The Commission prevailed in another insider trading case when a Newark, N.J. jury found Alfred S. Teo liable for insider trading. It also found the M.A.A.A. Trust, an entity for his children, liable for disclosure violations. SEC v. Teo, 04 Civ. 1815 (D. N.J. Filed April 22, 2004).

The Commission’s complaint centers on two take-overs and disclosure violations. The first involved a tender offer for Musicland Stores Corporation. The second involved the acquisition of C-Cube Microsystems, Inc.

Mr. Teo was the largest shareholder in Musicland. Prior to the announcement of a tender offer by Best Buy for Musicland he learned about the proposed transaction through several confidential communications with senior management in the fall of 2000, according to the complaint. Initially, the CFO and General Counsel told him that an undisclosed buyer was planning an offer. Mr. Teo later acknowledged this fact to an investment banking firm he held discussions with about conducting a leveraged buyout of the company.

Subsequently, the CEO of the company told him a bid by Best Buy had been delayed for a short period. The CFO later confirmed that the bid would proceed. Mr. Teo told management he supported it.

After learning about the tender offer, and before the announcement, Mr. Teo began buying Musicland shares. Overall he purchased 45,000 shares. He also tipped several others. Musicland announced on December 7, 2000 that it would be acquired after which the share price increased 30%. Mr. Teo sold his shares at a profit of $185,275.0. Eight others he tipped had profits of over $1.1 million, according to the complaint.

The MAAA trust also held a substantial number of shares of Musicland. The trust, along with Mr. Teo and another, filed a Schedule 13D which falsely disclosed their holdings. This permitted them to avoid triggering the Musicland poison pill. False reports were also filed in violation of Exchange Act Section 16(a). This stock was later sold at a profit of $22 million.

Teo also engaged in insider trading and illegal tipping in connection with the acquisition of C-Cube. That acquisition was announced on March 26, 2001. Mr. Teo learned about C-Cube through his board position with Cirrus Logic, Inc. At the time the company was considering acquiring C-Cube and another company. After learning this information Mr. Teo purchased 35,000 shares of C-Cube stock. He also tipped another who purchased. Following the announcement Mr. Teo sold his shares at a profit of $180,012 while his tippee had profits of $115, 155.

The court will determine remedies at a later date.

Seminar: June 8, 2011, 12:00 — 1:30, Trends In DOJ and SEC Financial Fraud Cases, ABA Program, Live in Washington, D.C. and webcast nationally. Co-Chairs: Thomas Gorman and Frank Razzano. Panel: Lorin Reisner, Deputy Director, Division of Enforcement, SEC: Patrick Stokes, Deputy Chief, Fraud Section, Department of Justice; Stephen Gannon, Deputy General Counsel and V.P., Capital One. The program is live, and will be broadcast from, the Metropolitan Club of Washington, D.C. (dress code — jacket and tie for gentlemen, similar for ladies; cell phone use not permitted in the club; lunch served).

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