U.S. Securities and Exchange Commission
Litigation Release No. 18877 / September 9, 2004
SECURITIES AND EXCHANGE COMMISSION v. DONNA YUN & JERRY BURCH, Case Number 6:99-cv-117-ORL-22KRS (United States District Court for the Middle District of Florida, Orlando Division)
ORLANDO REAL ESTATE AGENTS ORDERED TO DISGORGE $269,000 PLUS PRE-JUDGMENT INTEREST AND PAY $200,000 IN CIVIL PENALTIES FOR ILLEGAL INSIDER TRADING
The Securities and Exchange Commission announced that final judgment was entered today pursuant to order by United States District Judge Anne C. Conway of the Middle District of Florida in an insider trading case against Orlando real-estate agents Donna Yun of Longwood, Florida, and Jerry Burch of Heathrow, Florida. The judgment ordered defendants Donna Yun and Jerry Burch to disgorge ill-gotten profits in the amount of $269,000, plus pre-judgment interest, and ordered them each to pay $100,000 in civil penalties for their illegal insider trading.
On July 22, 2004, after a three-day retrial, a federal jury found Yun and Burch liable for fraud as a result of insider trading in options on the stock of Scholastic Corporation. In its complaint, filed on February 3, 1999, the Commission alleged that on or before Tuesday, February 18, 1997, Yun's husband, then an officer of Scholastic, told Yun in confidence that Scholastic would announce that it expected a loss for the quarter ending February 28, 1997, and that the price of Scholastic common stock would likely decline as a result. Yun breached her duty of confidence and disclosed the inside information at a cocktail party that Tuesday evening to her friend and colleague of six years, Jerry Burch. During the following two days, Burch purchased 130 Scholastic put option contracts, including 10 February contracts that expired within 48 hours, that would rise in value if Scholastic's stock price went down. After Scholastic released its negative earnings announcement on February 20, 1997, Scholastic's common stock price dropped approximately 40 percent, from $61.50 to $36.75. On February 21, Burch exercised his options for a net profit of approximately $269,000 - a 1300 percent return on his two-day investment.
The case had previously been tried before a jury in Tampa, Florida, in December 2000. In the first trial, the jury also found both Yun and Burch liable for insider trading. However, on appeal, the United States Court of Appeals for the Eleventh Circuit vacated the district court's judgment based on the district court's jury instructions. The appeals court remanded the case for a second trial.
The second jury's verdict finding insider trading in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, resulted in today's entry by the Clerk of the Court of the final judgment against Yun and Burch, requiring both defendants jointly and severally to pay disgorgement of the $269,000 illegal profits plus prejudgment interest, and imposing a $100,000 civil penalty on each.