FORMER EXECUTIVE CHARGED BY SEC WITH INSIDER TRADING BASED ON CONFIDENTIAL INFORMATION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission today charged a former executive at Qualcomm Inc. and his former financial advisor with insider trading ahead of major announcements by the San Diego-based wireless technology company for more than a quarter-million dollars in profits.

The SEC alleges that Jing Wang, a former executive vice president and president of global business operations at Qualcomm, used a secret offshore brokerage account to make illegal trades based on confidential information that he learned on the job.  Gary Yin, a former registered representative at Merrill Lynch, helped Wang set up the account.  Yin also created a secret offshore account of his own and traded on the non-public information gleaned from Wang.  When Wang eventually realized that insider trading in the offshore accounts still may be discovered by the SEC or other regulators, he concocted a plan to conceal his trading activity by claiming the trades were made by his brother.  Wang even convinced Yin to travel to China and go over the account statements with Wang’s brother so he could explain the trades if asked by investigators.

“Wang violated his duty as an insider to protect confidential information when he made timely illegal trades ahead of major announcements to the detriment of other Qualcomm shareholders who did not have the same information,” said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office.  “Wang and Yin went to extraordinary lengths to conceal their trading and cover it up afterwards, but despite their expansive efforts they still wound up in law enforcement’s crosshairs.”

In a parallel action, the U.S. Attorney’s Office for the Southern District of California today announced criminal charges against Wang and Yin.

According to the SEC’s complaint, Wang and Yin became friends in 2005 as members of the same church.  When Wang learned that Yin was a financial advisor at Merrill Lynch, he asked Yin to manage his money and opened a number of brokerage accounts at the firm’s San Diego branch office.  Each account was disclosed to Qualcomm because, as a company officer, Wang was restricted in his ability to trade Qualcomm stock and required to pre-clear all Qualcomm trades with the company.

The SEC alleges that in early 2006, Wang approached Yin about hiding cash transactions.  Yin suggested that Wang create an entity registered in the British Virgin Islands (BVI) and use the name of a non-U.S. citizen family member as the beneficial owner.  Then he could open a brokerage account in the newly created entity’s name.  Yin then helped Wang set up a secret account in the name of a BVI company called Unicorn Global Enterprises, and Wang’s older brother was listed as the owner.  Yin similarly created his own BVI-registered entity named Pacific Rim and put it in his mother-in-law’s name.  Yin opened a Merrill Lynch brokerage account for Pacific Rim and used it to hide funds that he was using for investments.

The SEC alleges that Wang and Yin used their secret offshore accounts to trade on material, non-public information that Wang learned as an executive at Qualcomm.  In early 2010, Wang was aware that Qualcomm executives were planning a board proposal to increase Qualcomm’s quarterly dividends and request authority to initiate a stock repurchase program.  Qualcomm informed Wang and all executives that they would not be permitted to trade Qualcomm stock.  On March 1, Wang attended a Qualcomm board meeting where the quarterly dividend increase and stock repurchase were approved.  Wang immediately instructed Yin to use all of the funds in the offshore Unicorn account to purchase Qualcomm stock.  Yin knew that Wang did not pre-clear these trades and realized that the purchase was out of character for Wang because he previously never purchased Qualcomm stock on the open market in his Merrill Lynch accounts.  Within the hour of executing the trades for Wang, Yin himself bought Qualcomm stock on the basis of the material, non-public information.  The stock price increased 6.7 percent after Qualcomm publicly announced the quarterly cash dividend and stock repurchase program.  Wang and Yin profited when they sold all of their shares.

According to the SEC’s complaint, Wang used the funds from that sale to conduct insider trading again – this time in the shares of San Jose-based Atheros Communications, which was the highly confidential target of a planned acquisition by Qualcomm. Wang was regularly briefed on the transaction internally tabbed as “Project Tango” to protect its confidentiality.  Wang instructed Yin to sell all of his Qualcomm stock in the Unicorn account on Dec. 2, 2010, and prepare to buy as many shares of Atheros stock as possible with the funds in that account.  He told Yin that he was leaving on a trip to China and would contact him to execute the Atheros trade.  On December 6, Wang attended a Qualcomm board meeting in Hong Kong and a resolution was passed to pursue the acquisition. Wang learned that Qualcomm planned to acquire Atheros at $45 per share.  Wang and Yin immediately communicated several times through phone calls and a text message, and Wang then purchased the maximum number of shares he could purchase with the existing funds in the Unicorn account at prices between $34 and $35 per share.  At Wang’s encouragement, Yin also purchased Atheros stock for himself in his offshore account.  When the news became public in early January, Atheros stock increased more than 20 percent.  Yin sold all of his Atheros shares in the Pacific Rim account on January 12, and Wang sold his Atheros shares in the Unicorn account on January 25.

