U.S. Securities and Exchange Commission
Litigation Release No. 19527 / January 10, 2006
Securities and Exchange Commission v. Richard A. Svoboda and Michael A. Robles, Civil Action No. 00 Civ. 8557 (Mukasey, J.) (S.D. New York, decided January 3, 2006)
SEC Obtains Summary Judgment Against Insider Trading Defendants
On January 3, 2006, United States District Judge Michael B. Mukasey granted the Securities and Exchange Commission’s motion for summary judgment against insider trading defendants Richard A. Svoboda (Svoboda) and Michael A. Robles (Robles).
In granting the Commission’s motion for summary judgment Judge Mukasey made the following findings of fact, among others: In late 1994 or early 1995, Svoboda—a NationsBank credit policy officer at the time—devised a scheme with Robles to use NationsBank’s confidential information to trade for profit. Svoboda and Robles agreed that Svoboda would furnish Robles with inside information regarding NationsBank clients, including information about prospective acquisitions or negative earnings developments. Robles would then execute all of the securities trades and split the illegal profits evenly with Svoboda. Pursuant to their scheme, Robles traded in the securities of over 20 different issuers based on inside information. In addition, Svoboda secretly executed several trades using confidential inside information for his own profit through his own brokerage accounts and brokerage accounts held by his wife, despite the defendants’ agreement that Robles would do all of the trading.
Judge Mukasey concluded that both Svoboda and Robles violated Section 17(a) of the Securities Act of 1933, and Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. Judge Mukasey permanently enjoined both defendants from violating the foregoing antifraud provisions of the federal securities laws and ordered Svoboda to disgorge $219,100 in ill-gotten insider trading gains plus prejudgment interest of $186,911.11 and Robles to disgorge $1,039,252.80 in ill-gotten insider trading gains plus prejudgment interest of $757,821.53. Under the Court’s order Svoboda is jointly and severally liable for Robles’ disgorgement and prejudgment interest. Judge Mukasey in turn imposed civil money penalties of $150,000 on Svoboda and $250,000 on Robles.
The Commission filed its original complaint on November 7, 2000, the same day Svoboda and Robles were indicted in a related criminal case in the United States District Court for the Southern District of New York. The Commission’s case was put on hold pending the resolution of the related criminal action. In the criminal case, Svoboda pleaded guilty to conspiracy, securities fraud, and tender offer fraud, and was sentenced to be incarcerated for 12 months and one day, and to pay a $200,000 fine. After trial, a federal jury convicted Robles of conspiracy, securities fraud, and tender offer fraud. He was sentenced to be incarcerated for 41 months, and to pay a $300,000 fine. The Second Circuit Court of Appeals affirmed Robles’ conviction on October 24, 2003. See United States of America v. Richard A. Svoboda and Michael A. Robles, 347 F.3d 471 (2d Cir. 2003), cert. denied, Robles v. United States, 541 U.S. 1044 (2004). The Commission amended its complaint on March 22, 2005.