UNITED STATES DISTRICT COURT
Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint against defendant Steven S. Goldberg, alleges as follows:
SUMMARY OF ALLEGATIONS
1. This action concerns insider trading by defendant Steven Goldberg, a tax attorney and securities professional, who bought stock in Home Port Bancorp, Inc. ("Home Port") in July 2000 while in possession of material, nonpublic information about an impending merger involving Home Port. Steven Goldberg misappropriated this information from a client who was a member of Home Port's board of directors (the "Client"). On or around June 7, 2000, the Client told Steven Goldberg that Home Port was going to be merged into another bank and asked for advice about the impact that the merger would have on his estate. The Client specifically told Steven Goldberg that the information was confidential and that he expected that Steven Goldberg would consider it privileged. Three days before the merger announcement, Steven Goldberg purchased 2,000 shares of Home Port stock in his own account and caused a trust maintained for the benefit of his mother to purchase an additional 1,000 shares of Home Port stock. After the merger was publicly announced, those 3,000 shares of Home Port stock were sold for an illegal profit of $28,546.
2. By virtue of the conduct alleged herein, Steven Goldberg has engaged, directly or indirectly, in transactions, acts, practices, or courses of business that constitute violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5. Unless he is permanently restrained and enjoined, Steven Goldberg will again engage in the transactions, acts, practices and courses of business set forth in this Complaint and in transactions, acts, practices and courses of business of similar type and object.
JURISDICTION AND VENUE
3. The Commission brings this action pursuant to the authority conferred upon it by Section 21(d) of the Exchange Act, 15 U.S.C. § 78u(d), to restrain and enjoin Steven Goldberg permanently from engaging in the transactions, acts, practices, and courses of business alleged in this Complaint. The Commission also seeks a judgment requiring Steven Goldberg to disgorge the profits he made through his unlawful purchase Home Port stock, plus prejudgment interest thereon, and requiring him to pay civil money penalties pursuant to Section 21A(a) of the Exchange Act, 15 U.S.C § 78u-1(a).
4. This Court has jurisdiction over this action pursuant to Sections 21(d), 21A, and 27 of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u-1, 78aa.
5. Steven Goldberg, directly and indirectly, singly or in concert, made use of the means or instrumentalities of interstate commerce, or of the mails, or of any facility of any national securities exchange, in connection with the transactions, acts, practices, and courses of business alleged herein. Certain of the alleged transactions, acts, practices, and courses of business occurred in the Southern District of New York, including the purchase of Home Port stock for the trust account held by Steven Goldberg's mother. Steven Goldberg currently resides in New York, New York.
6. Steven Goldberg, 58, resides in New York, New York. From 1987 to September 2001, Steven Goldberg was a registered representative associated with MML Investors Services, Inc. ("MML"), a registered broker-dealer and wholly owned subsidiary of Massachusetts Mutual Life Insurance Company ("MassMutual"). During that time, he was also associated with Cowen Financial Services ("Cowen"), an agent of MassMutual with offices located in New York, New York. Steven Goldberg held Series 7 and Series 63 licenses. He is an attorney admitted to the New York State Bar.
7. Home Port was a bank holding company incorporated in Massachusetts from November 12, 1987 through December 31, 2000. Its principal asset was a savings bank with three branches located on Nantucket Island, Massachusetts. Prior to its merger with Seacoast Financial Services Corporation ("Seacoast"), Home Port's securities were registered with the Commission pursuant to Section 12(g) of the Exchange Act and trades in its common stock were reported on NASDAQ's National Market System.
8. Seacoast is a bank holding company incorporated in Massachusetts with headquarters in New Bedford, Massachusetts. On December 31, 2000, Seacoast completed its acquisition of Home Port. Seacoast's securities are registered with the Commission pursuant to Section 12(g) of the Exchange Act.
STEVEN GOLDBERG'S ILLEGAL INSIDER TRADING
A. The Home Port - Seacoast Merger
9. In January 2000, Home Port's board of directors authorized Home Port's Chairman and CEO to explore, among other things, the potential for a merger with an appropriate partner. In or around February 2000, Home Port's Chairman and CEO met with Seacoast's Chairman and CEO to discuss a possible transaction between the two banks. Over the next few months, the parties discussed a possible transaction and Seacoast and Seacoast's investment bankers reviewed Home Port's financial condition.
10. In mid to late May, Home Port's and Seacoast's management agreed upon the essential terms of a merger between the companies. On or about May 30, 2000, Seacoast's board authorized its management to offer $37 per share to buy Home Port. After further discussions about the specific terms of the offer, Seacoast sent a letter to Home Port on June 14, 2000 setting forth in detail the framework for a merger between the two companies at $37 per share. Home Port's board of directors authorized the company's senior management to conduct definitive discussions regarding the acquisition of Home Port based on the terms outlined in Seacoast's letter. Further negotiations ensued, and Home Port's board formally approved the merger on July 20, 2000. On July 21, 2000, Home Port and Seacoast jointly announced that they had entered into a merger agreement.
