SEC Sues Nevada Man For Insider Trading On 1994 Mergers
NEW YORK (Dow Jones)--The Securities and Exchange Commission sued a Nevada man over allegations that he earned $156,000 in illegal profits from trading on inside information in connection with five major mergers and proposed mergers in 1994.
In a civil suit filed in U.S. District Court for the Southern District of New York, the SEC said Edward Warren Eizman received the inside information from an associate at the law firm of Cravath Swaine & Moore, which represented parties in all of the mergers and proposed mergers.
The SEC alleged that Eizman made illegal profits by trading in call options using inside information in the never-completed proposed mergers of CBS Inc. and QVC Inc., and of Morgan Stanley Group Inc. (MS) and S.G. Warburg; the acquisition of 49.9% of Chiron Corp. (CHIR) by
Ciba-Geigy Ltd.; and ITT Corp.'s (ITT) merger with Caesars World Inc. The SEC also said Eizman traded in stock of Mitek Surgical Products Inc. ahead of its acquisition by Johnson & Johnson (JNJ).
Eizman's attorney couldn't immediately be reached for comment. Attorneys at Cravath Swaine & Moore also couldn't immediately be reached.
Eizman pleaded guilty today in federal court to one criminal count of conspiracy to commit securities fraud. The criminal charges were filed by the U.S. Attorney's office in addition to the SEC civil suit.
Eizman admitted that he obtained nonpublic information about the mergers and proposed mergers from his friend Richard Woodward, who was at the time an associate in the corporate finance department of Cravath Swaine.
In the criminal case, Eizman was accused of earning illegal profits of about $132,000. Eizman's sentencing in the criminal case was scheduled for July 26. He faces up to five years in prison plus a fine.
Stuart Abrams, Eizman's attorney, said Eizman ''is fundamentally a very decent person and his objective now is to get his life put back together.''
Woodward, who is not named as a defendant in the civil suit against Eizman, pleaded guilty to insider trading charges in June 1995. Woodward admitted he had given his brother John, who also has pleaded guilty, and others confidential information about 12 potential or actual deals, including all five of the deals mentioned in the suit against Eizman. The Woodwards are scheduled to be sentenced in June.
The SEC estimates a total of $933,000 in illegal profits were made by people who traded on Woodward's inside information. Of that amount, about $200,000 was made by people to whom Eizman passed on information after he got it from Woodward. In the criminal charges, that amount
is put at $156,000.
Richard Woodward wasn't accused of trading on the inside information himself.
Woodward was fired from Cravath Swain & Moore in March 1995 after he refused to cooperate with the firms inquiry into the matter.
The SEC is asking that Eizman be forced to forfeit all illegal profits that he earned and caused others to earn, that he pay civil penalities and that he be enjoined from securities law violations.
V.K |
