U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission

Washington, D.C.

Litigation Release No. 16765 \ October 13, 2000


SEC Charges Former Salomon Smith Barney Investment Banking Analyst with Insider Trading

The Commission today filed a civil complaint in the United States District Court for the Southern District of New York alleging that Michael A. Petrescu-Comnene, an analyst in the investment banking division of Salomon Smith Barney, engaged in repeated acts of insider trading over a nine-month period. The Commission's complaint alleges that Petrescu-Comnene illegally tipped at least two of his friends about several potential merger and acquisition transactions that he learned about while working at Salomon. The Commission's complaint further alleges that Petrescu-Comnene's tippees agreed to make trades in their own accounts and share the profits resulting from Petrescu-Comnene's tips. Petrescu-Comnene tipped one or more persons in connection with no fewer than eight Salomon deals, including the September 2000 acquisition of Associates First Capital Corp. ("AFS") by Citigroup, Inc., Salomon's parent.

The Commission's complaint specifically alleges that Petrescu-Comnene, who started working at Salomon in July 1999, began to tip his friends by no later than December 1999. That month, he tipped at least one of his friends prior to the December 20, 1999 public announcement that MMI Companies, Inc., a Salomon client, would be acquired by The St. Paul Companies. Petrescu-Comnene's tippee purchased 1500 shares of MMI stock on December 17, one business day prior to the announcement, and quickly sold his position, making a profit of $7,125.

Petrescu-Comnene and his friends made their largest profits by purchasing AFS call options the day before the September 6, 2000 announcement that Citigroup had agreed to purchase AFS in an all-stock transaction valued at $31.1 billion. At least two of his tippees purchased a total of fifty AFS Sept 30 call option contracts in two different brokerage accounts. The public announcement resulted in a 38 percent increase in the underlying price of AFS stock and resulted in profits to Petrescu-Comnene and his friends totaling $40,875.

The Commission's complaint alleges that Petrescu-Comnene violated his fiduciary obligations to Salomon and its clients by engaging in insider trading based on information he obtained through his employment. The complaint alleges that, as a result, Petrescu-Comnene violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Commission's complaint seeks a permanent injunction against future violations of the federal securities laws, disgorgement of profits and prejudgment interest thereon, plus a civil monetary penalty.

Also on October 13, 2000, the U.S. Attorney for the Southern District of New York arrested Petrescu-Comnene and filed a criminal complaint charging him with securities fraud and conspiracy to commit securities fraud. The Commission wishes to thank the U.S. Attorney's office for its cooperation in this matter.

The Commission is continuing its investigation in this matter.