U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21667 / September 27, 2010

Securities and Exchange Commission v. Richard A. Hansen, et al., Civil Action No. 10-CV-5050 (E.D.P.A., September 27, 2010)

SEC CHARGES FORMER REGIONAL INVESTMENT BANKING FIRM CHAIRMAN AND HIS FORMER STOCKBROKER FRIEND WITH INSIDER TRADING

The Securities and Exchange Commission alleged in an insider trading case filed today that from at least the summer of 2006 through the spring of 2007, Richard A. Hansen (“Hansen”), a registered representative and the former chairman of a regional investment bank, traded on inside information concerning at least five pending corporate acquisitions. Additionally, the Complaint alleges that Hansen tipped his longtime friend Stuart Kobrovsky (“Kobrovsky”) about one of the acquisitions, and that Kobrovsky, in turn, traded on that information. The Complaint alleges that Hansen and Kobrovsky made illegal trading profits of approximately $215,000. Without admitting or denying the allegations, Kobrovsky has agreed to settle the Commission’s allegations against him, and his settlement papers were submitted to the Court for its consideration.

The Complaint, filed in federal court in the Eastern District of Pennsylvania, alleges that defendant Hansen learned of each of the pending acquisitions, and the identity of the target companies, from his business associate, Donna Murdoch (“Murdoch”). Murdoch in turn, according to the Complaint, had learned the information from James E. Gansman (“Gansman”), then a partner in the Transaction Advisory Services Department of Ernst and Young, LLP (“E&Y”). According to the Complaint, by tipping Murdoch with material, non-public information about pending acquisitions, Gansman breached of a duty of confidentiality he owed to E&Y and its clients; and Murdoch, in turn, tipped Hansen. Hansen is then alleged to have traded on that information, and in one instance to have tipped his longtime friend, Stuart Kobrovsky, who also traded. The Complaint alleges that Hansen and Kobrovsky knew or recklessly disregarded that the tips on which each traded stemmed from a breach of duty to the information’s source.

For their part, Murdoch and Gansman were both defendants in the recently settled civil case of S.E.C. v. James E. Gansman, et al., 08-CV-4918 (PKC) (S.D.N.Y.). Both settled without admitting or denying the Commission’s allegations. Both were also charged in a parallel criminal case. In that criminal case, Murdoch entered guilty pleas to a total of 17 felony counts and is awaiting sentencing. Gansman was convicted by a jury of six felony counts and acquitted of four. He is currently incarcerated pending his appeal. See United States v. Gansman et al., 08 Cr. 471 (SGC) (S.D.N.Y.))

According to the instant Complaint, Hansen used material, nonpublic information Gansman provided to Murdoch, who in turn provided it to Hansen, by:

  • trading in his daughters’ accounts in the securities of at least two companies that were acquisition targets of E&Y’s clients, ATI Technologies (“ATI”) and Freescale Semiconductor (“Freescale”); and trading through Murdoch’s account in ATI, Freescale and Bausch and Lomb, another acquisition target client of an E&Y client, realizing illegal profits totaling at least $52,000;
     
  • tipping his longtime friend, defendant Kobrovsky, concerning one of the pending acquisitions—that of Freescale; Kobrovsky, in turn, traded on this information realizing illegal profits totaling $163,000.

The SEC complaint charges that Hansen and Kobrovsky each violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder. The SEC seeks injunctions against future violations of the federal securities laws, disgorgement of unlawful trading profits with prejudgment interest, and civil monetary penalties.

Without admitting or denying the Commission’s allegations, Kobrovsky signed a consent that provides—subject to approval by the Court—for the entry of a final judgment permanently enjoining him against future violations of the Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The final judgment to which Kobrovsky consented would further order that he is liable for disgorgement of $163,000 together with $39,589.17 in prejudgment interest thereon, but, based on his sworn financial statements and other documents submitted to the Commission, would waive payment of disgorgement and prejudgment interest and not impose a civil penalty.

In a parallel criminal case also filed today, the United States Attorney’s Office for the Southern District of New York charged Hansen with securities fraud and conspiracy to commit securities fraud, in a three-count criminal information. United Statesv. Hansen, 10 Crim. 875 (PAC) (S.D.N.Y.) Hansen was released on a $50,000 bond and a status conference was set for November 5, 2010.

The Commission acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, the Options Regulatory Surveillance Authority, and the Financial Industry Regulatory Authority.

See also Litigation Rel. Nos. 20603 (May 29, 2008), 21059 (May 27, 2009) and 21629 (August 18, 2010).

See Also: SEC Complaint

 
http://www.sec.gov/litigation/litreleases/2010/lr21667.htm

Last modified: 9/27/2010