SEC Enforcement Actions: Insider Trading Cases

Insider trading continues to be a high priority area for the SEC's enforcement program. The SEC brought 57 insider trading actions in FY 2011 against 124 individuals and entities, a nearly 8 percent increase in the number of filed actions from the prior fiscal year. Many of these actions involved financial professionals, hedge fund managers, corporate insiders, and attorneys who unlawfully traded on material non-public information, undermining the level playing field that is fundamental to the integrity and fair functioning of the capital markets.

Examples of the SEC's recent insider trading actions include:

2012	Former Major League Baseball Players and Company CEO – SEC announced a second round of charges involving insider trading ahead of an acquisition of Advanced Medical Optics. Newly charged are the company's Chairman and CEO James Mazzo, who was the source of the illegal tips, and Baseball Hall of Famer Eddie Murray and Utah businessman David Parker, who traded on confidential information. Murray agreed to pay $358,151 to settle the charges. (8/17/12) … See also: Doug DeCinces Pharmaceutical Company Executive – SEC charged Bristol-Myers Squibb executive Robert Ramnarine with insider trading for more than $300,000 in illegal profits by exploiting confidential information about companies being targeted for potential acquisitions by Bristol-Myers Squibb. (8/2/12) Insider Traders in Nexen Acquisition – The SEC obtained a court order to freeze the assets of traders using accounts in Hong Kong and Singapore to reap more than $13 million in illegal profits by trading in advance of a public announcement that China-based CNOOC Ltd. agreed to acquire Canada-based Nexen Inc. (7/27/12) Five Physicians – SEC charged five doctors with insider trading in the stock of an East Lansing, Mich.-based company at which one of them served as chairman of the board of directors. (7/10/12) Founder of Equity Research Firm – SEC charged the owner of the California-based equity research firm Insight Research with insider trading as part of agency’s ongoing investigation of insider trading involving “expert networks” that provide specialized information to investment firms. (6/28/12) Yahoo Executive and Ameriprise Manager – SEC charged a former executive at Yahoo! Inc. and a former mutual fund manager at a subsidiary of Ameriprise Financial Inc. with insider trading on confidential information about a search engine partnership between Yahoo and Microsoft. (5/21/12) Movie Producer and Ring of Relatives and Associates - SEC charged a Hollywood movie producer along with his brother, cousin, and three others in his circle of friends and business partners for insider trading in the stock of a company for which he served on the board of directors. (5/8/2012) Financial Advisors and Circle of Family and Friends - SEC charged two financial advisors and three others in their circle of family and friends with insider trading on confidential information about merger negotiations between a Philadelphia company and a Japanese firm. They made more than $1.8 million in illicit profits. (3/13/2012) Expert Consulting Firm and Owner - SEC charged John Kinnucan and his Portland, Oregon-based expert consulting firm Broadband Research Corporation with tipping clients with material nonpublic information obtained from prohibited sources inside public companies. Clients then traded on the inside information. (2/17/2012) California Hedge Fund Manager - SEC charged Douglas F. Whitman and his firm Whitman Capital for their involvement in the insider trading ring connected to Raj Rajaratnam and Galleon Management. Whitman's illegal trading resulted in nearly $1 million in ill-gotten gains. (2/10/2012) Hedge Fund Managers and Analysts - SEC charged multi-billion dollar hedge fund advisory firms Diamondback Capital Management LLC and Level Global Investors LP as well as seven fund managers and analysts involved in a $78 million insider trading scheme based on nonpublic information about Dell's quarterly earnings and similar information about Nvidia Corporation. (1/18/2012) Diamondback Capital Management Settles SEC Charges (1/23/2012)
2011	Former Goldman Sachs and Procter & Gamble Board Member - SEC charged former McKinsey & Co. global head Rajat Gupta with illegally tipping hedge fund manager Raj Rajaratnam while serving on the boards of Goldman Sachs and Procter & Gamble. (10/26/2011) Goldman Sachs Employee - SEC charged Spencer Mindlin and his father with insider trading on confidential information about Goldman's trading strategies and intentions that he learned while working on the firm's ETF desk. (9/21/11) Global Consulting Executive - SEC charged a former global consulting firm executive and his friend who once worked on Wall Street with insider trading on confidential information about impending takeovers of two biotechnology companies for more than $2.6 million in illicit profits. (9/15/11) Hedge