U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21185A / August 27, 2009
Securities and Exchange Commission v. John F. Marshall, et al. , Civil Action No. 08-CV-2527 (S.D.N.Y.)
SEC FILES AMENDED COMPLAINT CHARGING THOMAS GENZALE WITH INSIDER TRADING BASED ON FORMER ISE VICE-CHAIRMAN'S TIPS; ALL PARTIES AGREE TO SETTLE COMMISSION'S CHARGES; PARALLEL CRIMINAL CASE ALSO CONCLUDES
The Securities and Exchange Commission announced today that it has filed a First Amended Complaint in its pending insider trading case originally filed on March 13, 2008, against John F. Marshall, the former Vice Chairman of International Securities Exchange Holdings, Inc. ("ISE"), Alan L. Tucker and Mark R. Larson. The original complaint alleged that Marshall tipped his business partners, Tucker and Larson, concerning ISE's merger talks with Eurex Frankfurt AG ("Eurex"), a German company, and that both men traded on the information ahead of the April 30, 2007 announcement of Eurex's $2.8 billion cash merger agreement with ISE, for illegal profits totaling approximately $1.1 million and $31,000, respectively. See Lit. Rel. No. 20491 / March 13, 2008. The First Amended Complaint adds a new defendant, Thomas Genzale, and charges him with having also traded in ISE securities in advance of the April 30, 2007 acquisition announcement based on tips from defendant Marshall, resulting, in Genzale's case, in profits of approximately $826,000. Genzale, Marshall, and Tucker have all agreed to settle the Commission's charges set forth in the First Amended Complaint without admitting or denying those allegations, and their settlement papers, in the form of Consents with attached Final Judgments, have been submitted to the Court for its consideration.
Recently, on the Commission's motion, the Court dismissed the Commission's charges against defendant Larson with prejudice. In place of the original complaint's allegation that Marshall tipped Larson, the First Amended Complaint alleges that Marshall recommended the purchase of ISE securities to a business partner, who, in turn, purchased 1,700 shares of ISE, resulting in profits of approximately $31,000.
Genzale's, Marshall's, and Tucker's Consents-which are subject to approval by the Court-provide that, without admitting or denying the Commission's allegations, each would be permanently enjoined against future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Genzale has consented to pay $826,118.84 in disgorgement, $105,977.61 in prejudgment interest, and an $826,118.74 penalty. Marshall has consented to pay $31,452.73 in disgorgement (the alleged amount of the trading profits of the business partner to whom he recommended ISE), and $4,034.88 in prejudgment interest-and has also consented to be permanently barred from serving as an officer or director of a publicly-traded company. Finally, Tucker has consented to pay $18,342.06 in prejudgment interest.
Simultaneously with the Commission's March 13, 2008 complaint, the United States Attorney's Office for the Southern District of New York filed a criminal complaint charging, among others, Marshall and Tucker with conspiracy to commit securities fraud. On August 13, 2008, the Court granted the Government's motion to dismiss its charges against Larson without prejudice. In September 2008, both Marshall and Tucker pled guilty to the criminal charges. In December 2008, Marshall was sentenced to 18 months in prison followed by 12 months of home confinement as part of three years' supervised release, as well as a $10,000 fine. Tucker was ultimately re-sentenced, in July 2009, to a three-year term of probation, as well as a $10,000 fine. In addition, in accordance with their guilty pleas, Marshall and Tucker were each ordered, jointly and severally, to forfeit $1,054,979, representing the illegal profits from Tucker's ISE trading.
The Commission acknowledges the assistance of the U.S. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, the Options Regulatory Surveillance Authority (ORSA), the New York Stock Exchange (NYSE), and the Chicago Board Options Exchange (CBOE).