U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20258 / August 29, 2007
SEC v. Scott R. Sacane, et al., Civil Action No. 3:05cv1575-SRU (D. Conn., filed October 12, 2005)
SEC Settles With Connecticut Hedge Fund Manager in Securities Fraud Schemes
The Commission announced today that final judgments have been entered by consent against Scott R. Sacane, Durus Capital Management, LLC, and Durus Capital Management (N.A.), LLC (collectively, "Durus") in a civil fraud action the Commission filed against them on October 12, 2005. The final judgments include injunctions against future violations of various provisions of the federal securities laws. Based on Sacane's obligation to pay restitution in the related criminal action, United States v. Scott Sacane, 3:05-cr-325-AHN, the Court did not impose any disgorgement obligation or civil penalty against Sacane. In the criminal matter, after sentencing Sacane to three years in prison based on his guilty plea, the Court on April 11, 2007, ordered Sacane to pay restitution in accordance with a restitution agreement worth approximately $5.7 million.
The Commission's complaint, filed in federal district court in Connecticut, charged the defendants for their involvement during 2002 and 2003 in fraudulent schemes concerning the purchase and sale of the common stock of two biotechnology companies: Esperion Therapeutics, Inc. and Aksys Ltd. The Commission's complaint alleged that the defendants manipulated the price of both Esperion and Aksys stock by making regular and substantial purchases of both stocks through the hedge funds that they managed and concealing these purchases by failing to file various forms and schedules with the Commission as required by the federal securities laws and making false filings with the Commission. According to the complaint, Sacane also made misrepresentations to officers of Esperion and Aksys about the stock purchases, and made misrepresentations to Sacane's former employer about purported non-public information Sacane possessed about both companies in order to prevent the former employer from selling Aksys and Esperion stock. The Complaint further alleged that Sacane and Durus later sold stock of both companies without disclosing their ownership position as required by the federal securities laws. The Commission's complaint alleged that the defendants' undisclosed purchases of Esperion and Aksys stock artificially inflated the price of both stocks by creating the appearance of a greater demand for the stocks than actually existed in the market. According to the complaint, from November 2002 through July 2003, Esperion's stock price more than tripled from $5.65 per share to approximately $20 per share, and Aksys' stock price quadrupled from $3.65 per share to approximately $15 per share. By July 24, 2003, the defendants' undisclosed purchases also resulted in them controlling approximately 33% of Esperion's outstanding stock and approximately 78% of Aksys' outstanding stock.
In settling the Commission's complaint, and without admitting or denying the allegations in the complaint, Sacane and Durus consented to the entry of the final judgments that enjoin Sacane and Durus from violating Section 17(a) of the Securities Act of 1933 , Sections 10(b), 13(d), 13(f), 13(g), 16(a), and 16(c) of the Securities Exchange Act of 1934 and Rules 10b-5, 13d-1, 13d-2, 13f-1, and 16a-3 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Based on Sacane's guilty plea in the criminal action, the Commission previously barred Sacane from association with an investment adviser.
The Commission acknowledges the assistance of the United States Attorney's Office for the District of Connecticut and the Federal Bureau of Investigation in this matter.
For further information, please see: Litigation Release No. 19424 (October 12, 2005); Litigation Release No. 19605 (March 9, 2006); Litigation Release No. 19988 (February 2, 2007); Release No. IA-2483 (February 7, 2006); Release No. IA-2491 (February 28, 2006).