UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18096 / April 21, 2003
Securities and Exchange Commission v. David A. Zwick, Todd J. Cohen, and Terrence J. O'Donnell, 03 Civ. 2742 (JGK) (S.D.N.Y.)
SEC CHARGES FORMER SUNCOAST PRINCIPALS AND TRADER WITH SECURITIES FRAUD FOR PARTICIPATION IN KICKBACK SCHEME
David A. Zwick, Todd J. Cohen, and Terrence J. O'Donnell Charged
The Securities and Exchange Commission today filed a civil enforcement action charging David A. Zwick and Todd J. Cohen, two former principals of Suncoast Capital Group, Ltd., and Terrence J. O'Donnell, a former Suncoast trader, with participation in a fraudulent kickback scheme. Suncoast was a registered broker-dealer based in Fort Lauderdale, Florida.
The Commission alleges that Suncoast, through Deborah J. Breckenridge, a former Suncoast salesperson, received order flow and trades at favorable prices from Anthony Dong-Yin Shen, an employee of New York Life Insurance Company, Inc., in exchange for cash kickbacks and gifts. Shen was responsible for trading in New York Life's proprietary accounts.
The Commission's Complaint alleges that over a fifteen-month period in 1998 and 1999, Shen directed approximately forty trades totaling millions of dollars of securities to Suncoast at prices that were "off-market" or more favorable to Suncoast and detrimental to New York Life than were otherwise available in the market. In exchange for the trades, Shen was paid at least $50,800 in cash, and at least $6,400 in non-cash gifts. Suncoast realized gross profits in excess of $1,500,000 from the trades.
The Complaint further alleges that:
- Former Suncoast principal and compliance officer David A. Zwick procured, approved, and / or encouraged Breckenridge to give gifts and cash kickbacks to Shen - including kickbacks disguised as payments on losing bets -- and knowingly or recklessly approved fraudulent prices on Suncoast trades with New York Life.
- Former Suncoast principal and trading desk supervisor Todd J. Cohen encouraged Breckenridge to pay cash kickbacks to Shen disguised as payments on losing bets, and knowingly or recklessly approved fraudulent prices on Suncoast trades with New York Life.
- Former Suncoast trader Terrence J. O'Donnell encouraged Breckenridge to pay cash kickbacks to Shen disguised as payments on losing bets, and knowingly or recklessly executed most of the fraudulently priced New York Life trades.
- Zwick, Cohen, and O'Donnell each actively assisted Breckenridge in concealing the kickback scheme from New York Life.
The Commission charges that the Defendants each violated Section 17(a) of the Securities Act of 1933; and that each violated and aided and abetted violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder -- antifraud provisions of the federal securities laws. The Commission seeks permanent injunctions, disgorgement plus prejudgment interest, and civil penalties against all three Defendants.
The Commission acknowledges the assistance provided by the United States Attorney's Office for the Southern District of New York and the United States Postal Inspection Service in the investigation of this matter.
SEC Complaint in this matter