SEC Charges Attorney in Insider Trading Scheme
FOR IMMEDIATE RELEASE
Washington, D.C., Dec. 10, 2009 — The Securities and Exchange Commission today charged an additional attorney who worked at international law firm Ropes & Gray LLP in the agency's ongoing investigation into a $20 million insider trading ring involving Wall Street traders, lawyers, and hedge fund managers.
The SEC alleges that Brien P. Santarlas of Hoboken, N.J., tipped material nonpublic information about confidential proposed corporate acquisitions by firm clients to a network of others in exchange for kickbacks. Santarlas worked with another former attorney in Ropes & Gray's New York office, Arthur J. Cutillo, to access and misappropriate the confidential information. The SEC last month charged Cutillo and eight others with insider trading.
"Gatekeepers serve a critical role advising participants in the capital markets. When lawyers who have access to nonpublic information betray client confidences, it both tarnishes the profession and undermines investor faith in the marketplace," said Robert Khuzami, Director of the SEC's Division of Enforcement.
According to the SEC's complaint, filed in federal court in Manhattan, Cutillo and Santarlas tipped material, nonpublic information to Zvi Goffer, through Jason Goldfarb, concerning two proposed corporate acquisitions or bids in which Ropes & Gray represented certain acquirers:
- Acquisition of 3Com by Bain Capital LLC and Huawei Technologies announced on Sept. 28, 2007.
- Acquisition of Axcan by TPG LLP announced on Nov. 29, 2007.
The SEC alleges that the downstream tippees of Santarlas and Cutillo who traded on these two deals made approximately $20 million in illegal profits.
The SEC's complaint charges Santarlas with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and financial penalties.
The SEC thanks the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation for their cooperation and assistance with this matter.
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For more information about this enforcement action, contact:
Associate Director, SEC Division of Enforcement
Assistant Director, SEC Division of Enforcement