According to the SEC’s complaint, Wang took his next insider trading step merely four minutes after selling the Atheros stock, using the proceeds to purchase Qualcomm shares in advance of a company announcement that it would raise its revenue and earnings guidance for the 2011 fiscal year.  Wang had learned the confidential information prior to the board meeting he attended in Hong Kong, where Qualcomm’s better-than-expected first quarter financial performance was further discussed.  Wang learned that Qualcomm planned to announce its earnings results on January 26, and thus purchased his Qualcomm shares the day before the announcement.  After Qualcomm issued a press release to announcing its positive first quarter results, Qualcomm’s stock increased 5.9 percent.

The SEC alleges that Wang made more than $244,000 in illegal profits through the insider trading scheme, and Yin realized gains of more than $27,000.  Wang eventually realized that his illegal trading may be detected by Merrill Lynch or others.  Wang first asked Yin to delete records of the trades in the Unicorn account, but because they were permanent records in Merrill Lynch’s systems they could not be erased.  Around January 2012, Wang directed Yin to establish a new BVI corporation named Clearview Resources and open a new account at Merrill Lynch to which they transferred the insider trading proceeds in the Unicorn account to further distance Wang from the suspicious trades.  A few months later, Wang informed Yin that the trades may have been detected because the SEC had subpoenaed his e-mails.  So Wang devised a cover story and convinced Yin if ever questioned to say that the Atheros trades were made by Wang’s brother.  Because Yin had never communicated with Wang’s brother, Wang instructed him to travel to China with the Unicorn account statements and review the trades with his brother so he could explain the trading if asked.  Yin did so in May 2012.  To further hide Wang’s ownership of the Unicorn account and his link to the Atheros trades, Yin removed the Unicorn account from Wang’s “household” in Merrill Lynch’s computer system in July 2012. “Householding” is a function used by Merrill Lynch to link related accounts.

The SEC's complaint charges Wang, who lives in Del Mar, Calif., with violating Sections 10(b) and 16(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 16a-3.  Yin, who lives in San Diego, is charged with violating Section 10(b) of the Exchange Act and Rule 10b-5.  The SEC’s complaint seeks disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, and permanent injunctions.  The SEC also seeks an officer-and-director bar against Wang.

The SEC’s investigation has been conducted by Ann C. Kim, Wendy E. Pearson, Nina Yamamoto, and Finola H. Manvelian of the Los Angeles Regional Office.  The SEC’s litigation will be led by Sam Puathasnanon.  The SEC appreciates the assistance of the Department of Justice’s Criminal Division, the U.S. Attorney’s Office for the Southern District of California, and the Federal Bureau of Investigation.

FOUR STEEL COMPANY EXECUTIVES AND TIPPEES SETTLE INSIDER TRADING CHARGES

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

February 5, 2013 — The Securities and Exchange Commission today announced that four steel company executives and two of their tippees have agreed to pay $639,260 to settle insider trading charges against them.

The SEC filed a civil action on March 17, 2011, against eight individuals, alleging that they traded on the basis of material, nonpublic information about the forthcoming acquisition of Steel Technologies, Inc. by Mitsui & Co. (USA). Specifically, the SEC alleged that four executives traded based on inside information and that three of them tipped others who also traded in advance of the upcoming acquisition. The six settling defendants collectively earned $268,805 from their trades.

Without admitting or denying the SEC’s allegations, each of the settling defendants consented to final judgments that have been entered by the court. The final judgments order: (i) Patrick M. Carroll to disgorge $34,279 plus pay prejudgment interest of $10,412 and a penalty of $34,279; (ii) James P. Carroll to disgorge $3,020 plus pay prejudgment interest of $917 and a penalty of $3,020; (iii) William T. Carroll to disgorge $54,163 plus pay prejudgment interest of $16,452 and a penalty of $54,163; (iv) David Mark Calcutt to disgorge $150,297 plus pay prejudgment interest of $45,652 and a penalty of $150,297; (v) Christopher T. Calcutt to disgorge $4,250 plus pay prejudgment interest of $1,291 and a penalty of $4,250; and (vi) David Stitt to disgorge $22,796 plus pay prejudgment interest of $6,924 and a penalty of $42,796. They are also permanently enjoined from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

The SEC’s charges against the other traders, John Monroe and Stephen Somers, remain pending.

