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Thomas M. Piccone
Local Counsel:
UNITED STATES DISTRICT COURT
SUMMARY 1. On two separate occasions in 2000, Jeffrey Kramer obtained material nonpublic information while working in the trust division of a national bank, and misused that information to earn illegal profits trading stock. In each instance, he also conveyed the information to his father John Kramer and his friend Richard Pulling, and Richard Pulling then conveyed the information to his brother Keith Pulling. And each time, John Kramer, Richard Pulling and Keith Pulling made improper use of the nonpublic or "inside" information to obtain illegal trading profits. Collectively, the defendants made approximately $619,831 in illegal trading profits. 2. First, by no later than June 14, 2000, Jeffrey Kramer learned that a customer of the bank he worked for was forming a trust for the purpose of acquiring Justin Industries, Inc. ("Justin"). Between June 14 and June 19, 2000, Jeffrey Kramer, John Kramer, Richard Pulling, and Keith Pulling purchased 40,750 shares of Justin stock. On June 20, 2000, Justin announced that it had agreed to a cash tender offer made by another company, and the price of Justin stock rose in response to the announcement. Following the June 20, 2000 announcement, the defendants sold the Justin stock they had purchased for total illicit profits of $185,650. 3. Then, by August 7, 2000, Jeffrey Kramer learned that another trust was being formed for the purpose of a merger involving Republic Group, Inc. ("Republic"). Between August 8 and August 11, 2000, Jeffrey Kramer, John Kramer, Richard Pulling and Keith Pulling purchased 172,900 shares of Republic stock. On August 11, 2000, Republic announced that it had entered into a merger agreement with the trust. Again, the announcement, as well as the purchases by the defendants, caused a substantial increase in the price of Republic stock. The defendants then sold the Republic stock they had purchased for total illicit profits of $434,181. DEFENDANTS 4. John S. Kramer ("John Kramer") resides in Skillman, New Jersey and in Greensboro, Vermont. He is the father of Jeffrey Kramer and Elizabeth Kramer Whitney. John Kramer graduated from Columbia Law School in 1954 and worked as an attorney emphasizing corporate and securities law until 1982. From 1982 until 1987, John Kramer was president of Investment Advisors of Princeton, Inc., a firm registered with the Commission as an investment advisor until 1987. John Kramer is currently retired but actively trades stocks for himself, his family members, and one client, relief defendant Lucien Yokana. 5. W. Jeffrey Kramer ("Jeffrey Kramer") resides in Glastonbury, Connecticut. He was employed as the vice president and manager of First Union National Bank's Administrative Trust Division in Hartford, Connecticut. 6. Richard K. Pulling, Jr. ("Richard Pulling") resides in Skillman, New Jersey. He is a vice president of sales for Arrowsight, Inc., a privately owned video equipment company located in New York, New York. Richard Pulling has been a close friend of Jeffrey Kramer since 1985. 7. Keith E. C. Pulling ("Keith Pulling") resides in Oak Ridge, North Carolina and is Richard Pulling's brother. Keith Pulling is the general manager for Essilor Labs of America, a manufacturer of optical lenses located in Greensboro, North Carolina. RELIEF DEFENDANTS 8. Nancy Kramer is John Kramer's wife and resides with him in Skillman, New Jersey and in Greensboro, Vermont. She is the mother of Jeffrey Kramer and Elizabeth Kramer Whitney. 9. Elizabeth Kramer Whitney resides in Locust Valley, New York with her husband, Robert Whitney. She is the daughter of John and Nancy Kramer and the sister of Jeffrey Kramer. 10. Northeast Investment Properties ("Northeast") is a Vermont general partnership formed in 1982 to invest in securities and real estate. John, Nancy and Jeffrey Kramer are the general partners. John and Nancy Kramer each own a 47.15 percent interest. Jeffrey Kramer owns the remaining 5.7 percent but, according to John Kramer, is not currently entitled to any profits. John Kramer is the managing general partner. 11. Vermont Capital Investors ("Vermont Capital") is a Vermont general partnership formed in 1989 to invest in securities and real estate. John Kramer and Nancy Kramer are the general partners and each owns a 50 percent interest. John Kramer is the managing general partner. 