U.S. SECURITIES & EXCHANGE COMMISSION
Litigation Release No. 19414 / October 5, 2005
Commission Awarded Default Judgment in Connection with Suspicious Purchases of InVision Technologies, Inc. Call Options
SEC to Recover over $3 Million in Proceeds from Orders Placed Through Foreign Accounts Just Ahead of Acquisition Announcement
Securities and Exchange Commission v. One or More Unknown Purchasers of Call Options for the Common Stock of InVision Technologies, Inc., 04 Civ. 02037 (WHP) (S.D.N.Y. filed March 16, 2004).
On September 27, 2005, the U.S. District Court for the Southern District of New York entered a final judgment by default in Securities and Exchange Commission v. One or More Unknown Purchasers of Call Options for the Common Stock of InVision Technologies, Inc., 04 Civ. 02037 (WHP) (S.D.N.Y. filed March 16, 2004), permanently restraining and enjoining one or more unknown purchasers of call options for the common stock of InVision Technologies, Inc. (the “Defendant Unknown Purchasers”) from violating Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. The District Court further ordered that the Defendant Unknown Purchasers are liable for disgorgement of $2,699,287.57, representing profits gained as a result of the conduct alleged in the Commission’s Complaint in this litigation, together with prejudgment interest in the amount of $93,482.00, for a total of $2,792,769.57. Finally, the Court ordered the Defendant Unknown Purchasers to pay a civil penalty in the amount of $377,786.50, pursuant to Section 21A of the Exchange Act. Accordingly, the Defendant Unknown Purchasers are liable for an aggregate amount of $3,170,556.07.
The Commission’s Complaint alleged that the Defendant Unknown Purchasers engaged in illegal insider trading in call options of InVision Technologies, Inc. (“InVision”) in the days immediately prior to a March 15, 2004, joint announcement by General Electric Company (“GE”) and InVision, a manufacturer of explosive-detection systems, that GE had agreed to acquire InVision in an all-cash transaction valued at approximately $900 million, or $50 per share of InVision common stock.
Based on the Commission’s applications, the District Court initially froze $3,077,074.07 of suspicious funds through Temporary Restraining Orders issued March 17 and March 24, 2004, and an Order of Preliminary Injunction issued on April 2, 2004. The proceeds were frozen in accounts of UBS Securities, LLC, a U.S. brokerage firm, and resulted from InVision call option purchase orders that came to UBS Securities through certain of its Swiss affiliates. In addition to the freeze provisions, the injunctive order issued by the District Court required those who purchased the InVision call options through the UBS Securities accounts to identify themselves and prohibited the defendants from destroying documents. To date, no defendant has made an appearance in this action or come forward to contact the Commission staff or the District Court.