James E. Gansman, et al.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20603 / May 29, 2008
Securities and Exchange Commission v. James E. Gansman, et al., Civil Action No. 08-CV-4918 (PKC) (S.D.N.Y., May 29, 2008)
SEC Charges Former Partner of Big Four Accounting Firm and a Registered Securities Professional With Repeated Instances of Insider Trading
The Securities and Exchange Commission alleged in an insider trading case filed today that from at least the summer of 2006 through the fall of 2007, a partner at a Big Four accounting firm tipped his friend concerning the identities of at least seven different acquisition targets of clients who sought valuation services from the partner's firm in connection with those acquisitions. According to the complaint, knowing the confidential nature of this information, the friend used the information to trade in the securities of the target companies, and made recommendations to others who traded as well, resulting in total illegal trading profits of $596,000.
The complaint alleges that defendant James E. Gansman ("Gansman"), a lawyer and a former partner in Ernst & Young LLP's ("E&Y's") Transaction Advisory Services ("TAS") department in New York, learned of each of the pending acquisitions, and the identity of the target companies, through his work at E&Y advising the acquirers. According to the complaint, on numerous occasions, in breach of a duty of confidentiality he owed to E&Y and the firm's clients, Gansman misappropriated the information about pending acquisitions by tipping defendant Donna B. Murdoch ("Murdoch"). Murdoch was a registered securities professional and Managing Director of a Philadelphia-based broker-dealer and investment banking firm. The complaint alleges that Gansman provided Murdoch material, nonpublic information, including information concerning the identities of target companies and the existence of acquisition talks involving those companies.
According to the Complaint, Murdoch used the material, nonpublic information Gansman provided to her, by:
- trading in the securities of at least seven companies that were acquisition targets of E&Y's clients, realizing illegal profits totaling at least $392,035;
- tipping her father, defendant Gerald L. Brodsky ("Brodsky"), concerning one of the pending acquisitions-that of Freescale Semiconductor, Inc. ("Freescale"); Brodsky, in turn, traded on this information through a nominee account, realizing illegal profits totaling $63,400; and
- recommending trading in the securities of two of the target companies-Freescale and ATI Technologies, Inc.-to other persons, who likewise traded, for profits totaling an additional $140,760.
In all, the alleged illegal profits flowing from Gansman's tipping of Murdoch totaled at least $596,195.
The SEC complaint charges that each of the three defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder, and that defendants Gansman and Murdoch also violated Section 14(e) of the Exchange Act and Rule 14e-3 thereunder. The SEC seeks injunctions against future violations of the federal securities laws, disgorgement of unlawful trading profits with prejudgment interest, and civil monetary penalties.
The Commission acknowledges the assistance of the U.S. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, the Chicago Board of Options Exchange, the Options Regulatory Surveillance Authority, and the Financial Industry Regulatory Authority.
The Commission's investigation in this matter is ongoing.
