UNITED STATES DISTRICT COURT
Securities and Exchange Commission,
DAVID F. CARVAJAL,
03 Civ. 3626 (JGK)
Plaintiff, Securities and Exchange Commission ("Commission"), for its Complaint against defendant David F. Carvajal ("Carvajal") alleges as follows:
1. This matter involves illegal insider trading based on material, non-public information that Hotjobs.com, Inc. ("Hotjobs") was to be acquired by TMP Worldwide, Inc. ("TMP") in the summer of 2001. During the month prior to the public announcement of the transaction, Carvajal, a senior vice president at Hotjobs, bought Hotjobs shares in his parents' brokerage accounts based on material, non-public information about the potential merger. After the announcement on June 29, 2001, Carvajal sold the shares of Hotjobs in his parents' accounts, generating a total of $10,491.52 in illicit profits.
2. The Commission brings this action pursuant to the authority conferred upon it by Section 21(d) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78u(d), to enjoin Carvajal from violating the antifraud provisions of federal securities laws. The Commission also seeks a judgment requiring Carvajal to disgorge the profits of his fraudulent conduct plus prejudgment interest thereon, to pay a civil penalty equal to two times the profits of the fraudulent conduct, and such other and further relief as the Court may deem appropriate.
3. This Court has jurisdiction over this action, and venue is proper, pursuant to Sections 21(d) and 27 of the Exchange Act, 15 U.S.C. §§ 78u(d), 78aa. Certain of the alleged transactions, acts, practices, and courses of business occurred in the Southern District of New York, including, but not limited to, the purchase and sale of securities by telephone.
4. Carvajal has engaged, and unless enjoined, will continue to engage, directly or indirectly, in transactions, acts, practices or courses of business that constitute violations of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
5.David F. Carvajal, age 32, was a senior vice president for Hotjobs at the time of the conduct alleged herein. He lived and worked in New York, New York during the relevanttime period, and currently resides in Watchung, New Jersey.
6. In 1999, TMP approached Hotjobs about a combination of the two competing companies, both of which provided on-line recruiting services for employers. Hotjobs declined, but from time to time thereafter the companies discussed issues relating to the on-line recruiting industry.
7. On or about May 23, 2001, Hotjobs reopened merger discussions with TMP. Between May 31 and June 8, 2001, Hotjobs interviewed investment banking firms and law firms to advise it through the merger transaction.
8. On June 7, 2001, TMP offered to buy Hotjobs for various premiums over the trading price of Hotjobs's common stock, which closed at $6.78 per share that day. Hotjobs responded that the prices initially offered by TMP were insufficient, and TMP raised the offer to $9 per share on June 12, 2001, when the stock closed at $7.46 per share. TMP's offer was contingent on the transaction being completed by June 29, 2001.
9. On June 28, 2001, the companies agreed on the final terms of a merger, including an exchange ratio of .2195 shares of TMP for each share of Hotjobs.
10. On June 29, 2001, after the close of trading, TMP publicly announced that it would acquire Hotjobs in a stock-swap transaction in which each share of Hotjobs would be exchanged for .2195 shares of TMP.
11. Hotjobs's stock price, which closed at $10.51 on Friday, June 29, 2001, jumped to$12.49 per share at the close of the market on Monday, July 2, 2001, and reached $12.57 per share at the close of the market on Tuesday, July 3, 2001.
12. On or about May 31, 2001, Carvajal learned that Hotjobs was discussing being acquired by another firm.
13. At all relevant times, Hotjobs had a corporate insider trading policy that was distributed to all employees, officers and directors, including Carvajal. The policy prohibited trading based on material, non-public information regarding Hotjobs's business because such transactions "can cause a substantial loss of confidence by the public and the securities markets in [Hotjobs]." The policy expressly stated that information concerning "[m]ajor corporate partnering transactions or proposed mergers, acquisitions or divestiture" is material information. If further warned that "there are no limits on the size of a transaction that will trigger insider trading liability."
14. At all relevant times, Carvajal had authority to trade securities in his parents' accounts one in his father's name and one in both parents' names.
15. On June 7, 2001, the same day that TMP made an offer to acquire Hotjobs, Carvajal placed an order in his parents' joint account to buy 2,000 shares of Hotjobs, which was executed at $6.874 per share. Carvajal used funds from the money market fund in his parents' account to pay for the Hotjobs stock.
16. On June 7, 2001, Carvajal placed an order in his father's account to buy 120 shares of Hotjobs, which was executed at $6.83 per share. Carvajal ordered the sale of otherstock in the account to pay for the purchase of the Hotjobs stock.
17. Carvajal made the purchases of Hotjobs stock without his parents' knowledge.
18. On July 3, 2001 Carvajal sold the 2,120 shares of Hotjobs that he had bought in his parents' accounts, yielding profits of $10,491.52.
19. Paragraphs 1 through 18 are realleged and incorporated herein by reference.
20. On or about June 7, 2001, Carvajal, directly or indirectly, singly or in concert, by use of the means or instrumentalities of interstate commerce, the mails, or any facility of any national securities exchange, in connection with the purchase or sale of securities: (1) employed devices, schemes, or artifices to defraud; (2) made untrue statements of material fact or omitted to state material facts necessary in order to make the statements made in light of the circumstances under which they were made, not misleading; and (3) engaged in acts, practices or courses of business which operated, or would operate as a fraud or deceit upon purchasers of the securities, or any other persons.
21. As part of and in furtherance of these violations, and as set forth above, Carvajal executed purchases of Hotjobs securities knowingly or recklessly while in possession of material, non-public information that he received in his role as an officer of Hotjobs.
22. By reason of the foregoing, Carvajal violated, and unless enjoined will again violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
WHEREFORE, plaintiff Commission respectfully requests that this Court enter judgment:
A. Permanently restraining and enjoining Carvajal, his agents, servants, employees, and attorneys, and all persons in active concert or participation with him who receive actual notice of the injunction by personal service or otherwise, and each of them, directly and indirectly, from violating Section 10(b) of the Exchange Act, 15. U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5;
B. Ordering Carvajal to disgorge the aggregate ill-gotten gains he enabled his parents to derive from the purchase of Hotjobs securities in violation of Section 10(b) of the Exchange Act, 15 U.S.C.§ 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5, and to pay prejudgment interest thereon;
C. Ordering Carvajal to pay a civil penalty, pursuant to Sections 21(d) and 21A of the Exchange Act, 15 U.S.C. § 78u(d)(3) and § 78u-1; and
D. Granting such other and further relief as this Court shall deem just and proper.
Dated: New York, New York
May __, 2003
By: WAYNE M. CARLIN (WC-2114)
Attorney for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
New York, New York 10279
Tel: (646) 428-1510
Fax: (646) 428-1981
Edwin H. Nordlinger
Mark K. Schonfeld
Caren N. Pennington
Doria G. Bachenheimer
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