12. Lucien D. Yokana resides in Princeton, New Jersey. He is the chairman of Merritt Davis Corporation, a manufacturer of equipment used for cable and fiber optic applications located in Hamden, Connecticut. In July 2000, Yokana hired John Kramer, through Northeast, as an investment adviser to trade in his brokerage accounts and agreed to pay Northeast 20 percent of any profits made on his behalf. GLOSSARY OF TERMS 13. "August 11, 2000 announcement" refers to the announcement, after the close of trading on August 11, 2000, that Republic had entered into a merger agreement with Premier whereby Premier agreed to pay $19 per share for all outstanding Republic shares. 14. "Baseline" refers to Baseline Statutory Trust, a trust that was formed by ICA for the purpose of acquiring Justin. 15. "Berkshire" refers to Berkshire Hathaway, Inc. Justin agreed to a cash tender offer made by Berkshire of $22 per share for all Justin shares outstanding. 16. "Commission" refers to the United States Securities and Exchange Commission. 17. "Defendants" refers to defendants Jeffrey Kramer, John Kramer, Richard Pulling and Keith Pulling. 18. "Exchange Act" refers to the Securities and Exchange Act of 1934, 15 U.S.C. §78a et seq. 19. "Fiduciary" refers to one in whom another places trust or confidence, or to a relationship of trust or confidence. 20. "First Union" refers to First Union National Bank. Jeffrey Kramer was employed as a trust officer by First Union. 21. "ICA" refers to Integrated Capital Associates, a customer of First Union. 22. "June 20, 2000 announcement" refers to the announcement, before the start of trading on June 20, 2000, that Justin had agreed to a cash tender offer made by Berkshire of $22 per share for all Justin shares outstanding. 23. "Justin" refers to Justin Industries, Inc., a Texas corporation with its principal offices in Fort Worth, Texas. At all times relevant to this Complaint, Justin manufactured and sold bricks and footwear products. Justin's common stock was registered with the Commission pursuant to Section 12(g) of the Exchange Act and was quoted on the NASDAQ National Market System. Justin common stock ceased trading on August 2, 2000 following completion of the tender offer by Berkshire. 24. "Merger" refers to a transaction that effectively results in the combining of two separate businesses. Republic entered into a merger agreement with Premier. 25. "Premier" refers to Premier Construction Products Statutory Trust, a trust that was formed by ICA for the purpose of acquiring Republic. 26. "Relief Defendants" refers to defendants Nancy Kramer, Elizabeth Kramer Whitney, Lucien D. Yokana, Northeast Investment Properties and Vermont Capital Investors. 27. "Republic" refers to Republic Group, Inc., a Delaware corporation headquartered in Hutchinson, Kansas. At all times relevant to this Complaint, Republic manufactured and sold recycled paperboard and gypsum wallboard. Its common stock was registered with the Commission pursuant to Section 12(b) of the Exchange Act and traded on the New York Stock Exchange. Republic common stock ceased trading on November 9, 2000 as a result of the Premiere merger. 28. "Tender Offer" refers to a corporate takeover technique where a person or entity announces that it will pay a specific price for the shares of a company it wishes to acquire or control; the person or entity offers to pay the price for any shares of the stock that are offered or "tendered" to it. 29. "Trustee" refers to one who holds property "in trust" for the benefit of another (the beneficiary), who must carry out specific duties with regard to the property, and who owes a fiduciary duty to the beneficiary. JURISDICTION AND VENUE 30. The Commission brings this action pursuant to the authority conferred upon it by Sections 21(d), 21(e) and 21A(a) of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e) and 78u-1(a)] to restrain and enjoin the Defendants permanently from engaging in the acts, practices and courses of business alleged in this Complaint, for imposition of civil penalties against the Defendants, for disgorgement of illegal trading profits by the Defendants and Relief Defendants, and for other relief. 31. This Court has jurisdiction over this action pursuant to Sections 21(e), 21A(a) and 27 of the Exchange Act [15 U.S.C. §§ 78u(e), 78u-1(a) and 78aa]. 