U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 18238 / July 18, 2003
SECURITIES AND EXCHANGE COMMISSION V. CARL STEVENS et al., 03-CV-5318 (R.B.) (S.D.N.Y.)
The Securities and Exchange Commission announced today that it has filed a civil injunctive action in the United States District Court for the Southern District of New York against eighteen defendants on charges of insider trading in the shares of PrimeSource Corporation ("PSRC"), a graphic arts dealer. The complaint alleges that the defendants purchased PSRC stock after receiving confidential information that Fuji Photo Film, U.S.A., Inc. ("Fuji") was planning to acquire PSRC. The defendants are individuals associated with two other Fuji graphic arts dealers - H.A. Metzger, Inc. ("Metzger") and London Litho Aluminum Company, Inc. ("London Litho") - and their tippees. The Commission's complaint also names two relief defendants who received profits from the illicit trades. To settle the case, the eighteen defendants have consented to be permanently enjoined from violating the antifraud and insider trading provisions of the Securities Exchange Act of 1934 ("Exchange Act"), to disgorge illicit profits plus prejudgment interest, and to pay civil penalties. The relief defendants have consented to disgorge their illicit profits plus prejudgment interest.
The complaint alleges that the defendants, who traded before Fuji announced its takeover of PSRC on August 31, 2001, essentially comprise two insider trading rings, the "Metzger Ring" and the "London Litho Ring." Trading by the defendants and the relief defendants resulted in illicit per-person profits ranging from as much as $89,500 to as little as $4,200. In some cases, the defendants mistakenly believed that they would avoid detection if they or their tippees limited their illegal trades to low-volume purchases.
Metzger Ring. The Commission's complaint alleges that in May 2001, Fuji representatives told Carl Stevens ("Stevens"), then president of Metzger, that Fuji was negotiating to acquire PSRC. In June 2001, Stevens told two Metzger executives, Steven Lauria ("Lauria") and Roger Oley ("Oley"), and a Metzger sales representative, Michael Susi ("Susi"), about Fuji's acquisition plans. Stevens and these three other Metzger employees signed a confidentiality agreement with Fuji. These individuals breached that agreement by buying PSRC stock - in the case of Stevens, Lauria, Oley and Susi - and by tipping others who traded - in the case of Stevens, Oley, and Susi. Stevens tipped Frank Trupia ("Trupia"), Stevens' son-in-law; Lawrence Read ("Read"), president of Read & Co. (another Fuji graphic arts dealer); and Alfred Lake ("Lake"), a Metzger sales representative. Trupia and Read bought PSRC in their own accounts; Lake bought PSRC in accounts controlled by his sons - relief defendants Peter Lake and Paul Lake - for the benefit of his grandchildren. Oley tipped his father-in-law, Yngvar Haslestad ("Haslestad"). Susi tipped his brother-in-law and son-in-law. Another Metzger sales representative Ron Jasser ("Jasser") traded in the shares of PSRC by providing money to two of his friends, Anthony Viola ("Viola") and Mark Kaplan ("Kaplan"), and directing them to purchase shares of PSRC. Viola and Kaplan purchased shares of PSRC using Jasser's money and their own, and provided Jasser with his share of the profits from the trades.
The complaint further alleges that Stevens told several individuals at Metzger that he had traded, suggested that they trade, and boasted that he would not get caught because he was too far removed from Fuji or PSRC to be detected. Stevens also told one defendant not to buy a large quantity of shares because it was insider trading, but suggested that a small trade would slip "under the radar" and not be detected. Stevens told another defendant: "Small quantities would probably not be a problem in terms of visibility. But then small quantities might not be worth the exposure for just small profits." All told, trading by Metzger associates and their tippees resulted in illicit profits of at least $276,500.
London Litho Ring. The Commission's complaint alleges that in April 2001, Fuji representatives told Eric London ("London"), president of London Litho, about Fuji's plans to acquire PSRC. Even though he signed a confidentiality agreement with Fuji, London purchased shares of PSRC and tipped seven others, including London's: (a) brother-in-law, Neil Fine ("N. Fine"); (b) father-in-law, Gerald Fine ("G. Fine"); (c) golfing friends, Robert Fink ("Fink"), Robert Lipke ("Lipke"), Rick Baruch ("Baruch"), and Robert Fisher ("Fisher"); and (d) business associate, Lawrence Hirsch ("Hirsch"). London suggested that these individuals buy shares of PSRC, and recommended that they purchase only a small amount in order to avoid detection. All told, trading by London and his tippees resulted in illicit profits of at least $48,000.
Without admitting or denying the Commission's allegations, the defendants have agreed to settle with the Commission by consenting to the entry of a judgment (a) enjoining them from violating Section 10(b) and 14(e) of the Exchange Act, and Rules 10b-5 and 14e-3 thereunder, and (b) ordering them to disgorge illicit profits, plus prejudgment interest, and pay civil penalties, in the following amounts:
In addition, the relief defendants have agreed to settle this matter by consenting to the entry of a judgment ordering them to disgorge their illicit profits, plus prejudgment interest. Relief Defendant Peter Lake has agreed to disgorge $53,038.71, plus prejudgment interest of $5,537.12, and Relief Defendant Paul Lake has agreed to disgorge $26,795.00, plus prejudgment interest of $2,797.32.
The Commission acknowledges the assistance of NASD Regulation - which uncovered some of the trading at issue - and the United States Attorney's Office for the District of New Jersey in the investigation of this matter.