The SEC concluded settlements with four of nine defendants in an on-going insider trading case centered on a market professional tipping others with material non-public information he misappropriated from his wife. SEC v. Devlin, Case No. 20831 (S.D.N.Y. Filed Dec 18, 2008).
Defendant Matthew Devlin who is at the center of the case is a former registered representative at Lehman Brothers, Inc. His wife was a partner in the New York City office of an international public relations firm. Through that position she had access to inside information on pending corporate transactions.
Over a four year period beginning in March 2004 Mr. Devlin is alleged to have misappropriated inside information regarding thirteen transactions involving: InVision Technologies, Inc.; Eon Labs, Inc., Mylan, Inc.; Abgenix, Inc.; Aztar Corporation; Veritas, DGC, Inc.; Mercantile Bankshares Corporation; Alcan, Inc.; Ventana Medical Systems, Inc.; Pharmion Corporation; Take Two Interactive Software, Inc.; Anheuser-Busch, Inc; and Rohm and Haas Company. According to the SEC a series of tips and illegal trades followed:
- Mr. Devlin tipped his friend and client, defendant Jamil Bouchareb about twelve deals in which he traded. He also tipped his co-worker defendant Frederick Bowers on at least three transactions in which he traded. He then tipped one of his clients Thomas Faulhaber who is also a defendant. In addition Mr. Devlin tipped defendant Eric Holzer, an attorney at a large New York law firm who traded on at least three deals and Jeffrey Glover, another Lehman client, who traded in five deals.
- Mr. Boucharbeb tipped his business partner defendant Daniel Corbin who traded in four deals through accounts in the name of his companies, Augustus Management LLC and Corbin Investment Holdings LLC, both of which are defendants. He also tipped his girl friend Maria Checa, a relief defendant, who traded in some deals.
- Daniel Corbin tipped his father and relief defendant Lee Corbin, an attorney, who traded in four deals and had an interest in Corbin Investment;
The complaint, which alleges violations of Exchange Act Sections 10(b) and 14(e), claims that the group made illegal trading profits of $4.8 million. Mr. Devlin furnished the information to curry favor and was rewarded with various gifts.
The Commission announced settlements with defendants Glover, Bower, Faulhaber and Holzer. Each settling defendant consented to the entry of a permanent injunction prohibiting future violations of Exchange Act Sections 10(b) and 14(e). In addition:
- Mr. Glover agreed to pay disgorgement of $209,356 along with prejudgment interest and a civil penalty of $305,761. In a related administrative proceeding he consented to the entry of an order barring him from the securities business.
- Mr. Bowers consented to the entry of a similar bar order and agreed to pay a $12,000 civil penalty. He also pleaded guilty to conspiracy and securities fraud in the parallel criminal case and was sentenced to three years probation and ordered to pay a $15,000 fine and forfeit $12,000. U.S. v. Bowers, No. 1:09-cr-00496 (S.D.N.Y.).
- Mr. Faulhaber also agreed to the entry of a bar order and to pay disgorgement of $235,300 along with prejudgment interest and a civil penalty of $235,300.
- Mr. Holzer agreed to pay disgorgement of $52,922 along with prejudgment interest and a civil penalty of $172,269. He also agreed to the entry of an order in a related administrative proceeding which bars him from appearing and practicing before the Commission as an accountant. In the related criminal case he pleaded guilty to securities fraud and conspiracy and was sentenced to five years probation and ordered to pay a fine of $15,000 and forfeit over $119,300. U.S. v. Holzer, No. 1:09-cr-00470 (S.D.N.Y.).
The parallel criminal cases are discussed here. See also Lit. Rel. No. 21854 (Feb. 14, 2011).