U.S. Securities and Exchange Commission
Litigation Release No. 18658 / April 7, 2004
SECURITIES AND EXCHANGE COMMISSION v. E. GARRETT BEWKES, JR. and ROBERT D. BEWKES, CV-04-2628(RMB) (S.D.N.Y.)
The Securities and Exchange Commission ("Commission") today filed a settled civil injunctive action in the United States District Court for the Southern District of New York against a former director of Interstate Bakeries Corporation ("IBC") and his son, a stockbroker, alleging insider trading in IBC stock. The Commission's complaint alleges that E. Garrett Bewkes, Jr. ("Garry Bewkes), while a director of IBC, received adverse material non-public information in advance of an IBC Board of Directors meeting and advised his son, Robert D. Bewkes ("Robert Bewkes"), a stockbroker, to sell his IBC stock. Approximately ten minutes after receiving that advice, Robert Bewkes sold over 16,000 shares of IBC owned by himself, his family, and a number of clients.
The Commission filed its complaint against:
The complaint alleges the following:
On January 29, 2003, a few days prior to a scheduled IBC Board meeting, Garry Bewkes received a highly confidential IBC report detailing the company's deteriorating financial condition. On February 3, 2003, the day before the Board meeting, Garry Bewkes telephoned Robert Bewkes, told him that IBC's business was "lousy" and advised him to sell any IBC stock that Robert Bewkes owned. Within ten minutes of that phone call, Robert Bewkes sold 16,230 shares of IBC stock owned by himself, family members, and his brokerage clients, at prices ranging from $14.30 to $14.42 per share. On February 11, 2003, IBC announced a reduction in its estimates for earnings during fiscal year 2003 from $1.30 per share to $0.90 to $0.95 per share. On that day, the price of IBC stock fell from $13.64 per share to $10.22 per share. By selling 16,230 shares of IBC stock on February 3, 2003, Robert Bewkes, his family, and his clients avoided losses of approximately $67,517.
The Commission charges Garry Bewkes and Robert Bewkes with violating Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Simultaneously with the filing of the Commission's complaint, Garry Bewkes and Robert Bewkes, without admitting or denying the allegations contained in the complaint, consented to the entry of final judgments enjoining them from future antifraud violations, ordering Garry Bewkes to pay a civil money penalty of $67,517, plus prejudgment interest, and ordering Robert Bewkes to pay $67,517 in disgorgement and a civil money penalty of $67,517, plus prejudgment interest. Robert Bewkes also consented to the entry of a Commission order barring him from association with any broker, dealer, or investment adviser, with a right to reapply after five years.
The Commission acknowledges the extensive assistance provided by New York Stock Exchange, Inc. in connection with this matter.