U.S. Securities and Exchange Commission
Litigation Release No. 18900 / September 28, 2004
SECURITIES AND EXCHANGE COMMISSION v. PHONG NGUYEN AND CHANH NGUYEN, Civil Action No. 03-863 (JMR/FLN) (United States District Court for the District of Minnesota)
INSIDER TRADING DEFENDANT PHONG NGUYEN ORDERED TO PAY OVER $550,000 IN DISGORGEMENT AND CIVIL PENALTIES; CO-DEFENDANT CHANH NGUYEN CONSENTS TO INJUNCTION AND OVER $28,000 IN DISGORGEMENT AND CIVIL PENALTIES
The Securities and Exchange Commission announced that an order was issued on September 23, 2004, by United States Chief District Judge James M. Rosenbaum of the District of Minnesota granting the Commission's motion for disgorgement, prejudgment interest and civil penalties in an insider trading case against Phong Nguyen of Bloomington, Minnesota. The order requires Nguyen to disgorge ill-gotten profits in the amount of $185,559, plus prejudgment interest, and orders him to pay $371,118 in civil penalties. In May 2004, Nguyen consented to the entry of final judgment permanently enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. In consenting to the injunction, Nguyen neither admitted nor denied the allegations in the Commission's complaint, except that he agreed to the Commission's allegations being accepted and deemed true by the court for the purpose of determining appropriate monetary remedies. In July 2004, the Commission filed its motion for disgorgement, prejudgment interest and civil penalties, which Nguyen contested. The court granted the Commission's motion without a hearing.
In addition, in the same insider trading case, a final judgment was entered on September 23, 2004, against Chanh Nguyen of Chanhassen, Minnesota. (Chanh Nguyen and Phong Nguyen are not relatives.) The judgment enjoins Chanh Nguyen from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and requires him to pay disgorgement of $14,062, prejudgment interest thereon of $4,544, and a civil penalty of $14,062. Chanh Nguyen consented to the entry of the judgment, but in doing so neither admitted nor denied the allegations in the Commission's complaint.
The Commission alleged in its complaint against Phong Nguyen and Chanh Nguyen, filed on January 16, 2003, that Phong Nguyen bought 71,000 shares of iNTELEFILM Corporation, a Minnesota-based advertising company, shortly before the company publicly announced on December 8, 1999 that it was working with AT&T Corporation to develop an Internet-based product called "Intelesource.org" and that he made $185,559 in profits when the stock price increased immediately after the announcement. Nguyen was a data networking account executive for AT&T during the relevant time period, worked on the Intelesource.org project, and knew that iNTELEFILM was planning a public announcement about it. The Commission also alleged that Chanh Nguyen bought 5,000 shares of iNTELEFILM stock shortly before the Intelesource.org project was announced and made $14,062. A close friend of Phong Nguyen, Chanh Nguyen worked for Business Integration Services, an agent of AT&T that was procuring computer hardware for Intelesource.org. At the time Chanh Nguyen purchased the stock, he also knew that iNTELEFILM was planning a public announcement about the project.
Related Litigation Release: No. 17940, January 16, 2003