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U.S. Securities and Exchange Commission


Litigation Release No. 18805 / July 28, 2004

SECURITIES AND EXCHANGE COMMISSION v. DONNA YUN & JERRY BURCH, Case Number 6:99-CV-117-ORL-22KRS (United States District Court for the Middle District of Florida, Orlando Division)


The Securities and Exchange Commission announced today that on July 22, 2004, a federal jury found two Orlando-area real estate agents, Donna Yun of Longwood, Florida, and Jerry Burch of Heathrow, Florida, liable for illegal insider trading in options on the stock of Scholastic Corporation. The jury returned its verdict after a three-day retrial presided over by U.S. District Judge Anne C. Conway.

In its complaint, filed on February 3, 1999, the Commission alleged that on or before Tuesday, February 18, 1997, Yun's husband, then an officer of Scholastic, told Yun in confidence that Scholastic would announce that it expected a loss for the quarter ending February 28, 1997, and that the price of Scholastic common stock would likely decline as a result. Yun breached her duty of confidence and disclosed the inside information at a cocktail party that Tuesday evening to her friend and colleague of six years, Jerry Burch. During the following two days, Burch purchased 130 Scholastic put option contracts, including 10 February contracts that expired within 48 hours, that would rise in value if Scholastic's stock price went down. After Scholastic released its negative earnings announcement on February 20, 1997, Scholastic's common stock price dropped approximately 40 percent, from $61.50 to $36.75. On February 21, Burch exercised his options for a net profit of approximately $269,000 - a 1300 percent return on his two-day investment.

The case had previously been tried in December 2000. In the first trial, the jury also found both Yun and Burch liable for insider trading. However, on appeal, the United States Court of Appeals for the Eleventh Circuit vacated the district court's judgment based on prejudicial error in the district court's jury instructions. The appeals court remanded the case for a second trial.

At the second trial, the jury determined that Yun and Burch had violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. At a later date, Judge Conway will determine the appropriate relief against Yun and Burch, which may include permanent injunctions, disgorgement of the ill-gotten gains, and civil penalties.

Related Litigation Releases:

No. 17360, February 12, 2002
No. 16840, December 21, 2000
No. 16052, February 3, 1999


Modified: 08/06/2004