Author Archives: David Weintraub

The SEC charged Robert W. Kwok, Yahoo’s former Senior Director of Business Management, and Reema D. Shah, a former mutual fund manager at a subsidiary of Ameriprise Financial Inc., with insider trading.  The SEC alleged that Kwok provided Shah with information about Yahoo, including whether Yahoo’s quarterly financial performance was expected to be in line with market estimates, and confirming a partnership between Yahoo and Microsoft Corporation.  In turn, Shah provided Kwok with information she learned through the course of her work, and he used it to help make personal investment decisions.

In January 2008, Shah and Kwok began discussing their respective lines of work.  Shortly thereafter, Shah told Kwok that she had learned of the acquisition of Moldflow Corporation by Autodesk, Inc.  Based on this confidential non-public information, Kwok purchased 1,500 shares of Moldflow in his personal account.  Autodesk and Moldflow announced the acquisition on May 1, preceding Moldflow’s 11% stock increase.  Kwok sold his position for a profit of $4,754.  The SEC alleged that in July 2009, Shah reached out to Kwok seeking material non-public information about a reported partnership between Yahoo and Microsoft.  Kwok breached his fiduciary duty to Yahoo when he tipped Shah about Yahoo and Microsoft’s announcement.   Consequently, Shah prompted certain funds she helped manage to purchase 700,300 shares of Yahoo.  The shares were sold twelve days later, for a profit of approximately $389,000.

The SEC stated, “[w]hen corporate executives and mutual fund professionals misuse their access to confidential information, they undermine the integrity of our markets and violate the trust placed in them by investors.”  In a parallel criminal case, the U.S. Attorney’s Office for the Southern District of New York filed criminal charges against Kwok and Shah.  Kwok has pled guilty to conspiracy to commit securities fraud, and Shah has pled guilty to both a primary and conspiracy charges.

The Securities and Exchange Commission (“SEC”) charged Seattle-based financial advisor, Mark Spangler, and his firm with defrauding clients by secretly investing $47.7 million in two risky start-up companies he co-founded.  In 1990, Spangler founded The Spangler Group (“TSG”), an advisory firm that at one point managed approximately $100 million in assets with more than 50 clients.  Spangler founded the firm, served as its president, and made all of its investment decisions.

According to the SEC, between 1998 and 2011, Spangler raised more than $56 million for the private investment funds he managed.  Unbeknownst to his clients, beginning in 2003, Spangler funneled money from the private funds into two companies in which he had significant interest.  Spangler liquidated assets in the private funds and used the proceeds to invest in TeraHop and Tamarac, two of his own start-up companies.

The SEC alleged that by the summer of 2011, Spangler had invested almost $42 million in TeraHop and over $6 million in Tamarac.  These investments were inconsistent with his clients’ investment objectives.  Spangler failed to disclose to the funds’ clients that he had diverted 90% of the fund’s money into two illiquid, private companies.  Spangler did not seek his clients’ approval or consent to change their investment strategies.  Furthermore, TSG had received $830,000 in fees from TeraHop and Tamarac as “financial and operation support.”  These fees were charged on top of the advisory fees paid by TSG’s clients for Spangler’s management of their assets.

The SEC stated, “Spangler assured his clients he was investing them in publicly-traded equities and bonds, not risky start-ups in which he had a personal interest,” and “[f]or an investment adviser to put his self-interest above the best interests of his clients is a disturbing abuse of trust.”   According to the SEC’s complaint, when Spangler filed for personal and business receivership in June 2011, his clients learned the truth about how he had invested their money.  In a parallel action, the U.S. Attorney’s Office for the Western District of Washington announced it was filing criminal charges against Spangler.

The Securities and Exchange Commission (“SEC”) charged Martin Currie, Inc. (“MCI”) and Martin Currie Investment Management Ltd. (“MCIM”) with fraudulently using one of its U.S. fund clients to rescue another client.  MCI and MCIM are investment adviser firms headquartered in Scotland.  According to the SEC complaint, MCI and MCIM managed many accounts including the China Fund, Inc. (“China Fund”) and the Martin Currie China Hedge Fund L.P. (“Hedge Fund”) side by side under the direction of a single portfolio management team based in Shanghai, China.

According to the SEC, by November 2008 the Hedge Fund had invested $17 million in a Chinese printer cartridge recycling company (“Jackin.”)  As the global financial crisis deepened, the Hedge Fund and Jackin started to developed liquidity issues.  In April 2009, MCI and MCIM fraudulently caused the China Fund to make a $22.8 million convertible bond investment in a Jackin subsidiary, Ugent Holdings Ltd.  Ugent, in turn, used the proceeds to redeem $10 million of the Hedge Fund’s bonds and used the remaining $12.8 million to keep Jackin alive.

