U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21075 / June 9, 2009
Securities and Exchange Commission v. Lorenz Kohler and Swiss Real Estate International Holding AG, Defendants, and Sacho Todorov Dermendjiev, Relief Defendant, Civil Action No. 06-4540 (E.D. Pa. June 8, 2009)
SEC Charges Swiss National with Insider Trading
The Commission today announced that it filed a First Amended Complaint against Lorenz Kohler (Kohler), a resident of Mels, Switzerland, and Swiss Real Estate International Holding AG (Swiss Real Estate) alleging that they engaged in insider trading in advance of the October 9, 2006 public announcement of a $566 million merger between CNS and GlaxoSmithKline plc. The First Amended Complaint alleges that Kohler purchased out-of-the-money call options in CNS in his personal account and in an account in the name of Swiss Real Estate, a company controlled by Kohler, based on material non-public information relating to the company's potential acquisition. The Commission alleges that Kohler and Swiss Real Estate realized illicit gains of approximately $387,566. The Commission further alleges that Kohler tipped his wife and his brother-in-law, who then traded in CNS options in advance of the announcement of the acquisition of CNS and realized significant illicit gains.
The First Amended Complaint also names Sacho Todorov Dermendjiev (Dermendjiev) as a relief defendant. The Commission alleges that Dermendjiev, who resides in Bulgaria, was the beneficial owner of banking and securities accounts over which Kohler held power of attorney. According to the First Amended Complaint, Kohler purchased option contracts on CNS stock for Dermendjiev's account just prior to announcement of the acquisition of CNS and sold these options immediately after announcement of the CNS acquisition, resulting in illicit gains of $74,655 for Dermendjiev.
According to the First Amended Complaint, Kohler has engaged in a pattern of highly suspicious trading both prior to and immediately after the trades in CNS securities that are charged in the First Amended Complaint. During late 2005 and 2006, Kohler and a group of his friends and relatives also traded in the securities of five other public companies in advance of acquisitions or earnings announcements. The First Amended Complaint alleges that Kohler and his circle of traders realized over $5 million in profits on these trades.
In the pending lawsuit, the Commission alleges that Kohler and Swiss Real Estate engaged in illegal insider trading in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The First Amended Complaint seeks permanent injunctive relief, the disgorgement of all illegal profits, and the imposition of civil monetary penalties. The First Amended Complaint supersedes the Commission's original complaint in this action, which was filed on an emergency basis against purchasers of CNS call options whose identities were not, at that time, known to the Commission. See Securities and Exchange Commission v. One or More Unknown Purchasers of Call Options for the Common Stock of CNS, Inc. (Litigation Release No. 19867 / October 13, 2006).
The Commission acknowledges the assistance of the Swiss Financial Market Supervisory Authority (FINMA) in the investigation of this matter.
Antonia Chion, Associate Director, Division of Enforcement, (202) 551-4842
H. Michael Semler, Assistant Chief Litigation Counsel, (202) 551-4429