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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20831 / December 18, 2008

SEC v. Matthew C. Devlin, Jamil A. Bouchareb, Daniel A. Corbin, Frederick E. Bowers, Thomas R. Faulhaber, Eric A. Holzer, Jeffrey R. Glover, Corbin Investment Holdings, LLC and Augustus Management, defendants, and Maria T. Checa, Lee H. Corbin, LLC and Checa International, Inc., relief defendants, Civil Action No. 08-CV-11001 (S.D.N.Y.) (JGK)

SEC Charges Wall Street Professionals and Others with Widespread Insider Trading

The Securities and Exchange Commission today filed insider trading charges against nine defendants and also named three relief defendants. The Commission's complaint alleges that from at least March 2004 through July 2008, Matthew Devlin, then a registered representative at Lehman Brothers, Inc. ("Lehman") in New York City, traded on and tipped at least four of his clients and friends with inside information about 13 impending corporate transactions. According to the complaint, some of Devlin's clients and friends, three of whom worked in the securities or legal professions, tipped others who also traded in the securities. The complaint alleges that the illicit trading yielded over $4.8 million in profits.

As alleged in the complaint, although many of the defendants had accounts with Lehman, they often attempted to avoid detection by trading in the securities of the target companies in numerous accounts that were not associated with Lehman or Devlin. The complaint alleges that to further conceal their illicit trading, at least two of the defendants sold off some of the shares they had purchased based on inside information prior to public announcements of the deals. In addition, Devlin and one of his tippees arranged to buy shares on Devlin's behalf so Devlin could profit from the nonpublic information but evade scrutiny. When this tippee's name appeared on a watch list, Devlin and the tippee agreed that Devlin would stop providing him inside information.

The complaint alleges that Devlin misappropriated the confidential nonpublic information about the corporate transactions from his wife, a partner in the New York City office of an international public relations firm working on the deals. As alleged in the complaint, because the inside information was valuable, some of the traders referred to Devlin and his wife as the "golden goose." The complaint further alleges that by providing inside information, Devlin curried favor with his friends and business associates and, in return, was rewarded with cash and luxury items, including a Cartier watch, a Barneys New York gift card, a widescreen TV, a Ralph Lauren leather jacket and Porsche driving lessons.

The complaint alleges that, based on the information provided by Devlin, the defendants variously purchased the common stock and/or options of the following public companies: InVision Technologies, Inc.; Eon Labs, Inc.; Mylan, Inc.; Abgenix, Inc.; Aztar Corporation; Veritas, DGC, Inc.; Mercantile Bankshares Corporation; Alcan, Inc.; Ventana Medical Systems, Inc.; Pharmion Corporation; Take-Two Interactive Software, Inc.; Anheuser-Busch, Inc.; and Rohm and Haas Company. At the time that Devlin tipped the other defendants about these companies, each company was confidentially engaged in a significant transaction that involved a merger, tender offer, or stock repurchase.

The Commission's complaint contains the following additional allegations:

Bouchareb Trading Group

  • Devlin tipped Jamil Bouchareb, age 27, his friend and client at Lehman about 12 of the deals. Bouchareb, a Miami Beach, Florida-based trader, traded in his own accounts and tipped his friends and business partners. He also caused his parents to trade.

  • Bouchareb's tippees include his friend and business partner, Daniel Corbin, age 32, who traded in a number of the deals through accounts in the name of his companies, Augustus Management LLC and Corbin Investment Holdings LLC. Corbin, a Miami-based trader, shared some of the profits he made with Bouchareb. Bouchareb and Corbin also shared an interest in a number of accounts that traded in the deals. In turn, Daniel Corbin, provided the information to his father Lee Corbin, age 66, an attorney based in White Plains, New York. Lee Corbin traded in his personal accounts in four of the deals and owned an interest in the Corbin Investment Holdings account that Daniel used to trade in the deals. Bouchareb and Corbin introduced Devlin to Lee Corbin, who steered Devlin business from some of his trusts and estates clients. Bouchareb also provided the information to his girlfriend, Maria Checa, age 38, who currently resides in Greensboro, North Carolina. Checa traded in her accounts, Checa International, Inc. and Playmate Capital LLC. Bouchareb shared in some of the profits that Checa made. In total, Bouchareb, Daniel Corbin, Lee Corbin, Maria Checa and Bouchareb's parents reaped illegal profits of more than $4.2 million.

Devlin's Other Tippees

  • Frederick Bowers, age 40, a registered representative at Lehman and one of Devlin's work partners was tipped on at least three of the transactions. Bowers then tipped Thomas Faulhaber, one of Bowers' clients at Lehman. Faulhaber realized profits of approximately $217,000. Faulhaber kicked back cash to Bowers who shared some of it with Devlin. Devlin received at least $10,000.

  • Eric Holzer, age 34, Devlin's friend and a tax associate in the New York City office of an international law firm, traded in at least three of the transactions. Holzer reaped profits of $175,000 in his own accounts and two accounts controlled by his father. Holzer gave Devlin cash, some of which came from shares he had his father buy on Devlin's behalf.

  • Jeffrey Glover, age 46, another of Devlin's Lehman clients and an investment adviser, traded in at least five of the deals. Glover, who is a resident of Bellaire, Texas, made approximately $189,000 in illicit profits.

Defendants Devlin, Bouchareb, Daniel Corbin, Bowers, Faulhaber, Holzer, Glover, Corbin Investment Holdings, LLC and Augustus Management, LLC are charged with violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5 and 14e-3. The SEC seeks injunctive relief, disgorgement of illicit profits with prejudgment interest, and civil penalties. Defendants Checa, Checa International, Inc. and Lee Corbin are charged as relief defendants and the SEC seeks their trading profits.

The U.S. Attorney's Office for the Southern District of New York filed related criminal charges today against some of the defendants named in the SEC's complaint. The Commission wishes to thank the U.S. Attorney's Office and the Federal Bureau of Investigation for their assistance in connection with this matter. The Commission also thanks FINRA, NYSE Regulation, Inc., the International Securities Exchange and the Options Regulatory Surveillance Authority for their assistance.

SEC Complaint in this matter

 

http://www.sec.gov/litigation/litreleases/2008/lr20831.htm


Modified: 12/18/2008