32. Defendants, directly and indirectly, have made use of the means or instrumentalities of interstate commerce, of the mails, or of the facilities of a national securities exchange, in connection with the transactions, acts, practices, and courses of business alleged herein, certain of which have occurred in the District of New Jersey. 33. Venue lies in this Court pursuant to Sections 27 and 21A(d)(4) of the Exchange Act [15 U.S.C. §§ 78aa and 78u-1(d)(4)] because some of the Defendants and Relief Defendants, including John Kramer, Richard Pulling, Nancy Kramer, and Lucien Yokana, reside and transact business in the District of New Jersey, and certain of the acts, transactions, practices, and courses of business constituting the violations of law alleged herein occurred within the District of New Jersey. GENERAL ALLEGATIONS A. Background and Employment of Jeffrey Kramer 34. Jeffrey Kramer was employed by First Union from 1994 to 2001. 35. From January 1999 until June 2001, Jeffrey Kramer was the vice president and manager of First Union's Administrative Trust Division in Hartford, Connecticut. 36. In June 2001, following an investigation relating to Justin and Republic, First Union terminated Jeffrey Kramer's employment. 37. Jeffrey Kramer routinely handled confidential and nonpublic information concerning First Union's clients. 38. Jeffrey Kramer was informed of First Union's policies and procedures regarding the improper use of confidential nonpublic information, the fiduciary nature of First Union's role as a trustee, and the fiduciary nature of his role as a trust officer. Among other things, Jeffrey Kramer received First Union's Employee Handbook. The handbook contained First Union policies and procedures regarding confidential information. It stated that confidential and inside information concerning "proposals or agreements involving a merger" was never to be used for personal gain or given to persons outside of First Union. 39. As a trust officer for First Union, Jeffrey Kramer, among other things, worked on behalf of First Union with a Hartford, Connecticut law firm, Bingham Dana LLP ("Bingham"), and its client, ICA, to create statutory trusts for mergers and acquisitions. 40. ICA hired Bingham to form trusts to purchase target companies, and hired First Union to serve as trustee for the trusts. From 1999 through 2001, First Union was involved in the creation of four statutory trusts for ICA involving the acquisition of public companies. 41. ICA hired Bingham to form the Baseline and Premier trusts for the purpose of acquiring Justin and Republic, respectively. In addition, ICA hired First Union to be the trustee for each of the trusts. 42. Jeffrey Kramer was the main First Union contact for both the Justin and Republic transactions. 43. As to both the Justin and Republic transactions, ICA's attorneys told Jeffrey Kramer about the nature of the transactions and identified the parties involved. B. Justin Transaction 1. The Market for Justin Shares 44. In the week preceding June 20, 2000, Justin traded, on average, for approximately $17.087 per share on daily volume of roughly 68,780 shares. 45. On June 20, 2000, before the start of trading, Justin announced that it had agreed to a cash tender offer made by Berkshire of $22 per share for all Justin shares outstanding. That day, Justin opened and closed at $21.875 per share on volume of 1,449,900 shares. 46. Prior to the June 20, 2000 announcement, there was no public information in 2000 suggesting that Justin was interested in mergers or other business combinations. 47. On July 26, 2000, each outstanding share of Justin common stock was canceled and converted into the right to receive $22 per share in cash. 2. Jeffrey Kramer Purchased Justin Stock Based On Confidential Nonpublic Information 48. On or about Friday, June 9, 2000, ICA informed Bingham, its attorneys, that it planned to attempt to acquire or cause an acquisition of a company. As a result, ICA's attorneys began preparing to form a statutory trust. ICA did not identify the target company at that time. 49. On June 9, 2000, ICA's attorneys instructed Jeffrey Kramer to sign a form reserving the name Baseline as a statutory trust. Jeffrey Kramer signed the form as instructed, and the form was filed later that day in the Hartford office of the Connecticut Secretary of State. 