U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20774 / October 7, 2008
Securities and Exchange Commission v. Francis Elias Axiaq, Ciriaco Israel Rivor, Emmanuel Mario Axiaq and Steven Craig Lusardi, Case No. C-08-CV-4637 (CRB) (N.D. Cal. filed October 7, 2008)
SEC Charges Former Vice President at Restoration Hardware and Three Friends in Insider Trading Scheme
The Securities and Exchange Commission today charged a former vice president of national home furnishing retailer Restoration Hardware with insider trading for tipping three friends that the company was about to be acquired, enabling them to make more than $900,000 in unlawful profits when public announcement of the subsequent merger caused the stock price to soar.
The SEC alleges that Ciriaco "Eric" Rivor of Millbrae, Calif., who was Vice President of Treasury at Corte Madera, Calif.-based Restoration Hardware, learned in mid-2007 that the company was about to be acquired by a private equity firm at a substantial premium. Rivor allegedly passed the confidential, non-public information to friends Emmanuel Axiaq of San Carlos, Calif., and Steven Lusardi of San Jose. Rivor told Emmanuel Axiaq to pass the information to his father, Francis Axiaq of Millbrae. The SEC alleges that Rivor instructed his friends to limit the size of their Restoration Hardware stock purchases to prevent detection.
According to the SEC's complaint, filed in federal district court in San Francisco, Emmanuel Axiaq and Lusardi complied with Rivor's instruction to limit the size of their stock purchases. Meanwhile, Francis Axiaq spent the following weeks amassing nearly 250,000 shares of Restoration Hardware stock. When Restoration Hardware publicly announced the acquisition on Nov. 8, 2007, its stock price soared more than 140 percent, from $2.68 to $6.44 per share. The SEC's complaint alleges that Emmanuel Axiaq and Lusardi profited by $29,539 and $4,398, respectively, on their stock purchases. The announcement gave Francis Axiaq an illicit potential profit of nearly $900,000.
Rivor, Lusardi, and Emmanuel Axiaq, without admitting or denying the allegations in the SEC's complaint, have agreed to a permanent injunction from further violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Rivor, who did not personally trade on the information, has agreed to pay a $68,000 penalty. Lusardi has agreed to pay a total of $8,901, including disgorgement of his trading profits, prejudgment interest and a penalty equal to his trading profits. Emmanuel Axiaq has agreed to pay a total of $90,249, including $30,249 in disgorgement of his trading profits and prejudgment interest and a penalty of $60,000.
In a non-settled enforcement action, Francis Axiaq is charged with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking a permanent injunction, disgorgement, financial penalties, and other relief.
The Commission acknowledges the assistance of the New York Stock Exchange in this matter.