SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16791 / November 7, 2000
SECURITIES AND EXCHANGE COMMISSION v. RICHARD A. SVOBODA AND MICHAEL A. ROBLES, 00 Civ. 8557 (MBM) (Southern District of New York)
SEC SUES FORMER NATIONSBANK OFFICER AND FRIEND IN $1.2 MILLION, THREE YEAR, SERIAL INSIDER TRADING SCHEME;
CRIMINAL INDICTMENT FOR RELATED CHARGES UNSEALED
The Securities and Exchange Commission today filed an insider trading Complaint in the United States District Court for the Southern District of New York against Richard A. Svoboda, 46, a former NationsBank, N.A. employee, and his long-time friend Michael A. Robles, 46, a self-employed certified public accountant. The Complaint alleges that for more than three years Svoboda stole material nonpublic information from NationsBank and its corporate clients, traded securities while in possession of that information, and tipped his friend Robles, who also traded while in possession of material nonpublic information. According to the Complaint, Svoboda and Robles made over $1.2 million in illegal profits.
In particular, the Complaint alleges the following:
- Svoboda, a Credit Policy officer in the Dallas, Texas office of NationsBank, was responsible for evaluating existing and proposed credit arrangements with NationsBank corporate clients. In that context, Svoboda often obtained material nonpublic information concerning NationsBank's corporate clients or entities engaged in negotiations with NationsBank corporate clients, including advance notice of mergers, tender offers, quarterly results and other confidential material positive and negative developments.
- For more than three years, from June 1994 through December 1997, Svoboda misappropriated material nonpublic information from NationsBank concerning nineteen of NationsBank's corporate clients. On twelve occasions Svoboda traded in the securities of the following issuers while in possession of material nonpublic information: Theratx, Inc.; Eljer Industries, Inc.; MagneTek, Inc.; American Studios, Inc.; Bionaire, Inc.; NPC International; Younkers, Inc.; Worldway Corporation; Daniel Industries, Inc.; Merisel, Inc. (two events); and Acordia, Inc.
- On seventeen occasions Svoboda tipped Robles who then traded, either alone or in tandem with Svoboda, while in possession of material nonpublic information stolen from NationsBank and its customers, in the securities of the following issuers: Hi-Lo Automotive, Inc.; Credit Acceptance Corporation; Arbor Health Care Company; Regency Health Services, Inc.; Petsmart, Inc.; Transitional Hospitals Corporation; Varsity Spirit Corporation; Acordia, Inc.; Theratx, Inc.; Ivax Corporation; American Studios, Inc.; Bionaire, Inc.; NPC International; Younkers, Inc.; Worldway Corporation; Daniel Industries, Inc.; and Merisel, Inc.
- Svoboda frequently tipped Robles by telephone from his NationsBank office. On a number of occasions, Robles placed his illegal trades by computer even while speaking to Svoboda by telephone.
- In or about March 1997, NationsBank instituted a new trading policy that imposed additional procedures on Svoboda and other members of his department before they could trade securities. For instance, under the new policy Svoboda was required to obtain preapproval of securities transactions, and to report any new securities accounts to his supervisor and to the Compliance Department's Control Group. Following the institution of the new trading policy, Svoboda ceased using his own securities accounts for his illegal insider trading. However, Svoboda continued to tip Robles, who traded while in possession of material nonpublic information misappropriated from NationsBank during the period March through December 1997.
- In or about January 1999, after learning of the Commission's investigation, NationsBank commenced an internal inquiry concerning Svoboda's trading in the securities of companies that were NationsBank corporate clients. Svoboda refused to cooperate with NationsBank's internal inquiry, and was terminated from his position at NationsBank in or about March 1999.
The Commission's Complaint seeks to permanently enjoin Svoboda and
Robles from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 14(e) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14e-3 thereunder. The Complaint also seeks disgorgement of all ill-gotten gains, prejudgment interest, and civil monetary penalties.
In a related action, the United States Attorney for the Southern District of New York announced today the return of a twenty-count indictment charging Svoboda and Robles with conspiracy to commit securities fraud, securities fraud and fraud in connection with tender offers. The U.S. Attorney also announced today that arrest warrants were issued for Svoboda and Robles.
NationsBank (now known as Bank of America Corporation) cooperated with the Commission's investigation. The Commission also acknowledges the assistance of the New York Stock Exchange and the Chicago Board Options Exchange in the investigation of this matter.