50. By Tuesday, June 13, 2000, ICA's attorneys had drafted a certificate of trust for Baseline, and a trust agreement between Baseline and First Union, the trustee. The draft trust agreement made clear that Baseline's purpose was to acquire Justin. It also had a signature line for Jeffrey Kramer to sign on behalf of First Union as trustee of the trust. 51. No later than Wednesday, June 14, 2000, ICA's attorneys told Jeffrey Kramer that ICA, through Baseline, intended to acquire or cause an acquisition of Justin. 52. On June 14, 2000, the Certificate of Trust forming Baseline, signed by Jeffrey Kramer as the agent of the trustee, was filed with the office of the Connecticut Secretary of State. 53. Also on June 14, 2000, ICA delivered a written tender offer to Justin. 54. On the afternoon of June 14, 2000, Jeffrey Kramer purchased 3,000 shares of Justin stock for $50,625. On June 19, 2000, he bought an additional 7,000 shares for $123,844. Thus, he purchased a total of 10,000 Justin shares for $174,469. Jeffrey Kramer made the purchases in accounts he controlled and from which he benefited. 55. Within one week of the June 20, 2000 announcement, Jeffrey Kramer sold the Justin stock he purchased for a profit of $43,656. 3. John Kramer Purchased Justin Stock Based on Confidential Nonpublic Information From Jeffrey Kramer 56. John Kramer is an experienced investor in stocks. He trades stocks for himself as well as Nancy Kramer, Elizabeth Kramer Whitney, Northeast, Vermont Capital, and Yokana. 57. John Kramer and his only son, Jeffrey Kramer, have a close relationship. 58. Late in the business day on June 9, 2000, after Jeffrey Kramer had learned that ICA was forming Baseline as a statutory trust, Jeffrey Kramer placed a call to John Kramer and they spoke by telephone. 59. On June 9, 2000, John Kramer wrote checks to transfer a total of $150,000 from a checking account to two brokerage accounts - a Northeast account and a Vermont Capital account. 60. Late in the business day on June 12, 2000, Jeffrey Kramer placed another call to John Kramer and they spoke by telephone. 61. Around the middle of the business day on June 14, 2000, Jeffrey Kramer and John Kramer spoke again by telephone. They spoke yet again by telephone later that afternoon. On or before June 14, 2000, Jeffrey Kramer had learned that ICA was attempting to acquire or cause an acquisition of Justin. 62. During their communications on and prior to June 14, 2000, Jeffrey Kramer conveyed material nonpublic information, including information concerning an acquisition or tender offer involving Justin, to John Kramer. 63. During the afternoon of June 14, 2000, after speaking twice by telephone with Jeffrey Kramer, John Kramer placed an order to buy Justin stock. He purchased the stock in a Northeast account into which he had transferred $50,000 by check dated June 9, 2000. 64. Jeffrey Kramer and John Kramer spoke again by telephone during the afternoon of June 16, 2000. Jeffrey Kramer continued to discuss material nonpublic information concerning Justin with John Kramer. 65. John Kramer continued to buy Justin stock. Between June 14 and June 19, 2000, he purchased 21,800 Justin shares for $376,505. These purchases were made through two different Northeast accounts, an account in the name of Elizabeth Kramer, and a Vermont Capital account into which John Kramer had transferred $100,000 by check dated June 9, 2000. John Kramer controlled these accounts and benefited from profits in them. 66. John Kramer sold a portion of the Justin stock he purchased approximately one month after the June 20, 2000 announcement, and the remainder on July 31, 2000 after it converted to the right to receive cash. 67. John Kramer's trading in Justin stock resulted in profits of $101,562. 4. Richard Pulling Purchased Justin Stock Based on Confidential Nonpublic Information From Jeffrey Kramer 68. During the afternoon of June 14, 2000, Jeffrey Kramer and Richard Pulling spoke by telephone. 69. During their communications on June 14, 2000, Jeffrey Kramer conveyed material nonpublic information concerning an acquisition or tender offer involving Justin to Richard Pulling. 70. On June 15, 2000, before the stock market opened, Richard Pulling placed an order to buy Justin shares. He purchased additional shares later in the day, acquiring a total of 5,250 Justin shares on June 15, 2000 for $90,823. Richard Pulling made the purchases in accounts he controlled and from which he benefited. 