UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17850 / November 20, 2002
Securities and Exchange Commission v. Rodolfo Luzardo, Elias I. Kodsi, and Alain D. Kodsi, 01 Civ. 9206 (DC) (S.D.N.Y.)
FORMER INVESTMENT BANKING EMPLOYEE TO PAY $100,000 FINE TO SETTLE INSIDER TRADING ACTION ALLEGING USE OF SWISS ACCOUNTS
On November 12, 2002, Judge Denny Chin in the United States District Court for the Southern District of New York entered a final judgment against Rodolfo Luzardo ("Luzardo") of Norwalk, Ohio. The defendant was ordered to pay a $100,000 penalty in a Commission action that charged him with insider trading in the securities of BetzDearborn Inc. Luzardo settled the action without admitting or denying the allegations in the Commission's complaint.
The Commission's complaint in this matter, filed in October 2001, alleged that Rodolfo Luzardo, a former analyst in the mergers and acquisitions unit of J.P. Morgan Securities, Inc., Alain D. Kodsi, a co-owner of a venture capital firm, and Elias I. Kodsi, a retired jewelry distributor, engaged in illegal insider trading in advance of the July 30, 1998 announcement that BetzDearborn Inc. and Hercules Inc. had agreed to merge. The complaint alleged that Luzardo misappropriated confidential information regarding the pending merger from his then-employer, J.P. Morgan Securities, Inc., which was the adviser to BetzDearborn. According to the complaint, Luzardo tipped his friend and new employer, Alain Kodsi, who in turn tipped his father, Elias Kodsi. The complaint further alleged that Elias Kodsi purchased 30,000 shares of BetzDearborn common stock through two numbered Swiss accounts the day before the merger was announced at a cost of over $1 million, and that after the announcement on July 30, Elias Kodsi sold the shares for unlawful profits of $963,750. The complaint alleged that as a result of the conduct described above, Elias Kodsi, Alain Kodsi, and Luzardo violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder.
Without admitting or denying the allegations of the Commission's complaint, Rudolfo Luzardo consented to the entry of the final judgment which permanently enjoins him from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and orders him to pay a civil penalty of $100,000. The Commission previously settled its case against the Kodsis who each paid a $963,750 civil penalty and, jointly and severally, disgorged $963,750 in unlawful profits, and $308,992 in prejudgment interest.
Today, based on the entry of the Court's injunction, the Commission also instituted administrative proceedings to bar Luzardo from the securities industry. Without admitting or denying the Commission's findings, Luzardo consented to the entry of the Commission's Order, which bars him from association with any broker or dealer. In the Matter of Rodolfo Luzardo, Administrative Proceeding File No. 3-10938; Securities Exchange Act of 1934 Release No. 46854 (November 20, 2002).
See also Litigation Release No. 17197 (October 18,2001) and Litigation Release No. 17486 (April 24, 2002). See also the following related matters: SEC v. Joseph F. Doody IV, et al., 01 Civ. 9879 (JK) (S.D.N.Y.) (filed November 8, 2001) (Litigation Release No. 17225); SEC v. Bugenhagen, et al., 01 Civ. 6538 (E.D.PA.) (filed December 18, 2001) (Litigation Release No. 17278); SEC v. Litvinsky, et al., 02 Civ. 0312 (LMM) (S.D.N.Y.) (filed January 14, 2002) (Litigation Release No. 17306); and SEC v. Straub, et al., 1:02CV01128 (EGS) (D.D.C.) (filed June 10,2002) (Litigation Release No. 17549). To date, in the five insider trading cases concerning trading before the merger of BetzDearborn and Hercules, the Commission has obtained over $3.9 million in disgorgement, prejudgment interest, and penalties.