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U.S. Securities and Exchange Commission

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK


UNITED STATES SECURITIES
AND EXCHANGE COMMISSION

Plaintiff,

v.

BARRY L. SAFFER,

Defendant.


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  CIVIL ACTION NO. ______

  COMPLAINT

The Securities and Exchange Commission ("Commission") alleges:

PRELIMINARY STATEMENT

  1. This case involves unlawful insider trading by a financial official who repeatedly and covertly traded in the securities of his employer. From about January 1999 through March 2002, while he worked for Manugistics Group, Inc. ("Manugistics"), a software company located in Rockville, Maryland, Defendant Barry L. Saffer engaged in at least seven episodes of trading while he possessed material, nonpublic information about Manugistics. He made these trades electronically over the Internet using accounts owned by him, owned by his spouse, and owned by the two of them jointly. Saffer's profits from this illegal trading exceeded $200,000.
     
  2. Barry Saffer was Manugistics' Director of Financial Planning and Analysis, and he reported directly to the company's Chief Financial Officer. Barry Saffer's job responsibilities required that he have unlimited access to material, nonpublic company financial information. Barry Saffer was routinely privy to confidential, top level discussions by senior Manugistics' officials regarding the company's finances, plans and problems.
     
  3. Barry Saffer was an experienced and sophisticated securities trader. He knew that his trading violated federal law and Manugistics' policies, and he took steps to conceal his trading. When he started work for Manugistics, Saffer signed an acknowledgement that he had received and read the company's insider trading policy, which stated: "[I]t is illegal to buy or sell Company securities if you have knowledge of material information about the Company that has not been publicly disclosed. . . . Violations may result in civil and criminal penalties, including fines and jail sentences."
     
  4. Barry Saffer bore a duty to Manugistics and its shareholders not to trade while in possession of material, non-public information concerning the company. He breached that duty by engaging in the conduct described below.
     
  5. By engaging in that conduct, Barry Saffer violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] promulgated thereunder. Unless enjoined, Barry Saffer will continue to engage in transactions, acts, practices, and courses of business similar to those set forth in this Complaint. Accordingly, the Commission seeks injunctions against future violations, disgorgement as described in its prayer for relief, and statutory civil penalties against Barry Saffer.

JURISDICTION AND VENUE

  1. The Commission brings this action pursuant to authority conferred upon it by Sections 21(d) and 21(e) of the Exchange Act [15 U.S.C. §§ 78u(d) and 78u(e)].
     
  2. The Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa]. Venue is proper under Section 27 of the Exchange Act [15 U.S.C. § 78aa].
     
  3. Barry Saffer, directly or indirectly, made use of the means and instrumentalities of interstate commerce, of the mails, or of the facilities of a national securities exchange in connection with the acts, practices, and courses of business alleged herein.

DEFENDANTS

  1. Barry Saffer, age 36, resides in Gaithersburg, Maryland. Manugistics employed him as the company's Director of Financial Planning and Analysis from about October 1998 through March 2002. His employment with Manugistics ended on or about April 3, 2002, shortly after the company learned of his trading activities.

ISSUER

  1. Manugistics is a public company whose shares are registered with the Commission pursuant to Section 12(g) of the Exchange Act and traded on the NASDAQ National Market System. As a publicly traded company, Manugistics reported its earnings and/or losses on a quarterly basis. A number of the options trades alleged herein were executed on the International Securities Exchange located in Manhattan, New York.

STATEMENT OF FACTS

Background

  1. During the episodes described in this Complaint, Barry Saffer was Director of Financial Planning and Analysis for Manugistics. He was responsible for Manugistics' financial analyses and forecasts. Barry Saffer was one of a small number of senior officials whom Manugistics entrusted with unlimited access to material, nonpublic information about the company, including its financial and accounting information. Barry Saffer prepared the company's quarterly earnings estimates based upon, among other things, the company's prior actual quarterly results, at a time when those results were nonpublic. He also had routine daily discussions with senior company accounting officials about the quarterly closings and quarterly results when those results were nonpublic. He also helped to prepare the company's press releases and scripts for quarterly conference calls with investors and stock market analysts. Additionally, Barry Saffer was involved in the analysis of and planning for other significant financial events, such as mergers, acquisitions, and layoffs. Thus, Barry Saffer knew information about Manugistics' financial performance and impending major events before such information was disclosed to the public.