71. During the week after the June 20, 2000 announcement, Richard Pulling sold the Justin stock he purchased for a profit of $23,481. 5. Keith Pulling Purchased Justin Stock Based on Confidential Nonpublic Information From Richard Pulling 72. During the evening of June 14, 2000, Richard Pulling spoke with his brother Keith Pulling by telephone two times. 73. During their communications on June 14, 2000, Richard Pulling conveyed material, nonpublic information concerning an acquisition or tender offer involving Justin that he had received from Jeffrey Kramer to Keith Pulling. 74. On June 15, 2000, just after the market opened, Keith Pulling placed an order to buy Justin shares. He purchased additional shares later in the day, acquiring a total of 3,700 Justin shares on June 15, 2000 for $63,756. Keith Pulling made the purchases in accounts he controlled and from which he benefited. 75. The week after the June 20 announcement, Keith Pulling sold the Justin stock he purchased for a profit of approximately $16,950. C. Republic Transaction 1. The Market for Republic Shares 76. On August 11, 2000, after the close of trading, Republic announced that it entered into a merger agreement with Premier, whereby Premier agreed to pay $19 per share for all outstanding Republic shares. On the first day of trading after the August 11, 2000 announcement, Republic closed at $17.69 per share, up $0.94 from the August 11 close, on volume of 676,200 shares. 77. In the week preceding August 8, 2000, Republic traded, on average, for approximately $12.63 per share on volume of roughly 13,485 shares per day. From August 8 through August 11, 2000, the closing price of Republic stock rose steadily from approximately $13.50 per share on August 8 to $16.75 per share on August 11. Likewise, the volume of Republic shares traded increased substantially over the volume the week before, with purchases by the proposed defendants comprising up to 44 percent of the trading volume between August 8 and August 11, 2000. 78. On or about November 10, 2000, outstanding Republic shares were each converted into the right to receive $19 in cash. 2. Jeffrey Kramer Purchased Republic Stock Based On Confidential Nonpublic Information 79. On August 7, 2000, ICA informed its attorneys that it was negotiating with and intended to acquire or cause a merger involving or acquisition of Republic. As a result, ICA's attorneys began to create Premier. 80. By the early afternoon of August 7, 2000, ICA's attorneys informed Jeffrey Kramer about the potential acquisition of Republic. 81. Shortly after 4:00 p.m. on August 7, 2000, a certificate of trust for Premier, signed by Jeffrey Kramer as the agent of the trust, was filed in the office of the Connecticut Secretary of State. 82. Late in the business day on August 7, 2000, Jeffrey Kramer received an e-mail from ICA's attorneys attaching the Premier trust agreement. The trust agreement made clear that Premier's purpose was to purchase all outstanding shares of Republic. 83. During the evening of August 7, 2000, Jeffrey Kramer placed an order to purchase Republic stock. His order filled just after the market opened on August 8, 2000. 84. In the days that followed, Jeffrey Kramer received additional information confirming that ICA was working on a merger with Republic and indicating that the proposed merger would likely be successful. 85. As the week progressed, Jeffrey Kramer continued to buy Republic stock. Between August 8 and 11, 2000, Jeffrey Kramer bought 18,500 Republic shares for $268,225. Jeffrey Kramer made the purchases in accounts he controlled and from which he benefited. 86. Within one month of the August 11, 2000 announcement, Jeffrey Kramer sold the Republic stock he purchased for a profit of $59,556. 3. John Kramer Purchased Republic Stock Based on Confidential Nonpublic Information From Jeffrey Kramer 87. Late in the business day on August 7, 2000, after Jeffrey Kramer had learned about the potential merger involving or acquisition of Republic, Jeffrey Kramer spoke to John Kramer by telephone. 88. During their communications on August 7, 2000, Jeffrey Kramer conveyed material, nonpublic information concerning a merger or acquisition involving Republic to John Kramer. 89. On August 8, 2000, before the stock market opened, John Kramer placed an order to buy Republic shares. 