U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 18298 / August 20, 2003
SEC SUES U.S. POSTAL WORKER WHO TIPPED AND TRADED ON INSIDE INFORMATION FROM BUSINESS WEEK MAGAZINE
The Securities and Exchange Commission announced today that it filed a Complaint against Davi Thomas, whose last known address was in Mount Vernon, New York, for illegally tipping and trading on misappropriated information about companies featured in the "Inside Wall Street" column of Business Week magazine. The Commission alleged that Thomas, a United States postal employee in Mount Vernon in the late 1990s, illicitly obtained the information from the magazine, which he intercepted from the U.S. Mail on its way to subscribers and news stands, in violation of postal regulations. Thomas shared information from the "Inside Wall Street" column with a friend and traded in his own accounts. Thomas's trading in stocks mentioned in a year-and-a-half period enabled him to reap profits of $154,268.61. Thomas's friend, Lionel Thotam, who settled with the Commission in October 2002 for insider trading, profited by $77,213.38 from inside information Thomas provided him.
The Complaint charges Thomas with violating the antifraud provisions of the federal securities laws, specifically Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5. The Commission's Complaint seeks a permanent injunction against Thomas from future violations of the antifraud provisions, disgorgement of illicit gains, and other appropriate relief. The Complaint, along with the indictment in the parallel criminal proceeding, was filed in the United States District Court for the Eastern District of New York.
The Commission's Complaint alleges as follows:
From August 1996 through January 1999, Thomas misappropriated information from Business Week magazine before its public release by reading the Inside Wall Street column in the magazine as it passed through the Mount Vernon, New York postal sorting facility on its way to subscribers and news stands. He tipped Thotam to the information. Thotam paid Thomas $10,000 for Thomas's efforts, and updated Thomas on his profits from the illegal trades. Starting in June 1997 and continuing through January 1999, Thomas also traded in his own accounts in the stocks of the companies mentioned in the Inside Wall Street column. In almost all instances, Thotam and Thomas bought stock of companies favorably mentioned in the column on Thursday afternoons and sold the stock after the price increased the next day, after the column had been published. Thomas's profits amounted to $154,268.61. By tipping Thotam to material, nonpublic information in breach of confidentiality requirements of postal regulations, and by trading on such information himself, Thomas violated the antifraud provisions of the Exchange Act.
The Commission acknowledges the assistance of the American Stock Exchange and the United States Attorney's Office for the Eastern District of New York.