Grum, and Foldy from violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder, and order them to pay combined disgorgement and prejudgment interest as follows: Pendolino, $68,862.12; Grum, $838,758.75; Castelli, $716,208.90.

Pendolino, Grum, and Castelli were criminally charged in a parallel criminal action in federal district court in the District of New Jersey. They have since pled guilty to charges of conspiracy to commit securities fraud and/or securities fraud and have been sentenced: Pendolino to probation of one year, and Grum and Castelli to prison terms of a year and a day, and nine months, respectively. United States v. Pendolino, 2:13-00657-KSH; United States v. Grum, 2:13-00737-KSH; United States v. Castelli, 2:13-00738-KSH.

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

4 CHARGED IN $12 MILLION INSIDER TRADING CASE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

SEC Charges Four California Residents in $12 Million Insider Trading Scheme

The Securities and Exchange Commission today charged four Northern California residents with insider trading in Ross Stores stock options based on nonpublic information about monthly sales results leaked by one of the retailer’s employees.

The SEC alleges that Saleem Khan was routinely tipped by his friend Roshanlal Chaganlal, who was a director in the finance department at Ross headquarters in Dublin, Calif. Khan used the confidential information to illegally trade on more than 40 occasions ahead of the company’s public release of financial results. Besides trading in his own brokerage account, Khan traded in his brother-in-law’s account as well as an account belonging to another acquaintance. Khan also tipped his work colleagues Ranjan Mendonsa and Ammar Akbari so they too could trade in Ross stock options based on the nonpublic information. The insider trading resulted in collective profits of more than $12 million.

The SEC further alleges that at the outset of the scheme, Chaganlal gave $17,000 to Khan for the purpose of insider trading in Ross securities using the brother-in-law’s account. They attempted to disguise the exchange by using two cashier’s checks for $8,500 purchased in the name of Chaganlal’s wife of a different surname. Khan later funneled $130,000 of the generated trading profits back to Chaganlal by using third-party intermediaries. For example, Khan wrote Akbari a check for $35,000, and Akbari in turn wrote two checks totaling $35,000 to Chaganlal’s wife. Another $75,000 was routed in a roundabout way to a title company so it could be credited at closing toward Chaganlal’s purchase of a newly-built home.

According to the SEC’s complaint filed in federal court in San Francisco, Khan separately made approximately $450,000 in illicit profits by insider trading in stock options of software company Taleo Corporation ahead of its 2012 acquisition by Oracle Corporation. Khan began purchasing large numbers of options in Taleo six days before the merger announcement based on nonpublic information he received from an insider he knew at Oracle. Khan had never previously traded in Taleo securities.

The SEC alleges that the serial insider trading involving Ross securities began in August 2009 and continued until December 2012, when Chaganlal was terminated by the company. He had access to confidential sales figures on an internal webpage limited to a relatively small group of Ross employees. Chaganlal regularly communicated the confidential details to Khan so he could trade ahead of impending monthly sales announcements by Ross. Khan generated $5.4 million in profits in his own account, and $6 million in profits in his brother-in-law’s account. Khan’s supervisor Mendonsa made approximately $800,000 in insider trading profits based on the nonpublic information that Khan in turn tipped to him. Akbari made approximately $2,000 by insider trading on Khan’s illegal tips.

The SEC’s complaint names two relief defendants - Khan’s acquaintance Michael Koza and Khan’s brother-in-law Shahid Khan - for the purposes of recovering insider trading profits in their brokerage accounts through trades conducted by Khan. They each have agreed to settle the matter by paying the court the entire amount of insider trading profits remaining in their accounts, which total $240,741 for Shadid Khan and $31,713 for Koza.

The SEC’s complaint charges Saleem Khan, Chaganlal, Mendonsa, and Akbari with violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctive relief, disgorgement of illicit profits plus interest, and financial penalties. The complaint also seeks an officer-and-director bar against Chaganlal.

The SEC’s investigation, which is continuing, has been conducted by Victor Hong and Elena Ro. The case has been supervised by Steven Buchholz and Jina L. Choi of the Market Abuse Unit and San Francisco Regional Office as well as Joseph G. Sansone of the Market Abuse Unit. The SEC’s litigation will be led by Aaron Arnzen. The SEC appreciates the assistance of the Options Regulatory Surveillance Authority.

SEC CHARGES TIPPER IN FRIENDS INSIDER TRADING CASE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

SEC Charges Tipper in Insider Trading Ring Involving High School Friends

The Securities and Exchange Commission today filed an enforcement action against Michael J. Baron for participating in an insider trading ring that involved a group of high school friends and others trading in the securities of health care companies. The SEC previously charged seven others involved.

The SEC's complaint alleges that Baron, a former senior editor at a financial publication, received material nonpublic information from his high school friend John Lazorchak, a Celgene Corporation insider, about Celgene's acquisition of Pharmion Corp., which was publicly announced on November 19, 2007. The SEC further alleges that Baron received material nonpublic information from a second high school friend Mark D. Foldy, an insider at Stryker Corporation, about Stryker Corp.'s tender offer to acquire Orthovita, Inc., which was publicly announced on May 16, 2011. In each instance, Baron illegally tipped the information to a relative, who traded on the basis of the tipped information.

The complaint charges Baron with violating 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 a final judgment ordering Baron to disgorge the ill-gotten gains of his tippee plus prejudgment interest, and to pay a civil penalty. Subject to approval by the court, Baron has agreed to settle the action by consenting to a final judgment enjoining him from an injunction against future violations and ordering him to pay disgorgement of $6,825 plus prejudgment interest and a penalty of $3,400.

The SEC's investigation was conducted by David W. Snyder and John S. Rymas and supervised by Kelly L. Gibson, who are members of the Market Abuse Unit in the Philadelphia Regional Office. Catherine E. Pappas is the trial counsel on the litigation.