U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21587 / July 7, 2010
SEC v. Brien Santarlas, Civil Action No. 09-CV-10100 (S.D.N.Y.) (RJS)
Former Ropes & Gray Attorney Brien Santarlas Settles SEC Insider Trading Charges
The Securities and Exchange Commission announced today that on July 2, 2010, The Honorable Richard J. Sullivan of the United States District Court for the Southern District of New York, entered a final judgment against Brien Santarlas in SEC v. Brien Santarlas, 09-CV-10100 (S.D.N.Y.), an insider trading case the Commission filed on December 10, 2009. The Commission charged Santarlas, who was an attorney at the law firm of Ropes & Gray LLP during the relevant time period, with violations of the antifraud provisions of the federal securities laws. The Commission alleged 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.
As alleged in the Commission's complaint, Santarlas gained access to material, nonpublic information concerning the acquisitions by, among other means, accessing Ropes & Gray's computer network and viewing confidential deal documents. According to the complaint, using attorney Jason Goldfarb as a conduit, Santarlas and his Ropes & Gray colleague, Arthur Cutillo, tipped inside information concerning these corporate acquisitions to Zvi Goffer, a proprietary trader at Schottenfeld Group, LLC, in exchange for cash kickbacks. The complaint further alleged that Goffer 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 Commission previously charged Cutillo, Goldfarb, Goffer, 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.) (RJS)/Lit. Rel. 21283.
To settle the Commission's charges, Santarlas consented to the entry of a final judgment that: (i) permanently enjoins him from future violations of Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5; (ii) orders him to pay disgorgement of $32,500, which will be deemed satisfied, on a dollar for dollar basis, by the amount of any forfeiture ordered in the parallel criminal case, United States v. Brien Santarlas, 09-CR-1170 (S.D.N.Y.); and (iii) orders him to pay a civil penalty of $32,500. Additionally, in a related administrative proceeding, Santarlas consented to the entry of a Commission order suspending him from appearing or practicing before the Commission as an attorney. In a parallel criminal case, Santarlas previously pled guilty to charges of securities fraud and conspiracy to commit securities fraud and is awaiting sentencing.
See also Litigation Release No. 21332 (December 10, 2009).