In insider trading investigations the focus is shifting at least momentarily from hedge funds and their expert networks to family cases. Last week, two sisters teamed up to use inside information obtained by one husband as the basis for securities trades by the husband of the other. This week two brothers-in-law teamed up in another family insider trading ring. SEC v. Temple, Case No. 10-cv-1058 (D. Del. Filed Dec. 7, 2010).
Temple names as defendants Jeffery Temple and his brother-in-law Benedict Pastro. Mr. Temple was employed at a Wilmington, Delaware law firm August 12, 2002 through October 11, 2010 when he was terminated because of the insider trading scheme alleged in the Commission’s complaint. At the firm, he held the position of Information Systems and Security Manager. This gave him access to electronic and other files containing material non-public information. Defendant Benedict Pastro is Mr. Temple’s brother-in-law. He was employed as a sales person for a consulting firm.
Beginning in June 2009, and continuing until his termination from the firm, Mr. Temple traded in advance of twenty-two prospective mergers and/or acquisition-related announcements involving twenty law firm clients. In twelve instances, the complaint claims Mr. Temple tipped his brother-in-law. Mr. Temple used one brokerage account opened in June 2009 in his name to place all of his trades. Mr. Pastro used two on-line brokerage accounts in his name to place all of this trades.
The complaint details twenty two transactions spread over about fifteen months when Mr. Temple traded. For example, by March 23, 2009, On2Thnoleogies, Inc. had engaged the law firm in connection with its possible acquisition by Google. Mr. Temple had access to inside information about the deal as a result of his position with the firm. On July 20, 2009 Mr. Temple purchased 11,000 shares of On2Technologies. Following the announcement of the deal on August 5, 2009, the share price rose 58%. Mr. Temple subsequently sold his stock at a profit of $1,800. The pattern of modest trades for small gains is repeated with the other stocks. Overall, Mr. Temple is alleged to have made illegal profits of $88,300. Mr. Pastro is alleged to have made $94,000 in illegal profits.
The complaint alleges violations of Exchange Act Sections 10(b) and 14(e). The case is in litigation. See alsoLitig. Rel. 21765 (Dec. 7, 2010).
FCPA Program: Thursday, December 9, 2010 from 12:00 to 1:30 p.m. Tom Gorman and Frank Razzano will co-chair the “Third Annual FCPA Update: Current SEC & DOJ Enforcement Activities.” The program is sponsored by the ABA Criminal Justice Section, White Collar Securities Fraud Subcommittee of which Mr. Gorman is co-chair.
The panel of speakers includes: Judge Stanley Sporkin, Law Offices of Stanley Sporkin, Peter B. Clark, Cadwalader, Wickersham & Taft, F. Joseph Warin, Gibson Dunn, and Tammy Eisenberg, Chief Compliance Officer and General Counsel of DIAM, New York City.
The program will be webcast nationally and live in Washington, D.C. at the offices of Pepper Hamilton where Mr. Razzano is a partner, 600 14th Street, Washington, D.C. Lunch will be served during the program. To register please click on the following link: http://www.abanet.org/cle/programs/t10fpa1.html.