Amazing Randy, you ever here of TIPPING? You invest for a living and I understand you are quite good at it. Here is a good example of what could happen
SEC, U.S. Attorney Bring Charges Against 19 Individuals for $8 Million Insider Trading Scheme
FOR IMMEDIATE RELEASE 2000-33
Respondents Include Wall Street Professionals; Case Is First Charging Use of Internet To Pass Inside Information
Washington, D.C., March 14, 2000 ? The Securities and Exchange Commission today brought civil fraud charges against 19 defendants who, from 1997 through January 2000, engaged in a widespread insider trading scheme that produced more than $8 million in illegal profits from trading in the securities of 23 public companies. The source of the inside information was a part-time word processor who was assigned by the temporary agency where he worked to two Wall Street investment banking firms, Goldman Sachs & Co. Inc., and Credit Suisse First Boston Corporation. Also among the defendants are four principals or employees of broker dealers who traded on the inside information for their own accounts and/or the accounts of their clients.
The case was filed in the U.S. District Court for the Southern District of New York. The U.S. Attorney for the Southern District of New York also filed criminal fraud charges against the same individuals for engaging in insider trading. The SEC seeks injunctive relief, disgorgement, civil penalties and other appropriate relief with respect to each of the defendants.
SEC Director of Enforcement Richard H. Walker said, "The SEC and the criminal authorities have zero tolerance for insider trading, which strikes at the fairness and integrity of our capital markets. The swift and thorough filing of these charges is a testament to the effectiveness of the coordinated effort by the SEC, the US Attorney, the FBI, and the self-regulatory organizations that form the Intermarket Surveillance Group. Also, while this is the first time we have charged someone with using the Internet to share insider information, we remain on guard and seek to keep the Internet free from those who abuse it for personal gain."
The Complaint charges that the source of the information was defendant John Freeman, 34, of Brooklyn, New York. From approximately October 1996 to January 2000, Freeman was employed as a graphic artist at Philip Morris. At the same time, Freeman also worked evenings at an agency that provides temporary word processing services. From May 1997 to June 1998, Freeman was assigned by the agency to work at Goldman Sachs. From October 1998 to January 2000, Freeman was assigned to work at CS First Boston. As a temporary employee at the two firms, Freeman was able to gain access to material nonpublic information regarding numerous merger and acquisition transactions. Freeman is charged with misappropriating confidential information concerning at least 23 different transactions, and tipping directly at least ten others about the transactions. Some of those tipped by Freeman then tipped others about the transactions.
The Commission alleges that, based on information provided by Freeman, each of the defendants purchased the common stock and/or options of some or all of the following public companies: Oregon Metallurgical Corp., Lukens, Inc., Sano Corp., U.S.F&G Corp., Regal Cinemas, Inc., Illinois Central Railroad Co., Coherent Communications Corp., Baker Hughes, Inc., CIENA Corp., DSC Communications Corp., Camco International, Inc., Getchell Gold Corp., United States Satellite Broadcasting Co., SmarTalk Teleservices, Inc., Fingerhut Co., Mercantile Bancorporation, Inc., Wang Laboratories, Cogeneration Systems Corp. of America, RailTex Inc., Medco Research, Inc., Splitrock Services, Inc., Cameron Ashley Building Products, Inc., and Jason, Inc.. At the time that Freeman tipped the other defendants about these companies, each of the companies was involved in a significant transaction that involved the merger or sale of the company.
The Complaint alleges that Freeman was compensated by those that he tipped in a variety of ways. In return for the information, many of the defendants agreed to pay Freeman for his tips. Their payments took many forms. In some instances, cash was enclosed in unsigned birthday cards sent to Freeman in envelopes bearing no return addresses. In other instances, checks were sent to third parties who cashed them and funneled the money to Freeman. One defendant disguised his payment as a "loan" to a friend of Freeman, who then repaid the loan to Freeman. Another defendant paid Freeman in cases of wine.
The Complaint includes the following allegations about Freeman and the other defendants:
Internet Tippees
The scheme began in mid-1997, when Freeman met defendants James Cooper and Benton Erskine in an Internet chat room devoted to the performance of a stock in which all three had invested and lost money. James Cooper, age 41, resides in Bowling Green, Kentucky, where he is an insurance agent. Erskine, age 39, resides in Charleston, West Virginia. Erskine is the Vice President of a laser printing company in Charleston.
Freeman had never met either James Cooper or Erskine before he began communicating with them via the Internet in mid-1997. In the course of their on-line communications, Freeman informed James Cooper and Erskine that he was assigned to the word processing department of Goldman Sachs. The three then agreed upon a plan to profit from any inside information Freeman could garner about merger and acquisition transactions being planned by Goldman Sachs' clients.
On numerous occasions, Freeman passed material nonpublic information to James Cooper and to Erskine regarding merger and acquisition transactions on which either Goldman Sachs or CS First Boston was working. Freeman often passed such information to James Cooper and Erskine by using private chat rooms and instant messaging capabilities of America On Line. In return, James Cooper and Erskine agreed to pay Freeman a portion of their trading profits.
James Cooper purchased securities in at least 16 companies that were the subject of merger and acquisition transactions Freeman learned about while working at Goldman Sachs and CS First Boston, and realized trading profits of more than $227,000. For his part, Erskine traded in the stock of companies involved in at least 16 of the deals, and reaped profits of more than $273,000.
Bowling Green Tippees
In addition to trading for his own account, James Cooper tipped at least three individuals who live in Bowling Green: his brother, defendant Benjamin Cooper; a friend, defendant Deon Benson, a local dentist; and his stockbroker, defendant Chad L. Conner. James Cooper also caused another friend, formerly a resident of Bowling Green, to trade on eight occasions, earning more than $60,000.
