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U.S. Securities and Exchange Commission

U.S. Securities and Exchange Commission

Litigation Release No. 22205 / December 21, 2011

SEC v. John R. Easom, et al., Civil Action No. 2:11-CV-7314-WHW-MCA, United States District Court for the District of New Jersey.

SEC Charges Eight Individuals with Making $450,000 from Insider Trading in Vital Signs, Inc.

On December 16, 2011, the Securities and Exchange Commission charged eight people with insider trading in securities of Vital Signs, Inc., ahead of a July 24, 2008 announcement that it would be acquired by a subsidiary of the General Electric Company (NYSE: GE). The Commission alleges that John R. Easom, who at the time was a Vital Signs Executive Vice President and officer, tipped a family member, William Echeverri (“Echeverri”), about the pending takeover. The complaint alleges that Echeverri, who at the time was a trader at a registered broker-dealer, then purchased Vital Signs stock and tipped five people, all of whom then traded. One of Echeverri’s tippees tipped another person who traded, and one of his other tippees recommended Vital Signs to two relatives. The eight defendants made approximately $450,000 from their illegal trading in Vital Signs.

The case was filed in U.S. District Court for the District of New Jersey. According to the complaint:

  • Easom learned the final GE acquisition terms on June 5, 2008, the same day they were agreed to by the companies’ CEOs. Shortly after being told, Easom sent the terms of the agreement in a text message to his cousin’s husband, Echeverri. By tipping Echeverri, Easom violated his duty of trust and confidence owed to Vital Signs.
  • On June 6, 2008, the day after receiving Easom’s tip, Echeverri began buying shares of Vital Signs. To conceal his trading from his employer, Echeverri placed his trades through an outside personal account. Echeverri sold his shares after the takeover announcement for illicit profits of approximately $150,000.
  • Echeverri tipped five others about the impending Vital Signs acquisition: his brother, Victor H. Echeverri (“V. Echeverri”), and four friends, Robert Miketich, Rory E. Tringali, Joseph F. Mancuso and Paul S. Qassis.
  • Each of Echeverri’s direct tippees purchased shares of Vital Signs while in possession of material, nonpublic information about the takeover, which they sold after the takeover announcement for illicit profits totaling approximately $190,000.
  • V. Echeverri, with Tringali’s help, placed his trades in an account held by Tringali’s father to conceal his trading.
  • Qassis tipped his friend and colleague Gary S. Saggu, who purchased shares while in possession of material, nonpublic information about the pending takeover, which he sold after the announcement for illicit profits of approximately $111,000.
  • Easom also bought 15 shares of Vital Signs on May 16, 2008. Previously, Easom had signed a January 21, 2008 non-disclosure agreement between Vital Signs and GE concerning the companies’ takeover negotiations.

Without admitting or denying the allegations in the complaint, Easom, Echeverri, V. Echeverri, Miketich, Mancuso, Qassis and Saggu have agreed to settle the Commission’s charges by consenting to the entry of final judgments permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Easom also agreed to be barred for five years from serving as an officer or director of a publicly traded company.

In total, the seven settling defendants have also agreed to pay over $900,000, representing disgorgement and prejudgment interest of over $430,000, and civil penalties of over $475,000. Specifically, Easom will pay disgorgement of $327, prejudgment interest of $50.75, and a civil penalty of $10,000. Echeverri will pay disgorgement of $150,121.19, prejudgment interest of $22,450.59, and a civil penalty of $227,428.22. V. Echeverri consented to an order to pay disgorgement of $12,477.19 and prejudgment interest of $1,829.52, but waiving payment and not imposing a civil penalty based on his inability to pay. Miketich will pay disgorgement of $31,455, prejudgment interest of $4,252.20, and a civil penalty of $41,455. Mancuso will pay disgorgement of $61,367.01, prejudgment interest of $8,998.13, and a civil penalty of $61,367.01. Qassis will pay disgorgement of $22,167.64, prejudgment interest of $3,082.17, and a civil penalty of $80,000.00. Saggu will pay disgorgement of $111,494.29, prejudgment interest of $15,073.97, and a civil penalty of $55,747.14. The settlements are subject to approval by the court.

The SEC has entered into a cooperation agreement with Easom. The terms of his proposed settlement reflect credit given to him by the Commission for his substantial assistance in its investigation and anticipated cooperation in its pending enforcement action. The Commission also considered his sworn statements concerning his financial condition.

The Commission acknowledges the assistance of FINRA in this matter.

SEC Complaint

 

http://www.sec.gov/litigation/litreleases/2011/lr22205.htm


Modified: 12/21/2011