U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20132 / May 30, 2007
SEC v. Barclays Bank PLC and Steven J. Landzberg, 07-CV-04427 (S.D.N.Y.)
Barclays Bank Pays $10.9 Million to Settle Charges of Insider Trading on Bankruptcy Creditor Committee Information
Barclays' Former Head Trader of Distressed Debt Also Pays $750,000
The Securities and Exchange Commission today filed a civil action against Barclays Bank PLC (Barclays) and Steven J. Landzberg (Landzberg), a former proprietary trader for Barclays' U.S. Distressed Debt Desk. The complaint, filed in the United States District Court for the Southern District of New York, alleges that Barclays and Landzberg engaged in securities fraud through a pattern of illegal insider trading.
According to the complaint, Barclays and Landzberg illegally traded millions of dollars of bond securities over eighteen months, while aware of material nonpublic information received through six creditors committees. Landzberg simultaneously served as Barclays' representative on the creditors committees and as its proprietary trader. Landzberg signed confidentiality agreements and committee bylaws on Barclays' behalf, and received material nonpublic information concerning the financial condition and prospects of the issuers, their most recent business plans, detailed management projections, contemplated financing alternatives, proprietary advisor analyses, and the timing and terms of proposed plans of reorganization. Between March 2002 and September 2003, the repeated illegal insider trading by Barclays and Landzberg breached fiduciary and other duties of trust or confidence.
The complaint alleges that Barclays and Landzberg misappropriated material nonpublic information by failing to disclose any of their trades to the creditors committees, issuers, or other sources of such information. In a few instances, Landzberg used purported "big boy letters" to advise his bond trading counterparties that Barclays may have possessed material nonpublic information. However, in no instance did Barclays or Landzberg disclose the material nonpublic information received from creditors committees to their bond trading counterparties. Three of the six committees were official unsecured creditors committees appointed by the Office of the United States Trustee under the auspices of the federal bankruptcy courts. Barclays served as "Chair" of two of these bankruptcy committees at the time of its illegal insider trading.
The complaint further alleges that Barclays' senior management authorized Landzberg to buy and sell securities for Barclays' account while he served on bankruptcy creditors committees. Barclays' Compliance personnel failed to prevent the illegal insider trading, despite receiving notice that the proprietary desk had nonpublic information and should have been restricted from trading.
Barclays and Landzberg each consented, without admitting or denying the allegations in the Commission's complaint, to entry of final judgments permanently enjoining them from violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. To settle the Commission's insider trading charges, Barclays also consented to entry of a court order requiring it to pay over $10.94 million: disgorgement of $3,971,736, prejudgment interest of $971,825, and a civil money penalty of $6,000,000. To settle the Commission's charges against him, Landzberg further consented to be permanently enjoined from participation in any creditors committee in any federal bankruptcy proceeding involving an issuer of securities, and to pay a civil money penalty of $750,000.