U.S. Securities and Exchange Commission
Litigation Release No. 18148 / May 20, 2003
Securities and Exchange Commission v. David F. Carvajal
03-CIV-3626 (JGK) (S.D.N.Y.)
SEC Sues Insider Who Traded Company Stock for His Parents Prior to Merger Announcement
The Securities and Exchange Commission announced today that it filed a Complaint against David F. Carvajal of Watchung, New Jersey, a former senior vice president at Hotjobs.com, Inc., for illegally trading in his parents' brokerage accounts on material, nonpublic information that Hotjobs.com was to be acquired by TMP Worldwide, Inc. before a public announcement in June 2001. The Commission alleged that Carvajal, who had been managing his parents' investments, learned of the merger negotiations in the course of his employment and capitalized on that information on behalf of his parents, Alonso and Beatriz Carvajal of Bay Shore, New York, who gained $10,491.52 in illicit profits.
The Commission also announced that it has reached a settlement with Carvajal. Carvajal has consented, without admitting or denying the allegations of the Commission's Complaint, to the entry of a final judgment that (1) permanently enjoins Carvajal from future violations of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, (2) orders Carvajal to disgorge the $10,491.52 in profits and to pay prejudgment interest in the sum of $923.35, and (3) orders Carvajal to pay a civil penalty of $20,983.04, a sum that is equal to twice his parents' ill-gotten gains. The Commission has submitted the proposed final consent judgment to the United States District Court for the Southern District of New York.
The Commission's Complaint alleges as follows:
On or about May 31, 2001, Carvajal learned from another high-ranking officer that Hotjobs.com was involved in confidential negotiations to be acquired by TMP Worldwide. On June 7, 2001, he used cash in a money market fund in his parents' joint brokerage account to buy 2,000 shares of Hotjobs.com shares in anticipation of a price increase at the time the transaction was announced. He also liquidated securities in his father's individual retirement account to purchase 120 shares of Hotjobs.com, also in anticipation of a price increase at the time of the public announcement. Carvajal's parents, who had given him trading authority in their accounts, did not learn of the purchases until they received their monthly account statements. On June 29, 2001, TMP Worldwide announced its plans to acquire Hotjobs.com, causing the stock price to jump approximately 19 percent. Carvajal sold the shares he bought for his parents and realized a profit of $10,491.52 in their two accounts. By these actions, Carvajal violated the antifraud provisions of the Exchange Act.
The Commission acknowledges the assistance of the National Association of Securities Dealers Regulation, Inc.
SEC Complaint in this matter