Litigation Release No. 16507 / April 7, 2000
Securities and Exchange Commission v. Charles L. Brumfield et al., United States District Court for the Southern District of New York, 95 Civ. 9283 (JES)
Court Enters Insider Trading Judgment Against Sharon Seiden
On April 6, 2000, the United States District Court for the Southern District of New York entered a final judgment against defendant Sharon Seiden, which permanently enjoins her from further violations of federal securities laws prohibiting insider trading in the context of tender offers. Seiden was the last defendant remaining in the civil enforcement proceedings brought by the Commission against twenty people who allegedly traded securities while in possession of material, nonpublic information concerning AT&T's plans to acquire four companies between 1988 and 1991. The Commission alleged that the defendants obtained the information, directly or indirectly, from Charles Brumfield, a former vice-president in AT&T's labor relations department.
Seiden, 58, is a resident of Boonville, New York. In November and December 1990, her boyfriend, Robert Flanagan, relayed to her material, nonpublic information concerning AT&T's planned tender offer for NCR Corp. Flanagan had been tipped by Thomas Alger, who had received the information from Charles Brumfield. Seiden bought approximately $16,000 worth of NCR call option contracts, and sold them after a takeover was publicly announced on December 2, 1990. She made illegal profits of over $350,000 in about two weeks.
On January 26, 1999, a jury found Seiden liable for insider trading in violation of Section 14(e) of the Securities Exchange Act of 1934 and Rule 14e-3, which prohibit insider trading in connection with tender offers. The jury also found her not liable for insider trading under Section 10(b) of the Exchange Act and Rule 10b-5. The judgment entered against her yesterday permanently enjoins her from future violations of Section 14(e) of the Exchange Act and Rule 14e-3. The Commission withdrew its claims for disgorgement of Seiden's illegal trading profits and a civil penalty based on her demonstrated inability to pay. Seiden consented to the Court's entry of the permanent injunction and waived her right to appeal.
The Commission obtained judgments against nineteen out of the twenty people it accused of participating in Charles Brumfield's insider trading scheme. See SEC Litigation Release Nos. 14706 (Oct. 31, 1995); 14779 (Jan. 11, 1996); (Jun. 20, 1996); 15180 (Dec. 9, 1996); 15221 (Jan. 21, 1997); 15227 (Jan. 28, 1997); 15285 (Mar. 12, 1997); 15426 (July 29, 1997); 15559 (Nov. 13, 1997); 15648 (Feb. 20, 1998); 15816 (Jul. 20, 1998); 6049 (Feb. 1, 1999). In addition, eight participants in the scheme were convicted of criminal charges brought by the United States Attorney's Office for the Southern District of New York.