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Microcap & Penny Stocks : Naked Shorting-Hedge Fund & Market Maker manipulation? -- Ignore unavailable to you. Want to Upgrade?

To: rrufff who wrote (207)	5/6/2005 8:08:46 AM
From: rrufff	Respond to of 5034

UPDATE: Ex-SG Cowen Exec Pleads Guilty, Sued By SEC 04-21-05 03:48 PM EST (Updates in last paragraph to include comment from SG Cowen.) By Siobhan Hughes Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--Guillaume Pollet, a former managing director at SG Cowen & Co., on Thursday pleaded guilty to a charge that he shorted stock in companies that were contemplating a type of securities offering that typically results in falling share prices. Pollet, 40 years old, also was sued by the Securities and Exchange Commission on charges that he engaged in similar transactions in the shares of other public companies that were considering selling shares in negotiated transactions to private investors. "He pleaded guilty. He admitted to his mistake," said Ronald P. Fischetti, Pollet's lawyer. "He wants to put this behind him." The resident of Switzerland faces a maximum of 10 years in prison when he is sentenced, which is scheduled for July 15. The guilty plea comes as federal prosecutors investigate other instances of trading abuses involving the sale of stock by public companies to private investors in privately negotiated offerings. "Today's plea shows that there are criminal penalties for financial insiders who exploit their privileged positions at the expense of investors," said U.S. Attorney Roslynn Mauskopf in a statement. The transactions at issue are known as PIPEs, an acronym for private investment in public equity. Companies typically turn to such offerings when they are too weak to raise money through traditional stock sales. Since share prices tend to decline upon the announcement of a private placement, investors with advance knowledge can reap big profits by selling borrowed shares and then buying them back at a lower price once the private offering is announced. From 1999 through 2001, Pollet ran the SG Cowen desk that was in charge of private placements. Starting in 2001, he would short company stock when he learned a public company was considering selling shares directly to private investors, according to the SEC. His strategy aimed to short the same number of shares as SG Cowen planned to buy for its own accounting, protecting the company from the risks associated with buying a PIPE, the SEC said. SG Cowen realized $4 million in profits from Pollet's trades, the SEC said. Pollet violated his promise to keep confidential the PIPE transactions contemplated by the companies in which SG Cowen planned to invest or whose PIPE transactions it planned to manage, according to an SEC complaint. Pollet also engaged in illegal insider trading, the SEC said, because he took advantage of information that was not available to the public when shorting company shares. The companies whose shares were subject to Pollet's trading abuses included HealthExtras Inc. (HLEX), Aradigm Corp. (ARDM), Proxim Corp. (PROX), and Sorrento Networks Inc. SG Cowen was the investment banker for these companies, and Pollet violated his obligations to the companies by shorting their shares, the SEC said. Sorrento became a private company last year. "SG Cowen fully expected the action taken today by the SEC," said Jean Calleja, an SG Cowen spokesman. He noted that Pollet tried to conceal his activities from SG Cowen and said the company fired Pollet and reported the matter to regulators after discovering that he may have violated trading policies. -By Siobhan Hughes, Dow Jones Newswires; 202-862-6654; Siobhan.Hughes@ dowjones.com (Chad Bray contributed to this story.) Dow Jones Newswires 04-21-05 1548ET Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.