U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20884 / February 5, 2009
Securities and Exchange Commission v. Nicos Achilleas Stephanou, Ramesh Chakrapani, Achilleas Stephanou, George Paparrizos a/k/a Georgios Paparrizos, Konstantinos Paparrizos, Michael G. Koulouroudis and Joseph Contorinis, Civil Action No. 09 CV 1043 (S.D.N.Y)
Securities and Exchange Commission v. Ramesh Chakrapani, Civil Action No. 09 CV 325 (RJS) (S.D.N.Y.)
SEC CHARGES WALL STREET PROFESSIONALS AND OTHERS WITH INSIDER TRADING
The Securities and Exchange Commission announced that it has filed complaints in the United States District Court for the Southern District of New York alleging that seven individuals engaged in insider trading, which generated a combined total of over $11.6 million in illegal profits and losses avoided. The Commission's complaint further alleges that two mergers and acquisitions professionals, Nicos Achilleas Stephanou at UBS Investment Bank, and Ramesh Chakrapani at Blackstone Advisory Services, L.P., tipped five individuals, including Joseph Contorinis, a portfolio manager for a Jefferies Group, Inc. hedge fund, and residents of Greece and Cyprus with material nonpublic information about three impending corporate acquisitions.
According to the Commission's complaint, the insider trading ring included:
Nicos Achilleas Stephanou, a resident of the United Kingdom, was an Associate Director of Mergers and Acquisitions at UBS Investment Bank;
Ramesh Chakrapani, a resident of the United Kingdom, was a Managing Director in the Corporate and Mergers and Acquisitions group at Blackstone Advisory Services, L.P. and a friend and former colleague of Nicos Stephanou;
Joseph Contorinis, a resident of Florida, was a Managing Director at Jefferies & Company, Inc. and portfolio manager for the Jefferies Paragon Fund, and a friend and former colleague of Nicos Stephanou;
Achilleas Stephanou, a resident of Cyprus, is Nicos Stephanou's father;
George Paparrizos, a resident of Foster City, California, is a former classmate of Nicos Stephanou;
Konstantinos Paparrizos, a resident of Greece, is George Paparrizos' father; and
Michael G. Koulouroudis, a resident of Brooklyn, New York, is a close family friend of Nicos Stephanou.
Related criminal charges by the U.S. Attorney's Office for the Southern District of New York were filed today against Ramesh Chakrapani, Achilleas Stephanou, George Paparrizos, Konstantinos Paparrizos, Michael Koulouroudis and Joseph Contorinis. Simultaneously, criminal charges against Nicos Stephanou were unsealed.
The Commission's complaint alleges that the illicit trading occurred from at least November 2005 through December 2006 and involved at least the following acquisitions:
Albertson's Inc. (ABS)
On Monday, January 23, 2006, prior to the opening of trading, ABS issued a press release announcing the acquisition of ABS by a consortium of buyers at $26.29 per share.
Nicos Stephanou had access to material nonpublic information concerning the acquisition of ABS prior to its public release because one of the companies that eventually acquired ABS retained UBS as its financial advisor and Nicos Stephanou was a member of the team at UBS that advised the company on the acquisition.
Nicos Stephanou tipped George Paparrizos, Michael Koulouroudis and Joseph Contorinis with material nonpublic information about the ABS acquisition, all of whom traded on the basis of that information. Nicos Stephanou also either tipped his father, Achilleas Stephanou, or in an effort to evade detection, Stephanou traded ABS securities in his father's brokerage account. In addition, Nicos Stephanou either tipped Konstantinos Paparrizos or, in an effort to evade detection, George Paparrizos traded ABS securities in his father's account.
In particular, after receiving the nonpublic information from Nicos Stephanou, Joseph Contorinis caused the Jefferies Paragon Fund to purchase over 2.6 million shares of ABS at a cost of $59 million.
By virtue of their trading in ABS securities, the defendants made total profits and avoided losses of approximately $7.7 million.
ElkCorp. (ELK)
On December 18, 2006, prior to the market open, ELK publicly announced that it had agreed to be acquired by The Carlyle Group for $38.00 per share.
ELK hired UBS as its financial advisor. Through working on the deal himself, through communications with other employees at UBS who advised ELK on the acquisition, and/or by virtue of his access to UBS' internal files, Nicos Stephanou had access to material nonpublic information regarding ELK's impending acquisition.
Nicos Stephanou tipped George Paparrizos and Michael Koulouroudis with material nonpublic information about the ELK acquisition. George Paparrizos and Michael Koulouroudis traded on the basis of that information. Nicos Stephanou also either tipped his father, Achilleas Stephanou or, in an effort to evade detection, traded ABS in his father's brokerage account. In addition, Nicos Stephanou either tipped Konstantinos Paparrizos or, in an effort to avoid detection, George Paparrizos traded ELK securities in his father's account.
By virtue of this trading in ELK securities, Achilleas Stephanou, George Paparrizos, Konstantinos Paparrizos and Michael Koulouroudis and his family members made total profits of approximately $300,000.
National Health Investors, Inc. (NHI)
On October 10, 2006, NHI publicly announced that its Board of Directors had formed a Special Committee of independent directors, and had retained Blackstone as its financial advisor to evaluate strategic alternatives to enhance shareholder value. NHI also announced that it had received a buyout offer from its CEO offering $30.00 per share in cash, but stated that the offer was inadequate.
Ramesh Chakrapani had access to material nonpublic information concerning a potential acquisition of NHI as a result of his employment at Blackstone. Ramesh Chakrapani was a member of the team at Blackstone that advised NHI on its potential acquisition.
Ramesh Chakrapani tipped Nicos Stephanou with material nonpublic information regarding the potential NHI acquisition, who in turn tipped Michael Koulouroudis with that information. Koulouroudis traded on the basis of this information. Nicos Stephanou also either tipped his father, or in an effort to evade detection, traded NHI in his father's brokerage account.
By virtue of this trading in NHI securities, Achilleas Stephanou and Michael Koulouroudis and his family members made total profits of $17,000.
Nicos Stephanou, Achilleas Stephanou, George Paparrizos, Konstantinos Paparrizos and Michael Koulouroudis are charged with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Ramesh Chakrapani and Joseph Contorinis are charged with violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Commission seeks injunctive relief, disgorgement of illicit profits and losses avoided with prejudgment interest, and civil monetary penalties.
On January 13, 2009, the Commission filed a related complaint against Ramesh Chakrapani alleging, among other things, that Ramesh Chakrapani tipped another friend, also an industry professional, with material nonpublic information about the ABS acquisition he learned as a result of his employment. The friend, identified in the complaint as Tippee 1, then traded in his personal account, was responsible for and/or caused trades on behalf of two proprietary trading accounts affiliated with his employer, and tipped or traded on behalf of his parents. The tippees generated a total of approximately $3.6 million in illegal profits. See SEC v. Chakrapani, 09 CV 325 (S.D.N.Y.).
The Commission acknowledges and appreciates the assistance of the U.S. Attorney's Office and the Federal Bureau of Investigation in connection with this matter.
The Commission's investigation is continuing.