90. Between August 8 and 11, 2000, John Kramer and Jeffrey Kramer spoke several times by telephone. Jeffrey Kramer continued to discuss material nonpublic information concerning Republic with John Kramer. 91. John Kramer continued to buy Republic stock. Between August 8 and August 11, 2000, he purchased a total of 110,800 Republic shares for roughly $1.76 million through three different Northeast accounts, a Vermont Capital account, and separate accounts in the names of John Kramer, Nancy Kramer, and Elizabeth Kramer. John Kramer controlled these accounts and benefited from profits in them. 92. John Kramer also purchased 25,800 shares of Republic stock on August 10, 2000 in two accounts in the name of his only client, Yokana, for $415,775. John Kramer controlled these accounts and benefited from profits in them. 93. After the August 11, 2000 announcement, John Kramer sold the Republic stock he had purchased for himself and his family at a profit of $257,794. 94. Also after the August 11, 2000 announcement, John Kramer sold the stock he purchased for Yokana at a profit of $74,425. Pursuant to an advisory agreement with Yokana, Northeast received a fee of approximately $14,885 from Yokana representing 20 percent of Yokana's profit from trading in Republic stock. 95. John Kramer lied to the Commission's staff concerning Republic during the investigation of this matter. In February 2001, John Kramer informed a member of the Commission's staff in a telephone interview that he never spoke to Jeffrey Kramer about Republic and could not recall Jeffrey Kramer even mentioning Republic. In June 2001, however, he admitted under oath that, prior to the August 11, 2000 announcement, Jeffrey Kramer told him that he should consider purchasing Republic stock, and that he discussed Republic with Jeffrey Kramer on more than one occasion. 4. Richard Pulling Purchased Republic Stock Based on Confidential Nonpublic Information From Jeffrey Kramer 96. Richard Pulling spoke with Jeffrey Kramer by telephone on the evening of August 8, 2000 and again on the morning of August 9, 2000. 97. During the course of their communications on August 8 and 9, 2000, Jeffrey Kramer conveyed material nonpublic information concerning a merger or acquisition involving Republic to Richard Pulling. 98. After speaking with Jeffrey Kramer on August 9, 2000, Richard Pulling placed an order to purchase Republic stock. He continued to buy Republic stock, purchasing 11,800 Republic shares for $182,000 on August 9, 2000. Richard Pulling made the purchases in accounts he controlled and from which he benefited. 99. After the August 11, 2000 announcement, Richard Pulling sold the Republic stock he purchased for a profit of $28,906. 5. Keith Pulling Purchased Republic Stock Based on Confidential Nonpublic Information From Richard Pulling 100. Around the middle of the business day on August 9, 2000, Richard Pulling spoke with his brother Keith Pulling by telephone. 101. During their communications on August 9, 2000, Richard Pulling conveyed material, nonpublic information concerning a merger or acquisition involving Republic that he had received from Jeffrey Kramer to Keith Pulling. 102. After speaking with his brother, Keith Pulling placed an order on August 9, 2000 to buy Republic shares. He continued to buy Republic stock, purchasing 6,000 Republic shares between August 9 and 10, 2000 for $95,000. Keith Pulling made the purchases in accounts he controlled and from which he benefited. 103. After the August 11, 2000 announcement, Keith Pulling sold the Republic stock he purchased for a profit of $13,500. FIRST CLAIM FOR RELIEF
104. Plaintiff realleges and incorporates by reference paragraphs 1 through 103 above. 105. Between on or about June 9, 2000 and June 20, 2000, Jeffrey Kramer, directly and indirectly, by use of the means and instrumentalities of interstate commerce, of the mails or of the facilities of a national securities exchange, in connection with the purchase or sale of Justin securities, with scienter: (1) employed devices, schemes, or artifices to defraud; (2) made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (3) engaged in acts, practices or courses of business which have operated as a fraud or deceit upon purchasers or sellers of securities or upon other persons. 