B. The Client's Confidential Discussions
With Steven Goldberg About The Merger
11. At all relevant times, the Client was a member of Home Port's board of directors and served on the board's executive committee. The Client first learned that Home Port was engaged in discussions about a potential merger with Seacoast in the winter of 2000. In late May 2000, the Client learned that Seacoast was going to acquire Home Port for $37 per share.
12. For approximately fifteen years, Steven Goldberg was the Client's personal attorney and assisted the Client with wills, trusts, and other estate planning. He also prepared the Client's tax returns. Steven Goldberg received an annual retainer of $2,500 for these services. Steven Goldberg knew that the Client was a Home Port director.
13. On or around June 7, 2000, the Client met with Steven Goldberg to obtain legal advice about his estate. At that meeting, the Client communicated to Steven Goldberg that: (i) Seacoast had agreed to acquire Home Port for $37 per share in cash; (ii) the Client would receive a large sum of money as a result of the transaction; (iii) Steven Goldberg needed to know about the transaction because he was doing estate work for the Client; and (iv) the transaction was going to be completed. The Client also specifically advised Steven Goldberg that the merger information was confidential, non-public information, and that the Client understood their discussion to be a privileged conversation. Steven Goldberg acknowledged that their conversation was privileged.
C. Steven Goldberg's Duty of Confidentiality and Purchase of Home Port Stock
14. At the time of the transactions and events alleged in this Complaint, Steven Goldberg was an attorney and had a fiduciary duty to keep confidential the information he learned from the Client in the course of his representation. In addition, Steven Goldberg had a fiduciary duty to refrain from using the confidence of a client for his own advantage or benefit unless the client consented to such use. The Client did not consent to Steven Goldberg's personal use of the confidential information conveyed at the June 7, 2000 meeting.
15. On July 18, 2000, Steven Goldberg purchased 2,000 shares of Home Port common stock in an account held in his own name at $25 15/16 per share.
16. Steven Goldberg is a trustee for a trust account maintained for the benefit of his mother. Steven Goldberg has trading authority over the account and is a residual beneficiary pursuant to the terms of the trust. On July 18, 2000, Steven Goldberg caused the trust to purchase 1,000 shares of Home Port stock for the trust account.
17. By virtue of the facts and conduct described above in paragraphs 15 and 16, Steven Goldberg breached his fiduciary duties to the Client.
18. On July 18, 2000, the price of Home Port common stock closed at $25 15/16 per share. On July 21, 2000, the date of the announcement, Home Port common stock closed at $35 ½. Following the announcement, the 3,000 shares of Home Port stock in Steven Goldberg's personal account and his mother's trust account were sold for an illegal profit of $28,546.
CLAIM FOR RELIEF
Violations of Section 10(b) of the Exchange Act,
15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5
19. The Commission realleges and incorporates by reference each and every allegation contained in Paragraphs 1 through 18, above.
20. Steven Goldberg, directly or indirectly, by the use of a means or instrumentality of interstate commerce, or of the mails, or of any facility of a national securities exchange, in connection with the purchase of Home Port securities: (a) employed devices, schemes, or artifices to defraud; (b) obtained money or property by means of, or otherwise made, untrue statements of material fact or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (c) engaged in transactions, acts, practices and courses of business which operated or would have operated as a fraud or deceit upon purchasers of Home Port securities and upon other persons.
21. On or around June 7, 2000, the Client conveyed material, nonpublic information concerning an impending merger involving Home Port to Steven Goldberg.
22. While in possession of material, nonpublic information concerning an impending merger involving Home Port, Steven Goldberg purchased, and caused his mother's trust to purchase, Home Port securities on July 18, 2000.
23. The information that Steven Goldberg possessed on July 18, 2000 concerning an impending merger by Home Port was material and confidential.
24. Steven Goldberg, by purchasing Home Port securities on July 18, 2000 breached a fiduciary duty, or other duty arising out of a relationship of trust and confidence, that he owed to the Client.
25. When Steven Goldberg purchased Home Port securities on July 18, 2000, Steven Goldberg knew or was reckless in not knowing that he possessed confidential information regarding Home Port's impending merger with Seacoast, and he knew or was reckless in not knowing that his purchase of Home Port securities constituted a breach of fiduciary duty, or other duty arising out of a relationship of trust and confidence, that he owed to the Client.
25. By reason of the foregoing, Steven Goldberg, singly or in concert, directly or indirectly, violated, and unless enjoined will again violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5.
WHEREFORE, Plaintiff respectfully requests a Final Judgment:
A. Permanently enjoining Steven Goldberg, his agents, servants, employees, and attorneys, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from future violations of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5;
B. Ordering Steven Goldberg to disgorge the ill-gotten gains he derived from the purchase of Home Port securities in violation of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, and to pay prejudgment interest thereon;
C. Ordering Steven Goldberg to pay civil money penalties pursuant to Section 21A(a) of the Exchange Act, 15 U.S.C. § 78u-1(a); and
D. Granting such other and further relief as this Court shall deem just and proper.
Dated: New York, New York
May 6, 2002
SECURITIES AND EXCHANGE COMMISSION
Edwin H. Nordlinger