Benjamin Cooper, 35, works with his brother James as an insurance agent in Bowling Green. Benjamin Cooper was tipped by his brother about fourteen announcements, and made at least $149,000 from trading on that information.
Following tips from James Cooper, Benson, 41, purchased the securities of 10 companies, and realized trading profits of $838,000.
Conner, 35, is a stockbroker in the Bowling Green office of Morgan Keegan & Co., Inc., a regional broker dealer headquartered in Nashville, Tennessee. Conner traded in his own account after being tipped by James Cooper on one occasion, earning at least $2700. He also caused five of his clients, all Bowling Green residents, to trade before 3 to 16 deal announcements, after he was tipped. Collectively, those clients had profits of more than $2.6 million. Conner also tipped at least two other residents of Bowling Green: his supervisor, defendant William H. Borders, II, and a friend, defendant Gordon K. Allen, Jr.
Borders, 37, is the branch manager of the Morgan Keegan office where Conner was employed. He was tipped both by Conner and by Benson (who was one of Borders' clients). With inside information he received from Conner and from Benson, Borders traded for his own account, and reaped profits of $84,150.
Allen, 35, is a principal of G2 Investments, Inc., a broker- dealer located in Nashville, Tennessee. Allen made profits of more than $415,000 by trading on tips on at least 13 deals. Allen, in turn, tipped a colleague at G2 Investments, defendant Jon Geibel of Nashville. Geibel, 29, made more than $94,000 in profits by trading on inside information in at least seven deals. Allen and Geibel together made an additional $377,000 in insider trading profits from two other accounts at G2 Investments that they controlled jointly. The two also caused another colleague at G2 Investments to purchase securities on two deals that they were tipped on, who realized profits of at least $47,000.
Phillip Morris Tippees
Freeman also tipped material nonpublic information he obtained from Goldman Sachs and/or CS First Boston to three of his co-workers at Philip Morris, defendants Anthony Seminara, Norman Lehrman and Linda Karlsen.
Seminara, age 47, resides in Long Beach, New York. He is a full time employee in the Composition Department of Philip Morris. Seminara traded in the securities of eight companies after being tipped by Freeman, and had profits of more than $42,000
Lehrman, age 42, resides in Tallman, New York. Lehrman was formerly employed as a manager of the company that provides the dining services for Philip Morris. Lehrman traded in the securities of four companies after being tipped by Freeman, and had profits of more than $110,000.
Karlsen, age 46, resides in Brooklyn, New York. She is a full time employee of Philip Morris. Karlsen purchased the securities of eleven companies after being tipped by Freeman, and had profits of more than $192,000.
Les Halles Tippees
Freeman also tipped two individuals he had met when he had worked as a waiter at the Les Halles restaurant in New York City: defendants Timothy Siemers and Norman Grossman. Siemers, age 33, resides in New York City, New York. He is a waiter at Les Halles. Siemers purchased in his accounts the securities of 18 companies and realized profits of at least $285,000. This figure includes a $28,000 profit in an account in Siemers' name that he shared with Freeman. In addition, Siemers' brothers purchased securities before at least eight transactions; together they made more than $36,000.
Grossman, age 54, resides in Long Island City, New York. He is a retired New York City school teacher and a frequent patron of Les Halles. Following tips from Freeman, Grossman purchased the securities of at nine companies, and realized trading profits of more than $445,000.
Friends and Neighbors
Freeman tipped three of his friends and or neighbors: defendants Lawrence Schwartz, Michael Akva, and Richard Zelman. Schwartz, age 59, resides in New York City. He is the owner of L&M Larjo Construction Company. Schwartz purchased the securities of 22 companies after being tipped by Freeman and realized profits of at least $822,000.
Akva, resides in Flushing, New York. He is a car salesman. Akva purchased the securities of at least seven companies after being tipped by Freeman, and realized profits of at least $100,000. Akva and Freeman also tipped a friend of Akva's, defendant Robert Fricker. Fricker, 46, lives in Kew Garden Hills, New York, where he owns a construction company. He purchased the securities of four companies and realized trading profits of more than $946,000.
Zelman, age 32, resides in Nyack, New York, and is a former neighbor of Freeman's. He is self-employed. With Freeman's agreement, Zelman caused a friend to purchase the securities of four companies, realizing profits of more than $200,000.
Freeman also told defendant Bradley Burke, who, like Freeman, was a temporary agency employee assigned to CS First Boston, about the scheme. Burke, age 38, resides in New York City. Burke was assigned to CS First Boston approximately one week after Freeman. In the spring of 1999, Burke approached Freeman about participating in the insider trading scheme, Freeman agreed that if Burke would provide information about impending deals, Freeman would disclose the information to his tippees, and Burke would receive a share of the trading profits. Burke told Freeman about several possible deals, but only one of those transactions occurred. Burke also tipped directly defendant Siemers, a mutual friend. Freeman gave Burke cash from certain of the tippees, as payment for the information Burke provided.
The Commission coordinated its investigation with that of the Securities and Commodities Fraud Task Force in the Office of the United States Attorney for the Southern District of New York, which filed related charges today. The Commission also acknowledges the assistance provided by the American Stock Exchange, the New York Stock Exchange, the Chicago Board Options Exchange, NASD Regulation Inc., and the Philadelphia Stock Exchange. These SROs are all participants in the Intermarket Surveillance Group, which coordinates the sharing of surveillance information across the domestic and international securities markets.
The Commission's investigation into these matters is continuing. |