The SEC alleged that MCI and MCIM officials were aware that the China Fund’s involvement presented a direct conflict of interest and may have been unlawful.  MCI and MCIM advised the China Fund’s board to value the convertible bonds at cost while failing to disclose information that was relevant for the board to fairly value the bonds.

MCI and MCIM agreed to pay a total of nearly $14 million to the SEC and the United Kingdom’s Financial Services Authority (FSA.)

The Securities and Exchange Commission (“SEC”) charged David Blech and his wife with running a complex market manipulation scheme involving biopharmaceutical stocks.  According to the SEC, at various points in 2007 and 2008, Blech, who in December 2000 was permanently barred from the securities industry for fraud, manipulated the stocks of Pluristem Therapeutics Inc. and Intellect Neurosciences Inc.

The SEC alleged that Blech had control of over 50 brokerage accounts in the names of family members, friends, and a private religious institution.  Blech used the accounts to engage in a complex scheme in which he bought and sold significant amounts of stock in two biopharmaceutical companies.  Blech allegedly established the illusion of an active and liquid market, in otherwise thinly traded securities, thus inflating their stock prices.  Blech also acted as an unregistered broker-dealer by soliciting investors to invest in various companies, including the two biopharmaceutical companies.

The SEC stated that “Blech hoped to avoid scrutiny by devising a complex scheme using accounts ostensibly belonging to family members and friends to place highly manipulative trades through different broker-dealers.  This enforcement action demonstrates the SEC’s ability to dissect such trades and lay bare their true economic substance.”  In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced it was filing criminal charges against Blech.

The Securities and Exchange Commission (“SEC”) charged Mohammed Mark Amin, a Hollywood movie producer, and five of his close acquaintances, with insider trading in DuPont Fabros Technology (“DFT”). DFT owns, develops, operates and manages facilities that maintain computer servers for companies such as Yahoo!, Facebook, Microsoft, and Google. 

The SEC alleged that Mr. Amin, who served on DFT’s board of directors since 2007, along with two of his relatives and three friends, used material non-public information to purchase and ultimately illegally profit in DFT securities. As a member of the board of directors, Mr. Amin attended a special board meeting on December 22, 2008 and participated in a telephone conference call with DFT’s CEO, on January 7, 2009. During these meetings, Mr. Amin acquired inside information.

According to the SEC’s complaint, after his telephone conference with DFT’s CEO, Mr. Amin tipped his cousin and asked him to purchase $100,000.00 of DFT shares. Between January 8 and February 10, 2009, Mr. Amin and his acquaintances purchased 405,150 shares of DFT shares, generating more than $618,000.00 in illicit profits. On February 11, 2009, DFT released its 2008 earnings report, disclosing the previously non-public information, causing DFT’s stock to increase 36%.

The SEC said, “Mark Amin disregarded his board responsibilities and betrayed shareholders at DuPont Fabros in favor of giving his circle of relatives and friends an inside scoop to trade on nonpublic information.”  Mr. Mark Amin resigned from DFT’s board of directors in February 2011. Without admitting or denying the allegations, the Defendants agreed to collectively pay nearly $2 million in disgorgement, interest and penalties.

The Securities and Exchange Commission (“SEC”) charged Angela Milliard, a former paralegal for Semitool, Inc., with trading on confidential information regarding the acquisition of Semitool by Applied Materials.

According to the SEC, in October 2009 Ms. Milliard learned through her employment at Semitol, of Applied Materials’ tender order to acquire Semitool.  The tender offer of $11 per share presented a significant premium above Semitool’s then trading price of $7.83.  This information was material and confidential.

The SEC’s complaint alleged that Ms. Miller, in an effort to conceal her trades, wired money to her boyfriend’s brokerage account and used it to secretly buy Semitool stock.   Between October 28 and November 16, 2009, Ms. Milliard purchased 5,700 Semitool shares in her and her boyfriend’s brokerage accounts.  At the same time, she tipped confidential information about the merger to her father.  Her father and other family members purchased 14,800 Semitool shares.  On the morning of November 17, 2009, after Applied Materials announced its acquisition, Ms. Milliard, her father and certain family members sold their shares for profits of $68,160.11.

The SEC stated, “Angela Milliard exploited her access to confidential merger and acquisition information to illicitly enrich herself and her family.”  And “[a]s a member of a legal department entrusted with sensitive deal documents, she had a duty to safeguard that information, not trade on it.”

Ms. Milliard and her father agreed to settle the SEC’s charges by paying $175,367.01 in disgorgement, interest and penalties.