Friday, March 29, 2013

SEC Litigation Releases: Week in Review

SEC Charges California-Based Hedge Fund Analyst and Two Others with Insider Trading, March 26, 2013, (Litigation Release No. 22660)

Hedge fund analyst, Matthew Teeple, has been charged by the SEC for allegedly trading on material non-public information regarding Brocade Communication Systems Inc.'s 2008 acquisition of Foundry Networks, Inc. According to the SEC, Teeple received the information from Foundry's chief information officer, David Riley, and then caused the "hedge fund advisory firm where he works to buy Foundry shares in large quantities in the days leading up to the public announcement." Additionally, Teeple allegedly tipped his friend John Johnson, who also traded on the information. The SEC has charged Teeple, Riley, and Johnson with violating various sections of the Exchange Act and Securities Act and seeks disgorgement, prejudgment interest, financial penalties, and permanent enjoinment. Additionally, the SEC seeks to "permanently prohibit Riley from serving as an officer or director of a public company."

In a separate action, criminal charges have been announced against Teeple, Riley, and Johnson.

SEC Charges Del Monte Foods Company Employee with Insider Trading, March 22, 2013, (Litigation Release No. 22659)

According to the complaint (opens to PDF), vice president of finance at Del Monte Foods Company, Juan Carlos Bertini, used his mother's brokerage account to trade on insider information regarding Del Monte's acquisition by an investor group. Bertini allegedly gained over $16,000 from the illicit activity. Bertini agreed to a judgment that permanently enjoins him from future violations of the Exchange Act and orders him to pay over $49,000 in disgorgement, prejudgment interest, and penalties. Bertini has also been barred from "serving as an officer and director of a public company for a period of five years."

SEC Charges Rengan Rajaratnam with Insider Trading, March 22, 2013, (Litigation Release No. 22658)

Rajarengan "Rengan" Rajaratnam has been charged by the SEC for his alleged role in "the massive insider trading scheme spearheaded by his older brother Raj Rajaratnam and hedge fund advisory firm Galleon Management." According to the SEC, from 2006 to 2008 Rengan Rajaratnam "repeatedly received inside information from his brother and reaped more than $3 million in illicit gains for himself and hedge funds that he managed at Galleon and Sedna Capital Management." Rengan Rajaratnam also allegedly participated in "his brother's scheme to cultivate highly placed sources and extract confidential information for an unfair advantage over other traders." He traded in the securities of "Polycom, Hilton Hotels, Clearwire Corporation, Akamai Technologies, and AMD." The SEC has charged Rengan Rajaratnam with violating sections of the Exchange Act and seeks permanent enjoinment, as well as payment of disgorgement, prejudgment interest, and financial penalties. "The SEC has now charged 33 defendants in its Galleon-related enforcement actions."

In a parallel action, criminal charges have been announced against Rengan Rajaratnam.

Vendor Settles SEC Charges of Aiding and Abetting Violations by Royal Ahold, March 22, 2013, (Litigation Release No. 22657)

A final judgment was entered against Joseph Grendys, for his alleged involvement in aiding and abetting "violations of the periodic reporting, books and records, and internal controls provisions of the federal securities laws by Royal Ahold." According to the SEC's complaint, Grendys signed a "materially false audit confirmation letter" and then sent it to the company's independent auditors. "At the time, Royal Ahold was the parent company of U.S. Foodservice, Inc. Grendys owns a vendor, Koch Poultry, which supplied U.S. Foodservice with certain products." Grendys agreed to the final judgment that permanently enjoins him from violations of the Exchange Act and orders him to pay a $25,000 civil penalty.

Securities and Exchange Commission v. Timothy J. Roth, et al., March 22, 2013, (Litigation Release No. 22656)

A judgment was entered against former investment advisor, Timothy J. Roth, who allegedly "misappropriated millions of dollars from the accounts of his advisory clients." According to the SEC, Roth secretly transferred over $16 million worth of his clients' mutual fund shares to an account under his control. The judgment permanently enjoins Roth from violating "the antifraud provisions of the federal securities laws."

Roth previously pleaded guilty to "one count of mail fraud and one count of money laundering" in a parallel criminal proceeding. Roth was then sentenced "to 151 months of incarceration and was ordered to pay $16,151,964 in restitution to his victims." Because of Roth's criminal conviction and "the $16 million in restitution ordered against him, the Court has also entered an order granting the Commission's motion to dismiss its monetary claims against Roth."

1 comment:

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