U.S. Securities and Exchange Commission
LITIGATION RELEASE NO. 18657 / April 5, 2004
Securities and Exchange Commission v. One or More Unknown Purchasers of Call Options for the Common Stock of InVision Technologies, Inc., 04 Civ. 02037 (WMP) (S.D.N.Y.) (filed March 16, 2004).
COMMISSION OBTAINS PRELIMINARY INJUNCTION AND SECOND TEMPORARY RESTRAINING ORDER IN CONNECTION WITH SUSPICIOUS PURCHASES OF INVISION TECHNOLOGY, INC. CALL OPTIONS
Orders Placed from Foreign Accounts Just Ahead of Acquisition Announcement; $2.7 Million in Resulting Proceeds Now Frozen
On April 2, 2004, the U.S. District Court for the Southern District of New York issued a Preliminary Injunction continuing a freeze of about $2.7 million in the accounts of certain Unknown Purchasers of the Call Options of InVision Technologies. The Commission's Complaint alleges that the frozen funds result from suspicious trading in call options of InVision Technologies, Inc. in the days immediately prior to a March 15, 2004, joint announcement by General Electric Company (GE) and InVision, a manufacturer of explosive-detection systems, that GE had agreed to acquire InVision in an all-cash transaction valued at approximately $900 million, or $50 per share of InVision common stock. The Preliminary Injunction was issued in the Commission's previously filed civil injunctive action, Securities and Exchange Commission v. One or More Unknown Purchasers of Call Options for the Common Stock of InVision Technologies, Inc., 04 Civ. 02037 (WHP) (S.D.N.Y.) (filed March 16, 2004).
The frozen proceeds are being held in accounts of UBS Securities LLC, a U.S. brokerage firm and resulted from InVision call option purchase orders that came to UBS Securities through certain of its European affiliates. In addition to the freeze provisions, the Preliminary Injunction continues the Temporary Restraining Order's provisions requiring those who purchased the InVision call options through the UBS Securities accounts to identify themselves, and prohibiting the defendants from destroying documents. To date, no defendant has come forward to contact the Commission staff or the District Court.
Additionally, on March 31, 2004, the Commission amended its complaint in the civil injunctive action to include additional suspicious trading in InVision call options immediately ahead of the joint GE/InVision announcement. The additional trading took place in accounts of Deutsche Bank Securities Inc., a U.S. brokerage firm, and resulted from purchase orders for InVision call options placed through a Deutsche Bank Securities European affiliate. These trades included orders to buy 1,000 April 45 InVision call options on March 12, 2004, the trading day immediately prior to the GE/InVision joint announcement, at prices ranging between $1.25 and $1.50 per contract. The positions were sold the next trading day, at an average price of $4.25 per contract, for a one-trading-day profit of approximately $286,728. On March 31, 2004, the District Court issued a second Temporary Restraining Order in the Commission's action, this time ordering a freeze of proceeds from the InVision option trading in the Deutsche Bank Securities accounts, requiring those who purchased those InVision call options to identify themselves, establishing an expedited discovery schedule and prohibiting the defendants from destroying documents. The District Court has scheduled a hearing for April 8, 2004, to determine whether this Temporary Restraining Order should be converted to a Preliminary Injunction.
The Commission acknowledges the assistance of the International Securities Exchange, the United Kingdom's Financial Services Authority and the Italian Commissione Nazionale per le Societa e la Borsa in the investigation of this matter.
See also Litigation Release No. 18627 (March 17, 2004).