UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16869 / January 23, 2001
SECURITIES AND EXCHANGE COMMISSION v. ALAN MYLES DORNFELD
No. 01-CIV-0576 (JSR) (S.D.N.Y.) (filed January 23, 2001)
SEC SUES NEW JERSEY ACCOUNTANT FOR INSIDER TRADING IN THE SBC-SNET MERGER; DEFENDANT SETTLES BY PAYING MORE THAN $350,000
The Securities and Exchange Commission today filed an insider trading action in the U.S. District Court for the Southern District of New York against New Jersey accountant Alan Myles Dornfeld in connection with his purchases of Southern New England Telecommunications Corp. ("SNET") common stock in advance of the January 5, 1998 public announcement of a merger between SBC Communications, Inc. and SNET. The SEC alleges that Dornfeld violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The complaint alleges that on December 22, 1997, Dornfeld received a call from a senior executive of SNET with knowledge of the proposed merger. Dornfeld was the long-time financial advisor to the SNET executive. Dornfeld was asked to perform calculations to determine the possible impact of an increase in SNET's stock price on the executive's financial situation. From their conversation, Dornfeld discerned that a combination involving SNET was likely to occur in the very near future, and that the price of SNET was likely to increase significantly. The SEC alleges that Dornfeld misappropriated that information when, on December 22 and December 31, 1997, he bought a total of 12,000 shares of SNET stock at a cost of $588,625. Dornfeld also recommended SNET to a relative. Based on Dornfeld's recommendation, his relative's spouse purchased 3,000 shares of SNET for $144,000. On January 5, 1998, the day of the merger announcement, SNET's stock price increased 22%. Dornfeld sold all of his SNET shares and realized profits of $132,937.50. His relative's spouse had profits of $37,500.
Simultaneously with the filing of the complaint, the defendant agreed to settle the civil action by consenting, without admitting or denying the allegations in the complaint, to the entry of an order permanently enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and ordering him to pay disgorgement, interest, and penalties totaling $350,685.44.
The Commission acknowledges the assistance of the New York Stock Exchange in this matter.