THE GUTTENBERG INSIDER TRADING CASE MOVES TO A CLOSE
The Commission resolved insider trading charges with three more defendants in the case many heralded as the most significant since the 1980’s and the days of Ivan Boesky, Dennis Levine and others. SEC v. Guttenberg, Case No. 07 CV 1774 (S.D.N.Y. Filed March 1, 2007). The fourteen defendants, largely Wall Street professionals, are alleged to have engaged in two over lapping schemes. One, called the UBS scheme, claimed that UBS executive director Michel Guttenberg provided inside information about upcoming firm analyst recommendations to Wall Street traders Eric Franklin and David Tavdy in exchange for a share of the trading profits from 2001 to 2006. Those traders used the inside information to trade in a number of deals. They also had downstream tippees.
A second alleged that from 2004 to 2005 Randi Collotta, an attorney in Morgan Stanley’s global compliance department, misappropriated inside information about upcoming corporate acquisitions. Together with her husband, who was a lawyer in private practice, Ms. Collotta furnished information to Marc Jurman, a broker dealer in Florida. Mr. Jurman traded through his account and another, splitting the trading profits with Ms. Collotta. The Commission’s complaint named fourteen defendants.
Last week, the Commission settled with Erik Franklin, Q Capital Investment Partners and David Tavdy. Mr. Franklin and his company consented to the entry of a permanent injunction prohibiting future violations of the antifraud provisions and orders requiring the payment of disgorgement of $5.4 million, on a joint and several basis, with all but $290,000 based on a demonstrated inability to pay. Mr. Franklin also agreed, in a related administrative proceeding, to an order barring him from future association with any broker, dealer, or investment adviser.
Mr. Tavdy also consented to the entry to the entry of a permanent injunction prohibiting future violations of the antifraud provisions. In addition, he consented to an order requiring the payment of $10.3 million. In a related administrative proceeding Mr. Tavdy agreed to the entry of an order barring him from future association with any broker or dealer.
The parallel criminal cases, discussed here, are based on essentially the same conduct as the Commission’s complaint. Thirteen defendants, including Messrs. Tavdy and Franklin, were named. All of the defendants in those case have pleaded guilty.