U.S. Securities and Exchange Commission
Litigation Release No. 18627 / March 17, 2004
Securities and Exchange Commission v. One or More Unknown Purchasers of Call Options for the Common Stock of InVision Technologies, Inc.,
4 Civ. 02037 (WHP) (S.D.N.Y.)(March 16, 2004)
Court Freezes More Than $2 Million of Assets Linked to Suspicious Purchases of Call Options of InVision Technology Inc.
SEC, In Emergency Federal Court Action, Obtains Order Freezing Call Options of InVision Technologies and Proceeds From Sales of InVision Call Options Purchased Through Foreign Banks Days Before $900 Million Merger Announcement
On March 16, 2004 the U.S. District Court for the Southern District of New York entered a Temporary Restraining Order freezing the accounts of certain Unknown Purchasers of the Call Options of InVision Technologies (the "Unknown Purchasers") prohibiting the Unknown Purchasers from obtaining the options or the proceeds from the sale of the options. The Commission alleges that the Unknown Purchasers engaged in illegal insider trading in the last six business days before the March 15, 2004 announcement that GE Infrastructure, a subsidiary of General Electric Company, intended to acquire InVision, a manufacturer of explosive-detection systems, for $50 per share in cash for all outstanding InVision shares.
The Commission's Complaint also alleges:
During the period from March 6, 2004 through March 12, 2004, the Unknown Purchasers purchased a total of 4575 out-of-the-money March 45 and April 45 call options for the shares of InVision. The Unknown Purchasers placed their purchase orders through UBS affiliates in Zurich and London and through UPB Private Bank, Geneva which, in turn, forwarded the purchase orders to UBS Securities LLC, a broker-dealer headquartered in Stamford, Connecticut, for execution.
The transaction was announced before the opening of the market on Monday March 15, 2004. When InVision opened for trading on March 15, the price of InVision's common stock increased by nearly 20% from the Friday closing price, opening at approximately $49.30 per share, an increase of over $8 per share from its closing price on Friday, March 12. As a result, the value of the Unknown Purchasers call options increased by about $1.7 million.
Also on March 15, the Unknown Purchasers sold most of the call options, realizing profits of about $1.27 million. Including the unrealized profits from the call options not sold, the total realized and unrealized profits are about $1.7 million.
In the pending lawsuit, the Commission alleges that the unknown defendants engaged in illegal insider trading in violation of Section 10(b) of the Securities Exchange Act and Rule 10b-5. The complaint seeks permanent injunctive relief, the disgorgement of all illegal profits, and the imposition of civil monetary penalties.
The Court's Temporary Restraining Order prohibits the removal of the InVision call options, or the proceeds, from the sales of the InVision call options from the U.S. brokerage accounts or other entities in which the securities or funds may be. In addition, the Order requires the Unknown Purchasers to identify themselves, imposes an expedited discovery schedule and prohibits the defendants from destroying documents.
The Commission acknowledges the assistance of the International Stock Exchange in this matter.
SEC Complaint in this matter