MAN CHARGED WITH INSIDER TRADING

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission today charged a Connecticut-based business executive with insider trading ahead of the sale of Patriot Capital Funding Group based on nonpublic information he learned at the helm of a firm involved in the bidding process.

The SEC alleges that I. Joseph Massoud, who founded investment advisory firm Compass Group Management, gained access to nonpublic information contained in an online "dataroom" where bidding companies could learn more about Patriot Capital's financial condition. For access to the data, Compass Group had to enter into a confidentiality agreement that prohibited its employees from buying Patriot Capital stock. Nonetheless, Massoud purchased shares soon after Compass Group gained access to the confidential information, and he bought even more stock after he learned that Compass Group's bid was what he described as "waaaaay off" compared to bids from other companies. Patriot Capital's share price more than doubled after a merger was publicly announced, and Massoud realized more than $676,000 in illegal profits.

Massoud, who lives in Westport, Conn., agreed to settle the SEC's charges by paying more than $1.4 million. He also will be barred from working in the securities industry or serving as an officer or director of a public company. The settlement is subject to court approval.

According to the SEC's complaint filed in federal court in Connecticut, Patriot Capital initiated a nonpublic bidding process in 2009 to entertain proposals for strategic investments and the possible sale of the company. In May 2009, Massoud directed Compass Group to execute a confidentiality agreement with Patriot Capital so it could participate in that process. After Compass Group was provided access to the online dataroom as part of the bidding process, a Compass Group analyst accessed the dataroom and provided various reports containing material, nonpublic information to Massoud.

The SEC alleges that Massoud also learned nonpublic information about the value of bids received by Patriot Capital from other parties involved in the bidding process. On July 7, 2009, Massoud e-mailed others working on the Patriot Capital transaction at Compass Group and indicated that he had just talked with Patriot Capital's CEO. He wrote that Compass Group was "waaaaay off" on its bid to acquire Patriot Capital, which according to the CEO had received several acquisition bids that were much higher than Compass Group's offer. Massoud also learned from the CEO that Compass Group would have to increase its bid to match those higher proposals if it wanted to be considered.

According to the SEC's complaint, Massoud bought 322,216 shares of Patriot Capital stock in transactions spread across 15 different trading days from May to July. Massoud purchased more than half of those shares after July 7 when Patriot Capital's CEO confidentially told him about other higher bids to acquire Patriot Capital. On August 3, 2009, Patriot Capital publicly announced a merger with Prospect Capital Corporation. On August 25, after Patriot Capital had been acquired and its stock price had increased significantly, Massoud sold all of his Patriot Capital stock.

The SEC alleges that Massoud violated Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder and that his profits constitute ill-gotten gains. Massoud agreed to pay disgorgement of $676,013, prejudgment interest of $80,785, and a penalty of $676,013. He agreed to be enjoined from violating Section 10(b) and Rule 10b-5 in the future, and he will be barred from serving as a public company officer or director and from being associated with any broker, dealer, investment adviser, municipal securities dealer, municipal adviser, transfer agent, or national recognized statistical rating organization. He also will be barred from participating in any penny stock offering.

A BOARD CHAIRMAN OF A CORPORATION IS CHARGED WITH INSIDER TRADING

The following excerpt is from the SEC website:

“The Commission announced that on January 31, 2012, an Illinois federal court entered a default judgment against Daniel J. Burns (“Burns”), a defendant in an action filed by the Commission in January 2011. The Commission alleged in its complaint that from 2003 to 2008, Burns, the former Chairman of the Board of Directors of CytoCore, Inc. (“CytoCore”), employed fraudulent schemes to profit from CytoCore stock transactions and received hundreds of thousands of dollars in improper compensation and benefits from CytoCore as an unregistered broker. According to the complaint, in February 2008, Burns caused CytoCore to issue a press release touting Burns’ investment in CytoCore stock, and then secretly sold shares immediately following the announcement. According to the complaint, Burns’ secret selling also constituted insider trading because Burns was in possession of material, nonpublic information about an ongoing CytoCore private stock offering.

