U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19605 / March 9, 2006
Securities and Exchange Commission v. Scott R. Sacane, et al., Civil Action No. 3:05cv1575-SRU (D. Conn., filed October 12, 2005)
COURT ENTERS FINAL JUDGMENT BY CONSENT AGAINST CHIEF OPERATING OFFICER OF CONNECTICUT HEDGE FUND IN SECURITIES FRAUD SCHEMES
The Commission announced today that on February 28, 2006, the Honorable Stefan R. Underhill of the United States District Court for the District of Connecticut entered a final judgment by consent against J. Douglas Schmidt in connection with a civil enforcement action the Commission filed against Schmidt, Scott R. Sacane, Durus Capital Management, LLC, and Durus Capital Management (N.A.), LLC, on October 12, 2005. The final judgment permanently enjoins Schmidt from violating various provisions of the federal securities laws and orders him to pay a total of $185,591 in disgorgement, prejudgment interest, and penalties. In related administrative proceedings, Schmidt consented to an Order issued by the Commission on February 28, 2006, that bars him from association with any investment adviser, with the right to reapply after five years.
The Commission's complaint in this matter charged the defendants for their involvement during 2002 and 2003 in fraudulent schemes concerning the purchase and sale of the common stock of two biotechnology companies: Esperion Therapeutics, Inc. and Aksys Ltd. The complaint alleged that the defendants manipulated the price of both Esperion and Aksys stock by making regular and substantial purchases of both stocks through the hedge funds that they managed and concealing these purchases by failing to file various forms and schedules with the Commission as required by the federal securities laws and making false filings with the Commission. The Commission's action remains pending against the other defendants.
Without admitting or denying the allegations in the Commission's complaint, Schmidt consented to the entry of the judgment enjoining him from violating Sections 10(b), 13(d), 13(f), and 13(g) of the Securities Exchange Act of 1934 and Rules 10b-5, 13d-1, 13d-2, and 13f-1 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The judgment further orders Schmidt to pay disgorgement of $110,000, representing profits gained as a result of the conduct alleged in the complaint, together with prejudgment interest thereon in the amount of $10,591, and a civil penalty of $65,000.
In related criminal proceedings, the United States Attorney's Office for the District of Connecticut announced on March 6, 2006, that Schmidt was sentenced to one year of probation and a fine in the amount of $10,000 in connection with Schmidt's October 12, 2006 guilty plea to one count of aiding and abetting the filing of false SEC statements.
For further information, please see: Litigation Release No. 19424 (October 12, 2005); Investment Advisers Act of 1940 Release No. 2491 (February 28, 2006).