U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21059 / May 27, 2009

Securities and Exchange Commission v. James E. Gansman, et al., Civil Action No. 08-CV-4918 (PKC)(S.D.N.Y)

U.S. District Court Enters $265,924 Default Judgment Against Defendant Gerald L. Brodsky for Insider Trading.

A federal judge in New York, on a complaint brought by the Securities and Exchange Commission, has imposed the maximum civil penalty for insider trading on defendant Gerald L. Brodsky ("Brodsky") for acting on a tip from his daughter to realize $63,400 in unlawful trading profits in the securities of Freescale Semiconductor, Inc. ("Freescale"). On May 21, 2009, Judge P. Kevin Castel of the United States District Court for the Southern District of New York ordered Brodsky to surrender his profits along with prejudgment interest, plus a penalty equal to three times those profits, for a total of $265,924. Judge Castel also enjoined Brodsky from further violations of the antifraud provisions of the United States securities laws.

The SEC complaint alleged that in August 2006 defendant Brodsky was tipped by his daughter, defendant Donna B. Murdoch ("Murdoch"), with the material, non-public information that Freescale was to be acquired by a private equity firm. The complaint alleged that Murdoch learned of the acquisition from a close friend, defendant James Gansman ("Gansman"). At the time, Gansman was employed by the accounting firm Ernst & Young LLP ("E&Y"), which had been retained to assist in conducting due diligence by the private equity firm looking to acquire Freescale. According to the complaint, Gansman worked on the engagement and breached his duty of confidentiality owed to E&Y and his client by telling Murdoch about the proposed deal. Murdoch then told her father, who used the information to profit from trading in Freescale securities.

The complaint alleged that by using the inside information, Brodsky violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Brodsky did not defend against the charges and the judgment was entered as a default. See also Litigation Release No. 20603 (May 29, 2008).