The complaint further alleged that, from 2003 to 2008, Burns improperly received transaction-based compensation as an unregistered broker soliciting investors in CytoCore stock. The complaint also alleged that Burns submitted false claims for commissions purportedly earned by a friend for soliciting CytoCore investors, and his friend, in turn, remitted those commission payments to Burns. The Complaint also alleged that Burns submitted to CytoCore false claims for expense reimbursements relating to his investor solicitations. The complaint further alleged that Burns violated insider reporting requirements.

The Court’s final judgment enjoins Burns from future violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 14(a), 15(a), and 16(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 14a-9, and 16a-3 thereunder, orders him to pay disgorgement in the amount of $804,100.00, plus prejudgment interest of $324,325.00, for a total amount of $1,128,425.00, and permanently bars him from acting as an officer or director of a public company.”

STEC INC. SALES DIRECTOR CHARGED BY SEC WITH INSIDER TRADING

The following is from the SEC website:

January 17, 2012
“The Securities and Exchange Commission today charged a sales director at Santa Ana, Calif.-based data storage manufacturer STEC Inc. with insider trading in company securities based on non-public information he learned on the job.

The SEC’s complaint filed in the U.S. District Court for the Central District of California, alleges that Farzin Bazshushtari, who lives in Mission Viejo and is STEC’s Director of Industrial Distribution, purchased 7,000 STEC shares on April 27, 2009, after learning about STEC’s positive first quarter financial results. When those results were announced publicly on May 11, STEC’s stock price jumped 30 percent.

The SEC further alleges that Bazshushtari purchased another 5,500 shares on May 27, 2009, after seeing internal weekly sales reports indicating that STEC would outperform second quarter guidance. He additionally purchased 200 STEC call options on June 10. When the company publicly increased second quarter revenue guidance on June 16 to reflect the surging sales, STEC’s stock price jumped 26 percent.

According to the SEC’s complaint, Bazshushtari made total profits of $76,676.50 by trading on inside information. Bazshushtari knew that he violated company policies when he placed the trades. His April 27 purchase was made during a “blackout” period when STEC employees were prohibited from trading in company stock. He purchased STEC call options despite STEC employees being prohibited from trading in STEC options, which give holders the right to buy or sell shares in the future. Bazshushtari further violated STEC’s written insider trading and ethics policies when he traded on margin and held his STEC securities in a margin account.

Bazshushtari agreed to settle the SEC’s charges by paying $76,676.50 in disgorgement and a $76,676.50 penalty. Bazshushtari also has consented without admitting or denying the SEC’s allegations to a permanent injunction from further violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.”

SEC CHARGES FORMER PRO-BASEBALL PLAYER WITH INSIDER SECURITIES TRADING

The following excerpt is from the SEC website:

On November 23, 2011, the Securities and Exchange Commission charged former professional baseball player Jeffrey S. Richardson with insider trading in securities of Genesis Energy, LP ahead of an April 26, 2007 announcement that Genesis would acquire several energy related businesses owned by the Davison family of Ruston, Louisiana. The Commission also alleges that Richardson tipped two family members and one friend who traded in Genesis Energy securities. Richardson has agreed to settle the matter.
According to the Commission’s complaint filed in U.S. District Court for the Southern District of New York, Richardson, who lives in Grand Island, Nebraska, received confidential information about the acquisition from a person knowledgeable about the negotiations between Genesis and the Davison family. In breach of a duty of trust and confidence he owed the source of the information, Richardson purchased units of Genesis on six separate dates between February 26 and April 25, 2007 based on the information he received regarding the acquisition. During this time, Richardson also illegally tipped two family members and one friend, who traded on the confidential information. Together, Richardson, his family members and the friend made profits of $88,026 from their illegal trading.
Without admitting or denying the complaint’s allegations, Richardson has agreed to settle the Commission’s charges by consenting to entry of a final judgment permanently enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and ordering him to pay $88,026 in disgorgement with $21,534 in prejudgment interest, and a civil penalty of $88,026. The settlements are subject to final approval by the court.”