Fund Manager and Company Insiders - SEC charged James Turner II and his firm Clay Capital Management with insider trading ahead of public announcements about corporate earnings and merger activity based on confidential information he obtained through his relationships with company insiders, who also were charged in the scheme that generated illicit gains of nearly $3.9 million. (8/31/11) Corporate Board Member - SEC charged former Mariner Energy Inc. board member H. Clayton Peterson and his son with insider trading on confidential information about the impending takeover of the company. The son also tipped several close friends. The Petersons and their tippees obtained more than $5.2 million in illicit profits. (8/5/11) Former Major League Baseball Player - SEC charged Doug DeCinces and three others with insider trading ahead of a company buyout and obtaining more than $1.7 million in illegal profits. DeCinces agreed to pay $2.5 million to settle the SEC's charges. (8/4/11) Emergency Action Against Three Swiss-Based Entities - SEC obtained asset freezes against entities charged with insider trading around an acquisition announcement. The asset freezes were intended to prohibit the foreign firms from transferring the proceeds of their illegal trading overseas. (7/18/11) Former NASDAQ Managing Director - SEC charged Donald L. Johnson, a former managing director of The NASDAQ Stock Market, with insider trading on confidential information that he misappropriated while working in a market intelligence unit that communicates with executives at listed companies about impending public announcements that could affect their stocks. Johnson obtained illicit trading profits of at least $755,000 during a three-year period. (5/26/11) Former FrontPoint Partners Hedge Fund Portfolio Manager - SEC charged Dr. Joseph F. "Chip" Skowron, a former hedge fund portfolio manager affiliated with a FrontPoint Partners LLC healthcare fund, with insider trading based on confidential information about negative details of an experimental drug that he received from Dr. Yves Benhamou, a medical researcher overseeing a clinical drug trial. (The SEC charged Benhamou on 11/2/10 for his misconduct in this matter). The material non-public information that Skowron received allowed the hedge funds that he managed to avoid losses of at least $30 million. (4/13/11) Insider Trading Scheme Involving Corporate Attorney and Wall Street Trader - SEC charged charged corporate attorney Matthew Kluger and Wall Street trader Garrett Bauer for their involvement in a highly organized serial insider trading ring that traded in advance of merger and acquisition announcements involving clients of the law firm Wilson Sonsini Goodrich & Rosati. The ring made at least $32 million in illegal profits between April 2006 and March 2011. (4/6/11) Kluger, Bauer, and Middleman Settle SEC Charges - Kluger, Bauer, and their mutual friend Kenneth Robinson agreed to give up their ill-gotten gains plus interest to settle the charges against them. (4/25/12) Insider Trading by FDA Chemist - SEC charged Cheng Yi Liang, a chemist at the U.S. Food and Drug Administration, with insider trading on confidential information concerning upcoming announcements of FDA drug approval decisions, generating more than $3.6 million in illicit profits and avoided losses. (3/29/11) Expert Networks Insider Trading Scheme - SEC charged a New York-based hedge fund and four hedge fund portfolio managers and analysts who illegally traded on confidential information obtained from technology company employees moonlighting as expert network consultants, in a scheme that netted more than $30 million in illicit profits. SEC Charges Hedge Fund Managers and Traders in $30 Million Expert Network Insider Trading Scheme (2/8/11) SEC Brings Expert Network Insider Trading Charges (2/3/11) Former Board Chairman of Home Diagnostics - SEC charged George Holley, a co-founder and former Chairman of the Board of Home Diagnostics Inc., with illegally tipping friends and business associates with inside information about an impending acquisition of the company. Holley's tips resulted in combined illicit profits of at least $170,000. (1/13/11)
2010	Former Law Firm Technology Manager and Brother-in-Law - SEC charged a former information technology manager at a Delaware law firm and his brother-in-law with insider trading on confidential information about impending mergers and acquisitions by the law firm's clients. The insider trading scheme resulted in over $182,000 in illegal profits. (12/7/10) Medical Researcher Tipping Inside Information about Clinical Trial - SEC charged Yves Benhamou, a French medical doctor and researcher, with tipping a hedge fund manager with confidential information about a clinical drug trial that he was overseeing. (The hedge fund manager was subsequently charged by the SEC on 4/13/11 for his misconduct in this matter). Benhamou tipped the hedge fund manager with non-public negative details