SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16815 \ December 4, 2000
SECURITIES AND EXCHANGE COMMISSION v. LESLYE R. SCHAEFER, ALLAN G. SCHAEFER, PAUL H. EPSTEIN, and RONALD ZWEIBAUM, United States District Court for the Southern District of New York, Civil Action No. 00CIV9156
FOUR INDIVIDUALS AGREE TO PAY $329,036 TO SETTLE SEC SUIT FOR INSIDER TRADING IN OPTIONS SECURITIES
The Securities and Exchange Commission announced today that it filed an insider trading action on Friday, December 1, 2000 against Leslye R. Schaefer, Allan G. Schaefer, Paul H. Epstein and Ronald Zweibaum for illegal tipping of confidential, material, nonpublic information and subsequent illegal insider trading in the securities of Scholastic Corporation, in advance of a February 20, 1997 announcement of negative earnings for Scholastic's third quarter.
The Commission's complaint alleges that on February 19, 1997 Leslye Schaefer, then a Senior Vice-President of Marketing at Scholastic Productions, Inc., a wholly-owned subsidiary of Scholastic, learned of the negative information before the Scholastic announcement and told her brother Allan Schaefer about the announcement. The SEC further alleges that Allan Schaefer tipped his friends, Paul Epstein and Ronald Zweibaum, about the negative information and his friends subsequently used that information to trade illegally in advance of Scholastic's negative announcement. The complaint charges that Paul Epstein purchased thirty April Scholastic put option contracts on February 19 and five March Scholastic put option contracts on February 20 and sold the contracts on February 24 and 25, realizing a profit of approximately $90,000. The complaint also charges that Ronald Zweibaum purchased ten February Scholastic put option contracts and ten March Scholastic put option contracts on February 19 and sold the contracts on February 21, realizing a profit of approximately $47,000. On February 21, immediately after Scholastic's negative announcement, the price of Scholastic's stock declined approximately 40 percent.
The Defendants have consented, without admitting or denying the allegations in the complaint, to the entry of a Final Judgment and Order of Permanent Injunction, which enjoins them from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, Leslye Schaefer has agreed to pay a penalty of $137,343 and more than $80,000 in disgorgement; Allan Schaefer has agreed to pay a civil penalty of $50,000; Paul Epstein has agreed to disgorge $10,000; and Ronald Zweibaum has agreed to disgorge $51,600 and to pay prejudgment and postjudgment interest on this amount. The judgments did not impose additional amounts as civil penalties on Epstein and Zweibaum based upon their demonstrated inability to pay.