U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21332 / December 10, 2009
Securities and Exchange Commission v. Brien P. Santarlas, 09-CV-10100 (S.D.N.Y.)
SEC Charges Additional Attorney in $20 Million Insider Trading Scheme
The Securities and Exchange Commission today announced insider trading charges against Brien P. Santarlas — a former attorney at Ropes & Gray LLP — for his role in the insider trading ring that made over $20 million trading ahead of corporate acquisition announcements using inside information tipped by Santarlas and his colleague at Ropes & Gray, Arthur J. Cutillo, in exchange for cash kickbacks. The SEC alleges that Santarlas misappropriated from his law firm material, nonpublic information concerning at least two corporate acquisitions involving Ropes & Gray clients — 3Com Corp. and Axcan Pharma Inc.
The complaint alleges that Santarlas gained access to material, nonpublic information by, among other means, accessing Ropes & Gray's computer network and viewing confidential deal documents. The SEC alleges that, using attorney Jason Goldfarb as a conduit, Santarlas and Cutillo tipped inside information concerning these corporate acquisitions to Zvi Goffer ("Zvi"), a proprietary trader at Schottenfeld Group, LLC ("Schottenfeld"). The complaint further alleges that Zvi traded on this information for Schottenfeld, and had numerous downstream tippees who also traded on the information, including other professional traders and portfolio managers at hedge fund advisers. The SEC previously charged Cutillo, Goldfarb, Zvi, and six others in connection with this insider trading scheme on November 5, 2009. See SEC v. Cutillo, et al., 09-CV-9208 (S.D.N.Y.) (LAK)/Lit. Rel. 21283.
As a result of conduct described in the complaint, the Commission alleges Santarlas violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission's complaint seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and the imposition of civil monetary penalties.
In a related criminal case, the U.S. Attorney's Office for the Southern District of New York announced today criminal charges against Santarlas in connection with the above insider trading scheme.
The Commission thanks the U.S. Attorney's Office and the Federal Bureau of Investigation for their cooperation and assistance in connection with this matter.
The Commission's investigation is continuing.