SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17401 / March 7, 2002
SECURITIES AND EXCHANGE COMMISSION v. RONALD K. MAHABIR, JOHN JAMES PANAGOTACOS AND JAMES JOHN PANAGOTACOS, Civil Action No. 02CV 1809 (BSJ) (S.D.N.Y.) (filed March 7, 2002)
SEC SUES FORMER MORGAN STANLEY ANALYST
AND TWO TIPPEES WITH INSIDER TRADING
On March 7, 2002, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Southern District of New York, alleging that former Morgan Stanley & Company ("Morgan Stanley") analyst Ronald K. Mahabir ("Mahabir"), tipped John James Panagotacos and James John Panagotacos, with material nonpublic information about three separate merger transactions. The complaint also alleges that Mahabir tipped another former Morgan Stanley analyst about one of the three merger transactions. Mahabir obtained this merger information while employed as an analyst at Morgan Stanley.
The Commission's Complaint specifically alleges that Mahabir tipped his friend and college roommate, John Panagotacos, who then tipped his father James Panagotacos, with material nonpublic information about the following three transactions: (1) that Perkin-Elmer Corporation ("Perkin-Elmer") would buy PerSeptive Biosystems, Inc. ("PerSeptive"), announced on August 25, 1997; (2) that NationsBank Corporation ("NationsBank") would acquire Barnett Banks, Inc. ("Barnett"), announced on August 29, 1997; and (3) that Equity Office Properties Trust ("Equity") would acquire Beacon Properties Corporation ("Beacon"), announced on September 15, 1997. The complaint also alleges that Mahabir tipped another former Morgan Stanley analyst about the same Barnett transaction.
After receiving Mahabir's tips, the Panagotacoses illegally traded in the securities of PerSeptive, Barnett and Beacon. James Panagotacos traded in all three securities, while his son, John, traded in Barnett and Beacon. As a result of their illicit trading, the Panagotacoses reaped illegal profits totaling $157,444. As a result of his illegal trading, the former Morgan Stanley analyst made illegal profits of $19,197.
The Complaint alleges that, through their conduct, Mahabir and the Panagotacoses violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. As to each of the defendants, the Commission's Complaint seeks a permanent injunction against future violations of the federal securities laws, disgorgement of profits and prejudgment interest thereon, plus a civil monetary penalty.