U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22112 / October 3, 2011
Securities and Exchange Commission v. Richard A. Hansen, et al., Civil Action No. 10-CV-5050 (E.D.P.A.)
FORMER REGIONAL INVESTMENT BANKING FIRM CHAIRMAN SETTLES INSIDER TRADING CASE; PARALLEL CRIMINAL CASE HAS ALSO BEEN CONCLUDED
The Securities and Exchange Commission announced today that it has reached a settlement of its pending insider trading charges against Richard A. Hansen, the former Chairman of Keystone Equities Group, a registered broker-dealer and regional investment bank. The Commission’s complaint, originally filed on September 27, 2010, alleged that Hansen received illegal tips concerning pending acquisitions from his then-employee and close personal friend Donna Murdoch; that Murdoch had learned of the acquisitions through her close personal relationship with James Gansman, then an Ernst & Young (“E&Y”) partner who worked on the transactions for E&Y clients; and that Hansen traded on the illegal tips through accounts in others’ names and also passed on one of the tips to his longtime friend Stuart Kobrovsky, a retired stockbroker, who likewise traded.
Without admitting or denying the allegations—except to the extent they are embraced by his guilty plea and conviction in the parallel criminal case of United States v. Hansen, 1:10-cr-875-PAC-1 (S.D.N.Y., judgment entered May 13, 2011) (hereinafter the “parallel criminal case”), which he admits—Hansen has agreed to settle the Commission’s allegations against him, and his settlement papers were submitted to the Court for its consideration. In particular, Hansen 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 Hansen consented would further order that he is liable for a combined total in disgorgement and prejudgment interest of $63,038, comprising all the profits flowing from his own illegal trading, which he conducted through the accounts of his daughters and Murdoch, according to the Commission’s Complaint. Of that total, $32,222 would be deemed satisfied by the order of criminal forfeiture entered against Hansen in the parallel criminal case, leaving a balance due of $30,816, which Hansen would be required to pay within 30 days after entry of the Final Judgment, or within 60 days after his release from prison in the parallel criminal case, whichever is later. Finally, the Final Judgment would bar Hansen permanently from serving as an officer or director of any public company. Additionally, Hansen consented, in related administrative proceedings, to the entry of a Commission order that would bar him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, or from participating in any offering of a penny stock.
The parallel criminal case was filed by the United States Attorneys’ Office for the Southern District of New York on September 27, 2010—simultaneously with the filing of the Commission’s Complaint in this action—and charged Hansen with securities fraud and conspiracy to commit securities fraud. Hansen pleaded guilty to those charges on February 9, 2011, and the court entered a judgment of conviction on May 13, 2011. As part of his plea, Hansen agreed to forfeit $59,631, representing proceeds traceable to his illegal conduct. Of that amount, $32,222 derives from illicit trades embraced by the Commission’s Complaint. The Court sentenced Hansen to three months imprisonment, followed by five months of home confinement and two years’ probation.
If approved by the Court, this settlement would conclude this case, as the Commission’s settlement with codefendant Kobrovsky was approved by the Court last October. The Commission’s related case against Gansman and Murdoch has also been concluded, as has a parallel criminal case against them. In that criminal case, Murdoch entered guilty pleas on December 23, 2008 to a total of 17 felony counts and was sentenced on July 27, 2011 to two years’ probation, including six months of home confinement, as well as 300 hours of community service and forfeiture of $392,000. For his part, Gansman was convicted by a jury on May 15, 2009 of six felony counts and acquitted of four; he was sentenced on February 25, 2010 to a year and a day in prison; and his convictions were recently affirmed on appeal. See United States v. Gansman, No. 10-0731-cr, 2011 U.S. App. LEXIS 18664 (2d Cir. Sept. 9, 2011).
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.