Episodes of Illicit Insider Trading

  1. On January 14, 1999, Manugistics revealed in regulatory filings that it was deciding on a future course, which might include a sale of the company. In the wake of this disclosure, Manugistics' share price closed at $16.63, up 32 percent from the previous day's close. However, because of his position at Manugistics, Barry Saffer knew that an acquisition was unlikely and that the company would soon announce layoffs. While in possession of this material, nonpublic information, from about January 5 through January 15, Barry Saffer bought a total of 80 Put options ("Puts") on Manugistics stock in an account he owned jointly with his spouse. (A Put is a right to sell shares of a stock at a specified price (the "strike price") within a specified period of time. If the share price falls, the Put becomes more valuable. Buying a Put represents an expectation that the share price will drop below the strike price at a future date.) On or about January 19, Manugistics announced to the public that it had ended talks about the merger or sale of the company and would lay off 400 workers. Following this announcement, Manugistics' share price went down, closing at $10.44, a 32 percent decrease from the previous trading day's closing share price. The Puts in the Saffers' joint account increased in value following the drop in Manugistics' share price. On or about January 21 and 25, Barry Saffer sold the Puts, realizing illicit profits of at least $8,437.
     
  2. Manugistics' second quarter for fiscal year 2000 ended on August 31, 1999. Because of his position at Manugistics, Barry Saffer knew before the information was public that second quarter company licensing revenues were less than expected. While in possession of this material, nonpublic information, on or about September 9 and September 14, Barry Saffer bought a total of 45 Puts on Manugistics, due to expire in October, in an account he owned jointly with his spouse. On or about September 15, Manugistics announced its second quarter results. Following this announcement, Manugistics' share price went down, closing at $10.81, a 15 percent decrease from the previous day's close. The Puts in the Saffers' joint account increased in value following the drop in Manugistics' share price. On September 15, after the company's announcement, Barry Saffer sold the Puts, realizing illicit profits of at least $1,687.
     
  3. Manugistics' first quarter for fiscal year 2001 ended on May 31, 2000. Because of his position at Manugistics, Barry Saffer knew before the information was public that first quarter company revenues exceeded expectations. While in possession of this material, nonpublic information, from on or about June 15 through June 21, Barry Saffer bought 4,000 shares of Manugistics for accounts he owned individually and jointly with his spouse. After the market closed on June 21, 2000, Manugistics announced its first quarter results. Following this announcement, Manugistics' share price went up, closing at $38.38 on June 22, a 54 percent increase from the previous day's close. On June 22, Barry Saffer sold all the shares, realizing illicit profits of at least $48,387.
     
  4. In late 2000, Manugistics was considering acquiring Talus Solutions, a private company in Atlanta, Georgia. Barry Saffer participated in evaluating the acquisition and knew that it was likely to take place soon. While in possession of this material, nonpublic information, on or about December 13 and 14, 2000, Barry Saffer wrote 30 Puts on Manugistics, due to expire in January, in an account he owned jointly with his spouse. ("Writing" Puts is the equivalent of short-selling Puts. A short-seller sells a security before he or she buys it, in anticipation that its price will fall. The price of a Put-a right to sell shares at a specified price-falls as the share price goes up. Therefore, writing a Put represents an expectation that the share price will go up.) On December 22, Manugistics announced that it completed the acquisition of Talus Solutions. Following this announcement, Manugistics' share price went up, closing at $53.06, a 25 percent increase from the previous days' close. As the share price went up, the price of the Puts that Barry Saffer wrote (sold short) went down. He subsequently bought Puts at the lower price to offset those that he previously wrote at the higher, pre-announcement price. Through these transactions, Barry Saffer realized illicit profits of at least $7,218.
     
  5. Manugistics' second quarter for fiscal year 2002 ended on August 31, 2001. Because of his position at Manugistics, Barry Saffer knew before the information was public that customer orders were down significantly, which would have a negative effect on second quarter results. While in the possession of this material, nonpublic information, on or about September 4 and September 5, Barry Saffer bought a total of 158 Puts on Manugistics, due to expire in October, using accounts he owned individually and jointly with his spouse. After the market closed on September 5, Manugistics pre-announced its second quarter results. Following this announcement, Manugistics' share price went down, closing at $7.80 on September 6, a 29 percent decrease from the previous day's close. The Saffers' Puts increased in value following the drop in Manugistics' share price. On or about September 6, Barry Saffer sold the Puts, realizing illicit profits of at least $56,310.
     