about an experimental drug ahead of a public announcement by the company that manufactured the drug. Based on Benhamou's tips, the hedge fund manager sold his shares in the drug company, allowing the hedge funds to avoid losses of at least $30 million. (11/2/10) Pharmaceutical Company Insider and Former Hedge Fund Manager - SEC charged James W. Self, Jr., a pharmaceutical company insider, and Stephen R. Goldfield, a former hedge fund manager, with insider trading in advance of an announcement that AstraZeneca would acquire MedImmune, Inc. The material non-public information about the acquisition allowed the former hedge fund manager to realize illicit profits of approximately $14 million. (9/1/10) Asset Freeze for Insider Trading by Spain-based Traders - In an expedited investigation, the SEC swiftly charged two residents of Spain with insider trading and obtained an emergency asset freeze. The residents made nearly $1.1 million by trading while in the possession of material non-public information in advance of the public announcement of a tender offer by BHP Billiton Plc to acquire Potash Corp. of Saskatchewan Inc. One of the defendants was the head of a research arm at Banco Santander, S.A., a Spanish banking group advising BHP on its bid. (8/20/10) Former Banco Santander Analyst Agrees to Settle Insider Trading Charges (4/25/11) Former Deloitte Partner and Son - SEC charged Thomas P. Flanagan, a former Deloitte and Touche LLP partner, and his son, Patrick T. Flanagan, with insider trading in the securities of several of the firm's audit clients. The illegal trading resulted in combined profits of approximately $490,000. The former Deloitte partner and his son agreed to pay more than $1.1 million to settle the SEC's charges. (8/4/10) Corporate Insider Brothers - SEC charged Samuel Wyly and Charles Wyly with insider trading in the securities of a company in which they served as the Chairman and Vice Chairman of the Board. Through their positions on the company's Board, the Wyly brothers knew that the company had decided to put itself up for sale. Based on this material non-public information, the Wyly brothers made a large and bullish transaction in the company's securities that yielded over $31 million in illicit profits. (7/29/2010) Pequot Capital Management and CEO Arthur Samberg - SEC charged hedge fund manager Pequot Capital Management, Inc. and its Chairman and CEO Arthur Samberg with insider trading in Microsoft Corporation securities. The SEC separately charged a former Microsoft employee who later worked at Pequot for allegedly tipping the firm and Samberg with non-public information about Microsoft's earnings. Pequot and Samberg paid nearly $28 million to settle the SEC's charges. (5/27/10) Wall Street Securities Professional Using Coded E-mail Messages - SEC charged Igor Poteroba, an investment banker at UBS Securities LLC, and two others in a clandestine insider trading ring that netted approximately $1 million in illicit profits by trading ahead of at least 11 mergers, acquisitions, and other corporate deals. The traders used coded e-mail messages in an attempt to conceal their unlawful trading. (3/24/10)
2009	Insider Trading by Former Employees of Global Financial Firms - SEC charged Vinayak S. Gowrish and Adnan S. Zaman, former employees at major global financial institutions, and two of their friends in a serial insider trading scheme to profit on highly confidential merger and acquisition information. (12/16/09) Galleon Cases - In the Galleon cases, the SEC has charged 29 defendants for widespread and repeated insider trading in the securities of 15 companies generating illicit profits totaling nearly $90 million. The illegal conduct involved Raj Rajaratnam and his New York-based hedge fund Galleon Management making cash payments in exchange for material non-public information. The case eventually ensnared corporate executives, consultants, rating agency personnel, proprietary traders, hedge fund executives, and public relations personnel. To date, 12 defendants have reached settlements or otherwise resolved their claims with the SEC. SEC Brings Additional Charges in Galleon Case (11/12/10) SEC Announces New Developments in Galleon Case (1/29/10) SEC Charges 13 More in Galleon Insider Trading Case (11/5/09) SEC Charges Raj Rajaratnam with Insider Trading (10/16/09) Wall Street Lawyers and Traders - SEC charged three New York-based attorneys at the law firm Ropes & Gray LLP for tipping inside information in exchange for kickbacks and six Wall Street traders and a proprietary trading firm involved in a $20 million insider trading scheme. The SEC alleged that the three lawyers tipped material non-public information about confidential corporate acquisitions by firm clients to a network of traders and hedge fund managers in exchange for kickbacks. SEC Charges Attorney in Insider Trading Scheme (12/10/09) SEC Charges Wall Street Lawyers and Traders in $20 million Insider Trading Scheme (11/5/09)