U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19714 / June 1, 2006
SEC v. Jay Slesinger, et al., Civil Action No. 3:06cv839 (CFD) (D. Conn., filed May 31, 2006)
SEC v. Jay Rice, Civil Action No. 3:06cv838 (MRK) (D. Conn., filed May 31, 2006)
SEC Charges Three Additional Individuals With Fraudulent Scheme to Obtain Stock in the NewAlliance Bancshares IPO
On May 31, 2006, the Securities and Exchange Commission filed partially settled civil fraud charges against three additional individuals in connection with the initial public offering of NewAlliance Bancshares, Inc. The Commission previously filed similar charges against five individuals. The most recent charges arise out of separate schemes by Jay Slesinger and Maurice Servetnick and Jay Rice in which Slesinger and Rice illegally purchased stock in the NewAlliance IPO in violation of the federal securities laws. Among other things, Servetnick negotiated an arrangement pursuant to which relief defendant Moshe Ariel purchased stock in the IPO. The SEC's actions were brought in the United States District Court for the District of Connecticut.
According to the Commission's complaints, the actions arise out of the April 2004 conversion of New Haven Savings Bank ("NHSB"), which was based in New Haven, Connecticut, from a mutual form of organization to a stock form of organization. Because mutual banks are owned by their depositors, the depositors are given first priority in receiving the shares arising out of the conversion's initial public offering. The Commission's complaint against Slesinger, Servetnick, and Ariel alleges that Slesinger entered into an illegal arrangement with a depositor of NHSB pursuant to which he used the depositor to illegally purchase 195,171 shares of NewAlliance Bancshares in the IPO. The complaint also alleges that Servetnick, then a registered representative associated with a broker-dealer, initiated the arrangement between defendant Slesinger and the depositor. The complaint further alleges that Servetnick orchestrated an arrangement between relief defendant Ariel and the same depositor whereby the depositor served as a nominee to purchase 40,000 shares of NewAlliance stock for Ariel. The Commission's complaint against Rice alleges that Rice, a former registered representative associated with a broker-dealer, entered into an illegal arrangement with a depositor of NHSB pursuant to which he used the depositor as a nominee to illegally purchase 66,000 shares of NewAlliance stock in the IPO.
The Commission's complaints allege that Slesinger, Servetnick, and Rice violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. Servetnick is also charged with violating Section 15(a) of the Exchange Act. Ariel was named as a relief defendant because he received proceeds of the violation and has no legitimate claim to the money. Without admitting or denying the allegations in the complaint, Slesinger and Servetnick agreed to a permanent injunction and the payment of disgorgement plus prejudgment interest of $481,119 and $28,167, respectively, and a civil penalty of $120,000 and $25,885, respectively. Without admitting or denying the allegations in the complaint, Ariel agreed to the payment of disgorgement plus prejudgment interest of $87,087. Without admitting or denying the allegations in the complaint, Rice agreed to a permanent injunction and the payment of disgorgement plus prejudgment interest of $170,962. The issue of a civil penalty against Rice will be subject to further litigation.
Today's actions are the result of ongoing investigations by the SEC, the U.S. Attorney for the District of Connecticut, and the New Haven Division of the Federal Bureau of Investigation. The SEC also acknowledges the assistance and cooperation of the Connecticut Department of Banking, Securities and Business Investment Division. The Commission's investigation is continuing.
For further information, please see Litigation Release No. 19288 (June 28, 2005), and the Investor Alert the Commission issued on June 28, 2005. The Investor Alert is available at: www.sec.gov/investor/pubs/mutualconversion.htm.