U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23898 / August 8, 2017
Securities and Exchange Commission v. Steven V. McClatchey and Gary J. Pusey, Civil Action No. 16-cv-4029 (VSB) (S.D.N.Y.)
United States v. Pusey, No. 16-cr-369 (S.D.N.Y. unsealed May 31, 2016)
United States v. McClatchey, No. 16-cr-369 (S.D.N.Y. filed May 31, 2016)
Court Enters Final Judgments Against Investment Banker and Plumber Charged With Insider Trading
On July 21, 2017, the Honorable Vernon S. Broderick of the United States District Court for the Southern District of New York entered final judgments on consent against two New York men charged with insider trading in the securities of deal targets in transactions involving an investment bank where one of them worked.
The SEC's complaint, filed on May 31, 2016, alleged that Steven V. McClatchey, an investment banker, had regular access to highly confidential nonpublic information about impending transactions being pursued for investment bank clients. From 2014 to 2015, McClatchey allegedly abused his fiduciary duty and tipped this confidential nonpublic information to his close friend Gary J. Pusey. Pusey then allegedly used the information to trade in advance of ten mergers and acquisitions deals, generating approximately $76,000 in illegal profits. In return, Pusey, who worked as a plumber, allegedly gave McClatchey a few thousand dollars in cash and also renovated a bathroom in McClatchey's home.
Previously, both Pusey and McClatchey pled guilty to parallel criminal charges. On May 27, 2016, Pusey pled guilty to insider trading charges in a parallel criminal case and was sentenced on May 4, 2017, to time served and two years of supervised release, and ordered to forfeit $76,000, jointly and severally with McClatchey, and pay a $5,000 fine. On July 12, 2016, McClatchey pled guilty to securities and wire fraud charges in the parallel criminal case and was sentenced on January 11, 2017, to five months in prison and two years of supervised release, and ordered to forfeit $76,000, jointly and severally with Pusey, and pay a $10,000 fine.
The final judgments enjoin Pusey and McClatchey from violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The judgments deem disgorgement satisfied and do not order civil penalties based on the forfeiture order and criminal sentences imposed, respectively. Pusey's order also notes his cooperation in not ordering a penalty. Pusey and McClatchy consented to the entry of the final judgments.
McClatchey also agreed to the entry of an SEC order, based on the entry of judgments in the SEC's case and the parallel criminal case, that imposes associational and penny stock offering bars.
The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.