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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21854 / February 14, 2011

Securities and Exchange Commission v. Matthew C. Devlin, et al., Civil Action No. 08-CV-11001 (S.D.N.Y.) (JGK)

Securities Industry Professionals and Attorney Settle SEC Charges in Wall Street Insider Trading Case

The Securities and Exchange Commission today announced that on February 9, 2011, the Honorable John G. Koeltl, United States District Judge for the Southern District of New York, entered final judgments against defendants Jeffrey Glover, Frederick Bowers, Thomas Faulhaber and Eric Holzer in a Commission case alleging widespread insider trading against nine defendants and three relief defendants. These four defendants are the first to settle the Commission’s pending civil action and have agreed to pay a total of more than $1.3 million in disgorgement, prejudgment interest and civil penalties.

The Commission’s complaint alleges that from at least March 2004 through July 2008, Matthew Devlin, then a registered representative at Lehman Brothers, Inc., traded on and tipped his clients and friends, including individuals in the securities and legal professions, with inside information about 13 impending corporate transactions. As alleged in the complaint, Devlin had misappropriated the inside information from his wife who was employed by a public relations firm working on the deals.

According to the complaint, Glover, an investment adviser and one of Devlin’s clients, traded on Devlin’s tips about five deals. The complaint alleges that Devlin also tipped his trading partner, Bowers, about three upcoming acquisitions. As alleged in the complaint, Bowers then tipped his client, Faulhaber, who was affiliated with a registered broker-dealer. Faulhaber traded in three deals, and kicked back cash to Bowers. The complaint further charges Holzer, Devlin’s friend and a former tax associate in the New York City office of an international law firm, with trading on Devlin’s tips in at least three deals. According to the complaint, Devlin and Holzer also agreed that Holzer would arrange for the purchase of shares for Devlin’s benefit so Devlin could profit from the nonpublic information but evade scrutiny.

Without admitting or denying the allegations in the complaint, Glover, Bowers, Faulhaber and Holzer settled the Commission’s insider trading charges. They agreed to injunctions from violating antifraud provisions, monetary relief and various bars in related administrative proceedings, as described below.

The final judgment against Glover (1) permanently enjoins him from violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 (“Exchange Act”) and Exchange Act Rules 10b-5 and 14e-3; and (2) orders him to pay disgorgement of $209,356, prejudgment interest of $55,390, and a $306,761 civil penalty. In a related settled administrative proceeding, the Commission barred Glover from associating with any broker, dealer, or investment adviser. (In the Matter of Jeffrey R. Glover, Administrative Proceeding File No. 3-14255).

The final judgment against Bowers (1) permanently enjoins him from violating Sections 10(b) and 14(e) of the Exchange Act and Exchange Act Rules 10b-5 and 14e-3; and (2) orders him to pay a $12,000 civil penalty. In a settled administrative proceeding, the Commission barred Bowers from associating with any broker, dealer, or investment adviser. (In the Matter of Frederick E. Bowers, Administrative Proceeding File No. 3-14253). The Commission’s administrative order against Bowers finds that in a parallel criminal case, Bowers pleaded guilty to securities fraud and conspiracy to commit securities fraud and was sentenced to three years probation and ordered to pay a $15,000 fine and forfeit $12,000. U.S. v. Frederick E. Bowers, No. 1:09-cr-00496 (S.D.N.Y.).

The final judgment against Faulhaber (1) permanently enjoins him from violating Sections 10(b) and 14(e) of the Exchange Act and Exchange Act Rules 10b-5 and 14e-3; and (2) orders him to pay disgorgement of $235,300, prejudgment interest of $50,663, and a civil penalty of $235,300. In a settled administrative proceeding, the Commission barred Faulhaber from associating with any broker or dealer. (In the Matter of Thomas Faulhaber, Administrative Proceeding File No. 3-14254).

The final judgment against Holzer (1) permanently enjoins him from violating Sections 10(b) and 14(e) of the Exchange Act and Exchange Act Rules 10b-5 and 14e-3; and (2) orders him to pay $52,922 in disgorgement, prejudgment interest of $25,055.04 and a civil penalty of $172,269. In a related administrative proceeding, the Commission forthwith suspended Holzer, a certified public accountant, from appearing or practicing before the Commission pursuant to Rule 102(e)(2) of the Commission’s Rules of Practice. (In the Matter of Eric A. Holzer, CPA, Administrative Proceeding File No. 3-14217). The Commission’s administrative order finds that in a parallel criminal case, Holzer pleaded guilty to securities fraud and conspiracy to commit securities fraud, felonies involving moral turpitude, and was sentenced to serve five years probation and ordered to pay a fine of $15,000 and forfeit over $119,300. U.S. v. Eric A. Holzer, No. 1:09-cr-00470 (S.D.N.Y.).

The Commission’s action against the other defendants and relief defendants is ongoing.

The Commission acknowledges the assistance and cooperation of the United States Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.

For further information, see Litigation Release No. 20831 (December 18, 2008).

 

 

http://www.sec.gov/litigation/litreleases/2011/lr21854.htm


Modified: 02/15/2011