U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23577 / June 21, 2016
Securities and Exchange Commission v. Thomas C. Conradt, et al., Civil Action No. 12-cv-8676 (S.D.N.Y.)
SEC Obtains $980,000 Penalty from Defendant Who Violated Cooperation Agreement
The Securities and Exchange Commission has obtained a final judgment against Thomas C. Conradt, including a penalty of $980,229, who the agency charged with trading on, and tipping, inside information ahead of a $1.2 billion acquisition of SPSS Inc. in 2009 by IBM Corporation.
In its complaint, filed in federal court in the Southern District of New York in 2012, the SEC alleged that Conradt received inside information about the SPSS acquisition from his roommate Trent Martin. Conradt then used that information to trade and tipped four friends, including Daryl Payton and Benjamin Durant, who Conradt worked with in the New York office of a Connecticut-based brokerage firm. The SEC separately charged Payton and Durant with trading on inside information ahead of the acquisition of SPSS by IBM.
After the SEC filed the complaint, Conradt entered into a consent judgment with the agency whereby he agreed to disgorge his own trading profits of $2,533.60 and cooperate fully and truthfully. Pursuant to the terms of the consent judgment, in exchange for Conradt's full cooperation, the SEC agreed to seek a penalty of no more than his trading profits, or $2,533.60. On the SEC's unopposed motion, the Court deferred the determination of a penalty for Conradt until after the trial of the SEC's suit against Payton and Durant.
In February 2016, the SEC went to trial against Payton and Durant, seeking to hold Payton and Durant liable for trading on the SPSS information that Conradt tipped them. During the trial the SEC called Conradt as a witness, in part to testify about his conversations with Payton and Durant about SPSS. But, as the Court found in its Memorandum Order and Final Judgment, Conradt's trial testimony "materially varied from [his] testimony at his deposition" just seven months before "in ways that indicate that Conradt was intentionally watering down his prior testimony in contravention of his cooperation agreement and . . . in contravention of the truth."
At the conclusion of the Payton/Durant trial, the jury returned a verdict for the SEC and against Payton and Durant finding that, through their conduct, they violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Thereafter, the SEC moved for final judgment, including penalties, as to Conradt. In its motion papers, the SEC argued that Conradt breached his cooperation obligations and asked the Court to impose significant penalties. In imposing judgment against Conradt, the Court agreed with the SEC's position that Conradt had failed to cooperate "fully and truthfully" and ordered Conradt to pay $980,229, an amount equal to the sum of the profits he and his tippees made trading on the SPSS information.
The trial team from the SEC's Philadelphia Regional Office consisted of attorneys David L. Axelrod, Scott A. Thompson, Catherine E. Pappas, and A. Kristina Littman, and paralegal Nichelle Pridgen.
For further information, see Litigation Release No. 23031.