U.S. Securities & Exchange Commission
LITIGATION Release No. 16733 / September 27, 2000
Securities and Exchange Commission v. Adrian A. Alexander (formerly known as "Adrian Antoniu"); Susi Belli; David V. Stratman; Patrick J. Rooney; Constantine Spyropoulos; Jacobus J. Lam; John R. Rooney; Patrick G. Rooney; Pavel Hillel; Westcliff Partners, Inc.; Potenza Investments, Inc.; Quintillion B.V.; Rooney Trading, Inc.; Gianna Toffoli; and Penelope Afouxenide, U.S. District Court For The Southern District Of New York (00 Civ. 7290 (LTS))
SEC SUES FIFTEEN FOR INSIDER TRADING, INCLUDING TWO CONVICTED IN PREVIOUS INSIDER TRADING SCHEME;
ANOTHER DEFENDANT, FORMER ROONEY PACE CHAIRMAN PATRICK J. ROONEY, PAYS OVER $1,000,000 TO SETTLE INSIDER TRADING CHARGES
The Securities and Exchange Commission sued eleven individuals and four entities today alleging insider trading in the securities of U.S. Shoe Corp. and Luxottica S.p.A. before the March 3, 1995 public announcement that Luxottica was commencing a hostile tender offer for U.S. Shoe. Among the defendants are Susi Belli, 39, former Manager of Investor and Public Relations for Luxottica, who is alleged to have repeatedly tipped her then boyfriend and current husband Adrian Alexander, 54, about Luxottica's secret plans to launch a tender offer for U.S. Shoe. Alexander, who in 1980 was convicted of insider trading under his former name Adrian Antoniu, in turn is alleged to have tipped others, including his then business partner Patrick J. Rooney, 61, former Chairman of Rooney Pace & Co., Inc., and Constantine Spyropoulos, 53, a resident of Greece who in 1983 was also convicted for his participation in Alexander's previous insider trading ring. The complaint seeks permanent injunctions, disgorgement of $624,787 in illegal profits and $20,250 in avoided losses, plus penalties and interest.
Simultaneously with the filing of the Complaint, Rooney settled the case against him. Without admitting or denying the allegations in the complaint, Rooney agreed to a permanent injunction against future violations of Section 10(b) and 14(e) of the Exchange Act and Rules 10b-5 and 14e-3 thereunder, to disgorge $405,290 which represents profits realized by people he tipped, plus $231,568 in prejudgment interest, and to pay a civil penalty of $405,290, for a total payment of $1,042,148.
The Commission's Complaint alleges the following:
- Belli was a senior executive at Luxottica who was intimately involved in Luxottica's secret preparations to acquire U.S. Shoe. Beginning in December1994, Belli repeatedly tipped confidential insider information about Luxottica's plans to Alexander.
- Alexander in turn tipped his friend, retired criminal law professor David V. Stratman, age 65. In a series of transactions from December 15 through December 23, Stratman made his first ever purchases of U.S. Shoe securities, acquiring a total of 6,000 shares and 15 call options. Stratman also tipped his friend Pavel Hillel, age 51, who made his first ever purchase of U.S. Shoe, and first ever options trade, when he bought 10 U.S. Shoe call options on December 19, 1994.
- Alexander also tipped Rooney, with whom Alexander was then working at an operation known at various times as EC/American Ltd. or EC/American Securities Inc. On December 20, 1994, Rooney attempted to buy 10,000 U.S. Shoe call options for an account in the name of Quintillion B.V., a Dutch company, nominally controlled by Jacobus Lam, age 51, a Dutch national who was a business associate of Rooney's and Alexander's. After learning that the premium for 10,000 options would exceed $2 million, Rooney reduced the order and arranged the purchase of 1,000 U.S. Shoe call options in Quintillion's account. Money to pay for the purchase came from another account held in the name of Potenza Investments, Inc., a Panamanian corporation based in the Netherlands. Lam is an officer of both Quintillion and Potenza.
- Alexander and Rooney also tipped Rooney's son John Rooney, who was also working with them at EC American Ltd. John and Patrick J. Rooney also tipped John's older brother Patrick G. Rooney. On January 6 and 9, 1995, Patrick G. Rooney made his first ever purchases of U.S. Shoe securities, buying a total of 36 call options and 5,000 shares.
- On or about January 29, 1995, Belli visited her mother, Italian national Gianna Toffoli, at her home in Cortina D'Ampezzo, Italy, and tipped her about Luxottica's plans to make a debt-financed tender offer. Shortly after this visit Toffoli sold 6,000 Luxottica ADRs.
- In mid-February 1995, Luxottica obtained preliminary financing committments for a tender offer, which it planned to launch later that month. Belli tipped this information to Alexander, who tipped Rooney, Stratman, Lam, and Spyropoulos, the member of Alexander's 1970s criminal insider trading ring. Those tips led to a renewed burst of insider trading in which the following defendants bought U.S. Shoe securities between February 17 and February 24:
Spyropoulos (trading in an account in relief defendant Penelope Afouxennide's name): 9,000 shares; 270 call options.
Stratman: 28,260 shares; 100 call options.
Westcliff Partners, Inc. (another Dutch entity controlled by Lam): 300 call options.
Patrick G. Rooney: 200 call options.
- On March 3, 1995, Luxottica announced its tender offer for U.S. Shoe at $24 per share - approximately 35% more than U.S. Shoe's closing price the day before. Luxottica's ADRs declined approximately 20%. Certain of the defendants had sold certain of their U.S. Shoe securities before the announcement to meet margin calls or for other reasons. As a result of their insider trading, defendants reaped the following illegal profits:
|Patrick G. Rooney
and Penelope Afouxenide
|David V. Stratman
In addition, Toffoli avoided losses of $20,250.
The Complaint alleges that each of the defendants except Afouxenide and Toffoli violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. It alleges that Toffoli violated Section 10(b) and Rule 10b-5. It seeks disgorgement, penalties and permanent injunctions against those defendants. It seeks disgorgement only against relief defendant Afouxenide.
This is the Commission's third enforcement action alleging insider trading before the Luxoticca/ U.S. Shoe tender offer. See SEC v. Malavasi (Lit. Rel. 14626 (September 6, 1995); and SEC v. Fiabane, et al., (Lit. Rel. 15010 (August 12, 1996). The Commission acknowledges the assistance of the Italian Commissione Nazionale per la Societa e la Borsa, the New York Stock Exchange and the Philadelphia Stock Exchange. Luxottica Group S.p.A. has cooperated with the Commission's investigation.