U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17364 / February 19, 2002
SEC v. John S. Kramer, W. Jeffrey Kramer, Richard K. Pulling, Jr., and Keith E.C. Pulling (Defendants), and Nancy Kramer, Elizabeth Kramer Whitney, Lucien D. Yokana, Northeast Investment Properties, and Vermont Capital Investors (Relief Defendants), Civil-2-690 (MLC) (D. N.J.)
Today, the Securities and Exchange Commission filed a complaint in the United States District Court for the District of New Jersey against John S. Kramer, W. Jeffrey Kramer, Richard K. Pulling, Jr., and Keith E.C. Pulling, for insider trading. Named also in the complaint as relief defendants are John Kramer's wife Nancy Kramer, his daughter Elizabeth Kramer Whitney, his client Lucien D. Yokana, and two family partnerships he controlled, Northeast Investment Properties ("Northeast Investment") and Vermont Capital Investors ("Vermont Capital"). Jeffrey Kramer, Richard Pulling, Keith Pulling, and Yokana have agreed to settlements with the Commission.
The complaint alleges that on two separate occasions in 2000, Jeffrey Kramer obtained material nonpublic information while working in the trust division of a national bank located in Hartford, Connecticut, and misused that information to earn illegal profits trading stock. The complaint further alleges that in each instance, he also tipped his father John Kramer and his friend Richard Pulling, and Richard Pulling then tipped his brother Keith Pulling. Both times, John Kramer, Richard Pulling, and Keith Pulling made improper use of the nonpublic or "inside" information to obtain illegal trading profits. The complaint alleges that collectively, the defendants made approximately $620,000 in illegal trading profits.
The complaint alleges that no later than June 14, 2000, Jeffrey Kramer learned that a customer of the bank he worked for was forming a trust for the purpose of acquiring Justin Industries, Inc. ("Justin"). Between June 14 and June 19, 2000, Jeffrey Kramer, John Kramer, Richard Pulling. and Keith Pulling purchased 40,750 shares of Justin stock. On June 20, 2000, Justin announced that it had agreed to a cash tender offer made by another company, and the price of Justin stock rose in response to the announcement. Following the June 20, 2000 announcement, the defendants sold the Justin stock they had purchased for total illicit profits of $185,650. The complaint further alleges that by August 7, 2000, Jeffrey Kramer learned that the same customer was forming another trust for the purpose of acquiring Republic Group, Inc. ("Republic"). Between August 8 and August 11, 2000, Jeffrey Kramer, John Kramer, Richard Pulling and Keith Pulling purchased 172,900 shares of Republic stock. On August 11, 2000, Republic announced that it had entered into a merger agreement with the trust. Again, the announcement caused a substantial increase in the price of Republic stock. The defendants then sold the Republic stock they had purchased for total illicit profits of $434,181.
The Commission alleges that as a result of the conduct described above, John Kramer, Jeffrey Kramer, Richard Pulling and Keith Pulling violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5 and 14e-3 thereunder. The Commission is seeking permanent injunctions, disgorgement of the illegal trading profits, prejudgment interest, and civil penalties against them. The Commission also alleges that Nancy Kramer, Elizabeth Kramer Whitney, Yokana, Northeast Investment, and Vermont Capital all received illegal profits because John Kramer bought Republic and Justin stock for them. The Commission is not charging them with fraud, but is seeking disgorgement of the ill-gotten gains they received due to John Kramer's alleged illegal trading.
John Kramer, age 71 and Nancy Kramer, age 71, live in Skillman, New Jersey and in Greensboro, Vermont; Jeffrey Kramer, age 45, lives in Glastonbury, Connecticut; Richard Pulling, age 45, lives in Skillman, New Jersey; Keith Pulling, age 42, lives in Oak Ridge, North Carolina; Elizabeth Kramer Whitney, age 40, lives in Locust Valley, New York; and Yokana, age 75, lives in Princeton, New Jersey.
Without admitting or denying the facts alleged in the complaint, Jeffrey Kramer, Richard Pulling, Keith Pulling, and Yokana have agreed to settlements under which they will pay a total of $479,902. The settlements filed with the court for approval provide that:
(1) Jeffrey Kramer, Richard Pulling, and Keith Pulling consent to entry of final judgments permanently enjoining them from future violations of Sections 10(b) and 14(e) of the Exchange Act and Rules 10b-5 and 14e-3 thereunder;
(2) Jeffrey Kramer will pay $103,212.00 in disgorgement, $11,656.00 in prejudgment interest, and $154,818.00 in penalties;
(3) Richard Pulling will pay $52,387 in disgorgement, $5,938 in prejudgment interest, and $52,387 in penalties;
(4) Keith Pulling will pay $30,450 in disgorgement, $3,505 in prejudgment interest, and $30,450 in penalties; and
(5) Yokana will pay $32,450 in disgorgement, and $2,649 in prejudgment interest.
The litigation is on-going against John Kramer, Nancy Kramer, Elizabeth Kramer Whitney, Northeast Investment, and Vermont Capital.