SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16937 / March 22, 2001
Securities and Exchange Commission v. Anthony Dong-Yin Shen, Srinivas Anumolu, Ronald W. Pinto, Deborah J. Breckenridge, and Dominick J. Savino, 01 Civ. 2438 (GBD) (S.D.N.Y.)
SEC CHARGES FIVE INDIVIDUALS WITH SECURITIES FRAUD
The Securities and Exchange Commission today filed an enforcement action charging five individuals with securities fraud. The SEC alleges that two former employees of New York Life Insurance Company, Inc. ("New York Life"), who traded mortgage-backed securities for the insurance company's proprietary accounts, obtained kickbacks and other improper gifts and gratuities from salespersons at three brokerage firms. In return, the New York Life traders directed securities transactions to the salespersons who, in turn, earned significant compensation on those transactions.
Named in the complaint are:
The Commission's complaint alleges that:
While they were New York Life employees, Shen and Anumolu each had authority to buy and sell mortgage-backed securities for certain of New York Life's proprietary accounts. Shen and Anumolu used this authority to obtain kickbacks and improper gifts from the three salespersons. Pinto, Breckenridge and Savino made the cash payments and provided the improper gifts and gratuities to ensure that Shen and/or Anumolu did business with them, often at prices that were favorable to the broker-dealer firms but detrimental to New York Life. The favorable pricing increased the salespersons' compensation.
The Arrangement with Pinto
During a 29-month period, from early 1997 to late 1999, Ron Pinto of Nomura gave Shen and Anumolu kickbacks, other cash payments, and improper gifts and gratuities. The three agreed that Pinto would secretly give Shen and Anumolu each 30 percent of Pinto's after-tax compensation on New York Life trades. In return, Shen and Anumolu agreed to provide Pinto a flow of New York Life securities transactions and favorable prices. Shen and Pinto often adjusted the prices on New York Life securities transactions to increase Pinto's compensation. Neither Shen, nor Anumolu, nor Pinto disclosed the kickback arrangement to New York Life; rather, together they made specific arrangements to conceal the scheme, which included:
In addition to kickbacks, Pinto gave Shen and Anumolu occasional cash and non-cash gifts, such as expensive electronics equipment and cash for gambling or adult entertainment.
From early 1997 through late 1999, Pinto gave Shen about $208,000 in kickbacks and other cash and at least $2,000 worth of improper non-cash gifts, in exchange for about 260 transactions involving several billions of dollars worth of securities. From the start of the arrangement until Anumolu left New York Life in January 1999, Pinto gave Anumolu about $203,000 in kickbacks and other cash and at least $2,500 worth of improper non-cash gifts. Pinto earned significant compensation on trades made pursuant to the arrangement.
The Arrangement with Breckenridge
Over a 15-month period in 1998 and 1999, Deborah Breckenridge of Suncoast paid Shen at least $50,800 in kickbacks and other cash payments, and arranged for him to receive at least $6,400 in improper gifts and gratuities. Under the scheme, Shen directed about 60 transactions to Breckenridge, and Breckenridge received significant compensation on these transactions.
Breckenridge initially gave Shen a series of gifts and cash payments in return for Shen's directing trades to her. Later, the two entered into an agreement under which Breckenridge paid Shen kickbacks according to a negotiated formula in exchange for an agreed level of New York Life business and favorable prices for Suncoast. Shen and Breckenridge attempted to conceal their scheme by arranging for payments to be made in cash, in cashier's checks and money orders, or through bank wires to an overseas account.
The Arrangement with Savino
Dominick Savino of Greenwich gave cash payments and improper gifts and gratuities to Shen in exchange for a flow of New York Life trades and, at times, favorable prices. The two discussed but did not agree on a kickback formula. In the spring of 1999, four of Savino's trades with Shen were conditioned on the following gifts or payments to Shen: car transportation; a stereo; adult entertainment; and reimbursement for a resort hotel bill for Shen and his girlfriend. Savino's other gifts to Shen included cash for gambling and tickets to sports and entertainment events.
The arrangement with Savino spanned about 12 months in 1998 and 1999. During that time, Savino gave Shen at least $3,400 in cash and at least $7,600 worth of non-cash gifts and gratuities, in exchange for about 63 New York Life transactions. Savino earned significant compensation on these transactions.
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The Commission alleges that Shen, Anumolu, Pinto, Breckenridge, and Savino each violated the antifraud provisions of the federal securities laws: Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5. The Commission also alleges that Pinto, Breckenridge, and Savino each aided and abetted Shen's violations of Section 10(b) of the Exchange Act and Rule 10b-5; and Pinto aided and abetted Anumolu's violations of Section 10(b) of the Exchange Act and Rule 10b-5. The Commission seeks permanent injunctions, disgorgement plus prejudgment interest, and civil penalties against all five defendants.
The United States Attorney for the Southern District of New York today announced criminal charges against Shen, Anumolu, Pinto and Breckenridge, arising from the same conduct charged in the Commission's complaint.
The Commission's investigation into these matters is continuing.http://www.sec.gov/litigation/litreleases/lr16937.htm