U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19736 / June 22, 2006
SEC v. Justin Huscher,, U.S. District Court for the Northern District of Illinois, Eastern Division, Civil Action No. 06C-3397, filed June 22, 2006
SEC Files Settled Insider Trading Charges Against Former Managing Director of Private Equity Firm
The Commission announced that today it charged Justin Huscher, a former managing director of a major private equity firm, with insider trading based on his advance knowledge of the acquisition of Unisource Energy Corp. (Unisource). According to the Commission, Huscher made more than $54,000 in illegal profits by buying Unisource stock after he learned of Unisource's impending acquisition from a good friend who was involved in the investor consortium that acquired Unisource. Without admitting or denying the Commission's allegations, Huscher has agreed to a civil injunction for violations of the federal securities laws and to pay more than $108,000 in disgorgement and civil penalties. He also agreed to a bar from association with any investment adviser, with a right to reapply after four years.
The Commission's complaint, filed in the United States District Court for the Northern District of Illinois, alleges that Huscher, 52, of Chicago, Illinois, first learned of a possible Unisource acquisition through his work as a managing director at Madison Dearborn Partners, LLC and Madison Dearborn Partners, Inc. (collectively referred to as MDP). According to the complaint, in the summer of 2002, a managing director at JP Morgan Securities Inc. (JP Morgan Securities), who was one of Huscher's close friends and business associates, called Huscher to see if MDP had any interest in helping to fund the acquisition of Unisource. The complaint alleges that, after expressing interest, Huscher agreed on behalf of MDP to keep in strict confidence all nonpublic information about Unisource. In October 2002, MDP decided to drop out of the investor consortium. JP Morgan Securities, however, moved ahead with the effort and, in November 2003, reached an agreement to acquire Unisource. According to the complaint, Huscher's friend at JP Morgan Securities called Huscher shortly before the announcement of the acquisition to tell Huscher that Unisource would soon be acquired by an investor consortium headed by JP Morgan Securities. The complaint alleges that Huscher, after learning of the impending acquisition, purchased 8,000 shares of Unisource stock through his personal brokerage accounts. The complaint further alleges that, following the announcement of the acquisition on November 24, 2003, the price of Unisource stock rose approximately 26%, yielding Huscher $54,692.25 in illegal profits.
The complaint charges Huscher with trading on the basis of material, nonpublic information in violation of Section 10(b) of Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Huscher, without admitting or denying the allegations in the complaint, agreed to the entry of a permanent injunction against future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Huscher also agreed to pay disgorgement of $54,692.25, prejudgment interest of $7,280.38, and a $54,692.25 civil penalty. Huscher also has consented to the entry of an order in a public administrative proceeding to be instituted by the Commission barring him from association with any investment adviser, with the right to reapply for association after four years to the appropriate self-regulatory organization, or if there is none, to the Commission pursuant to Section 203(f) of the Investment Advisers Act.