CALIFORNIA WORMAN SETTLES INSIDER TRADING CHARGES WITH SEC

The following excerpt is from the SEC website:

October 25, 2011
“The United States District Court for the Northern District of California approved a proposed settlement of the Securities and Exchange Commission’s insider trading claims against Annabel McClellan. The Commission alleged that Ms. McClellan obtained confidential information about pending mergers and acquisitions from her husband, a former partner in the San Francisco offices of Deloitte Tax LLP, to tip her sister and brother-in-law in London. As alleged by the Commission, Ms. McClellan’s relatives used the information to place trades in advance of the public announcements of the transaction, making millions of dollars in illicit profits.
Without admitting or denying the Commission’s allegations, Ms. McClellan consented to pay a $1 million civil money penalty. Ms. McClellan also consented to the entry of a final judgment that will enjoin her permanently from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The court entered the final judgment against Ms. McClellan on October 25, 2011.
Ms. McClellan previously pleaded guilty to one count of obstructing the Commission’s investigation into the insider trading scheme. The United Kingdom Financial Services Authority filed insider trading charges against Ms. McClellan’s relatives and three others in November 2010.
In a related action, the Commission requested the dismissal of the insider trading claims against Ms. McClellan’s husband, Arnold A. McClellan.”

October 11, 2011

MERGER AND AN ALLEGED INSIDE TRADING SCHEME IN HEWITT ASSOCIATES STOCK

The following is an excerpt from the SEC website:
“The Securities and Exchange Commission today filed a civil injunctive action in the U.S. District Court for the Northern District of Illinois charging M. Jason Hanold, a former managing director at an executive search firm in Chicago, with illegal insider trading in Hewitt Associates stock in advance of the July 12, 2010 public announcement of a merger agreement between Aon and Hewitt Associates.
The SEC alleges that on July 7, Hanold bought shares of Hewitt Associates stock after learning of the impending merger from his wife, who was an executive at Aon at the time. He did so despite requests from his wife that he keep this nonpublic information confidential.
According to the SEC’s complaint, Hanold’s wife learned on or about July 6, 2010 that Aon and Hewitt Associates had reached a merger agreement and that a public announcement was imminent. Hanold’s wife shared this information with Hanold in a telephone call that evening. Shortly after the call ended, Hanold’s wife sent him two emails in which she requested that he not share this information. Hanold replied, “I won’t, no need. I only wish we bought their stock!!!” The next day, July 7, 2010, Hanold purchased 831 shares of Hewitt Associate’s stock in advance of the July 12, 2010 public announcement of the agreement between Hewitt Associates and Aon. The announcement caused Hewitt Associates’ stock price to increase by more than 32%. Hanold sold all of his shares on July 12, 2010 for a profit of $10,241.
Without admitting or denying the allegations in the complaint, except as to jurisdiction, Hanold has consented to entry of a final judgment that permanently enjoins him from violating Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. Hanold has also consented to pay $20,766 in disgorgement, prejudgment interest and civil penalties. The settlement is subject to approval by the court.
James G. O’Keefe conducted the SEC’s investigation in this matter. The Commission acknowledges the assistance of FINRA in this investigation.”

FORMER EXEC. AT CHI-TOWN EXEC. SEARCH FIRM GETS INJUNCTION BY SEC REGARDING INSIDER TRADING

October 11, 2011
The following excerpt is from the SEC website:
“The Securities and Exchange Commission today filed a civil injunctive action in the U.S. District Court for the Northern District of Illinois charging M. Jason Hanold, a former managing director at an executive search firm in Chicago, with illegal insider trading in Hewitt Associates stock in advance of the July 12, 2010 public announcement of a merger agreement between Aon and Hewitt Associates.
The SEC alleges that on July 7, Hanold bought shares of Hewitt Associates stock after learning of the impending merger from his wife, who was an executive at Aon at the time. He did so despite requests from his wife that he keep this nonpublic information confidential.
According to the SEC’s complaint, Hanold’s wife learned on or about July 6, 2010 that Aon and Hewitt Associates had reached a merger agreement and that a public announcement was imminent. Hanold’s wife shared this information with Hanold in a telephone call that evening. Shortly after the call ended, Hanold’s wife sent him two emails in which she requested that he not share this information. Hanold replied, “I won’t, no need. I only wish we bought their stock!!!” The next day, July 7, 2010, Hanold purchased 831 shares of Hewitt Associate’s stock in advance of the July 12, 2010 public announcement of the agreement between Hewitt Associates and Aon. The announcement caused Hewitt Associates’ stock price to increase by more than 32%. Hanold sold all of his shares on July 12, 2010 for a profit of $10,241.
Without admitting or denying the allegations in the complaint, except as to jurisdiction, Hanold has consented to entry of a final judgment that permanently enjoins him from violating Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. Hanold has also consented to pay $20,766 in disgorgement, prejudgment interest and civil penalties. The settlement is subject to approval by the court.
James G. O’Keefe conducted the SEC’s investigation in this matter. The Commission acknowledges the assistance of FINRA in this investigation.”