  6. Manugistics' third quarter for fiscal year 2002 ended on November 30, 2001. Because of his position at Manugistics, Barry Saffer knew before the information was public that company sales and revenues were higher than expected. While in the possession of this material, nonpublic information, on or about December 20, Barry Saffer bought shares of Manugistics in an account owned by his spouse alone. After the market closed on December 20, Manugistics announced its third quarter results. Following this announcement, Manugistics' share price went up, closing at $19.47 on December 21, a 23 percent increase from the previous day's close. On or about December 21, Barry Saffer sold all the shares, realizing illicit profits of at least $2,592.
     
  7. Manugistics' fourth quarter for fiscal year 2002 ended on February 28, 2002. Because of his position at Manugistics, Barry Saffer knew before the information was public that company revenue was up and fourth quarter results were better than expected. While in possession of this material, nonpublic information, on or about March 25 and March 26, Barry Saffer bought 1,000 Call options ("Calls") on Manugistics stock, due to expire in April, using accounts he owned individually and jointly with his spouse. (A Call is a right to buy shares of a stock at a specified price (the strike price) within a specified period of time. Buying a Call represents an expectation that the share price will rise above the strike price.) He bought these Calls in 27 separate transactions. After the market closed on March 26, Manugistics announced its fourth quarter results. Following this announcement, Manugistics' share price went up, closing at $20.45 on March 27, a 12 percent increase from the previous day's close. The Saffers' Calls increased in value following the rise in Manugistics' share price. On or about March 27, Barry Saffer sold the Calls, realizing illicit profits of at least $82,775.

Knowledge and Concealment

  1. At all times during Barry Saffer's employment with Manugistics, the company forbade its senior officials, including Barry Saffer, from trading in options on the company's stock, trading during company blackout periods, trading without clearance from the company, and trading while in possession of material, nonpublic information. Barry Saffer knew and intentionally violated these policies in order to engage in his unlawful trading, and to do so covertly. In each of his episodes of illegal insider trading, he violated his company's policies against trading while in possession of material nonpublic information and against trading without obtaining clearance from the company. Further, in each episode he violated his company's policies against trading during blackout periods, or trading in options on company stock, or both.
     
  2. Barry Saffer took steps to conceal his unlawful trading from his employer and others by, among other things, violating his employer's policies, misrepresenting his employer's identity to a brokerage firm, and engaging in numerous small transactions rather than one large transaction to avoid detection.

VIOLATIONS OF SECTION 10(b) OF
THE EXCHANGE ACT [I5 U.S.C. § 78J(b)]
AND RULE 10b-5 [17 C.F.R. § 240.10B-5]

  1. Paragraphs 1 through 20 are realleged and incorporated herein by reference.
     
  2. By reason of the foregoing, defendant Barry L. Saffer violated Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. Defendant Saffer, directly or indirectly, by the use of the means or instrumentalities of interstate commerce, or of the mails, or the facilities of a national securities exchange, in connection with the purchase or sale of securities in Manugistics Group, Inc.: (a) employed devices, schemes, or artifices to defraud; (b) made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (c) engaged in transactions, acts, practices or courses of business which operated as a fraud or deceit upon other persons, as is more fully set forth above.

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that this Court:

(a)   permanently restrain and enjoin Barry Saffer and his agents, servants, employees, attorneys-in-fact, and assigns and those persons in active concert or participation with them, and each of them, from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder;

(b)   order Barry Saffer to disgorge ill-gotten gains derived from the unlawful trading alleged herein, plus prejudgment interest;

(c)   order Barry Saffer to pay a civil penalty pursuant to Section 21A of the Exchange Act [15 U.S.C. § 78u-1]; and

(d)   grant such other relief as the Court deems just and proper.

Dated: June _______, 2002

Respectfully submitted,


__________________________
James M. McHale (JM 8286)
Antonia Chion
Fredric D. Firestone
Moira T. Roberts
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, NW
Washington, DC 20549
Tel. (202) 942-4588 (McHale)

 

http://www.sec.gov/litigation/complaints/complr17597.htm

Modified: 07/03/2002