Former MDS Inc. IT Specialist and Spouse Made More Than $1 Million From Stolen Information About MDS's Impending Merger With Molecular Devices
FOR IMMEDIATE RELEASE
Washington, D.C., July 24, 2007 - The Securities and Exchange Commission today filed insider trading charges against a former MDS Inc. employee who allegedly stole confidential information about MDS's impending tender offer for the shares of Molecular Devices Corp. (Molecular) and, along with his wife, used that information to trade in Molecular securities ahead of the merger's public announcement. The Ontario Securities Commission also brought its own separate enforcement action today to address this conduct.
The SEC alleges that Shane Bashir Suman, 34, of Toronto, learned about secret merger negotiations through access he had to electronic data in his job as an information technology specialist at MDS, then gave that information to his wife, Monie Rahman, 36. In the days before the tender offer became publicly known, Suman and Rahman made just over $1 million by trading in the securities of Molecular.
"This is the latest in a growing list of SEC enforcement actions against corporate employees for trading on confidential information about upcoming mergers and acquisitions," said Linda Chatman Thomsen, Director of the Commission's Division of Enforcement. Investors deserve better, and the SEC will aggressively pursue those who abuse their positions and take advantage of their insider status."
Cheryl Scarboro, Associate Director of the SEC's Division of Enforcement, added, "The SEC appreciates the cooperation of the Ontario Securities Commission in this matter, and we will continue to cooperate with international regulators to chase down securities fraud when it crosses our borders."
The SEC's complaint, filed in the United States District Court for the Southern District of New York, alleges that Suman's job gave him access to a vast amount of secret corporate information. In particular, Suman was able to read the contents of confidential e-mails and other electronic data without detection. For example, the circumstances in which Suman was called to restore an electronic document on Jan. 23, 2007, the day before he and his wife started trading, suggested the code name for the MDS-Molecular merger and the sensitivity associated with that project. Later that day, Suman conducted Internet searches for both that code name and for "Molecular Devices". Just after running those searches, Suman called Rahman and spoke to her for 100 minutes, much longer than their phone records indicate they usually spoke.
Between Jan. 24 and Jan. 26, 2007, Suman and Rahman bought 12,000 Molecular shares and 900 Molecular call options. Brokerage account records indicate that a portion of the Molecular securities purchases were financed with a margin loan of approximately $200,000, and the couple previously did not have a position in Molecular securities. On Jan. 29, 2007, MDS and Molecular jointly announced the tender offer for Molecular's shares. The stock price immediately rose from almost $24 to roughly $35, making Rahman and Suman's trades worth more than $1 million.
Suman and Rahman are both Canadian citizens, though Rahman has lived in Logan, Utah, since June 2006. The Commission acknowledges the assistance of the OSC and the Chicago Board Options Exchange in this matter.
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For more information, contact:
John Reed Stark
Chief, SEC Office of Internet Enforcement
Additional materials: Litigation Release No. 20203