106. Jeffrey Kramer, through breach of fiduciary duties owed to ICA and First Union, or a duty arising out of a relationship of trust and confidence, or other wrongful acts, and with scienter, misappropriated material nonpublic information concerning Justin, and used the nonpublic information when he traded in Justin stock while in possession of and on the basis of that information. 107. Jeffrey Kramer, through breach of fiduciary duties owed to ICA and First Union, or a duty arising out of a relationship of trust and confidence, or other wrongful acts, with scienter, disclosed material nonpublic information involving Justin to John Kramer and Richard Pulling. When Jeffrey Kramer conveyed this information to John Kramer and Richard Pulling he knew, or was reckless in not knowing, that, as a result of these communications, they would purchase Justin stock. In conveying material nonpublic information to John Kramer and Richard Pulling, Jeffrey Kramer intended to benefit or make a gift of the nonpublic information to them. 108. By reason of the foregoing acts, practices, and courses of business, Jeffrey Kramer violated Exchange Act Section 10(b) and Rule 10b-5 [15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5], and unless restrained and enjoined will continue to do so. SECOND CLAIM FOR RELIEF
109. Plaintiff realleges and incorporates by reference paragraphs 1 through 108 above. 110. Between on or about June 9, 2000 and June 20, 2000, John Kramer, directly and indirectly, by use of the means and instrumentalities of interstate commerce, of the mails or of the facilities of a national securities exchange, in connection with the purchase or sale of Justin securities, with scienter: (1) employed devices, schemes, or artifices to defraud; (2) made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (3) engaged in acts, practices or courses of business which have operated as a fraud or deceit upon purchasers or sellers of securities or upon other persons. 111. Jeffrey Kramer conveyed material nonpublic information concerning Justin to John Kramer. John Kramer used the nonpublic information when he traded in Justin securities while in possession of and on the basis of that information. 112. In conveying material nonpublic information to John Kramer, Jeffrey Kramer intended to benefit or make a gift of the nonpublic information to his father. 113. John Kramer knew, or was reckless in not knowing, that the information concerning Justin conveyed by Jeffrey Kramer was nonpublic and confidential, and that the disclosure of information by Jeffrey Kramer to him was improper and in breach of fiduciary duties owed by Jeffrey Kramer to ICA and First Union. 114. By reason of the foregoing acts, practices, and courses of business, John Kramer violated Exchange Act Section 10(b) and Rule 10b-5 [15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5], and unless restrained and enjoined will continue to do so. THIRD CLAIM FOR RELIEF
115. Plaintiff realleges and incorporates by reference paragraphs 1 through 114 above. 116. Between on or about June 14, 2000 and June 20, 2000, Richard Pulling, directly and indirectly, by use of the means and instrumentalities of interstate commerce, of the mails or of the facilities of a national securities exchange, in connection with the purchase or sale of Justin securities, with scienter: (1) employed devices, schemes, or artifices to defraud; (2) made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (3) engaged in acts, practices or courses of business which have operated as a fraud or deceit upon purchasers or sellers of securities or upon other persons. 117. Jeffrey Kramer conveyed material nonpublic information concerning Justin to Richard Pulling. Richard Pulling used the nonpublic information when he traded in Justin securities while in possession of and on the basis of that information. 118. In conveying material nonpublic information to Richard Pulling, Jeffrey Kramer intended to benefit or make a gift of the nonpublic information to his friend Richard Pulling. 119. Richard Pulling knew, or was reckless in not knowing, that the information concerning Justin conveyed by Jeffrey Kramer was nonpublic and confidential, and that disclosure of this information by Jeffrey Kramer to him was improper and in breach of fiduciary duties owed by Jeffrey Kramer to ICA and First Union. 120. Richard Pulling disclosed material nonpublic information concerning Justin obtained from Jeffrey Kramer to Keith Pulling. When Richard Pulling conveyed this information to Keith Pulling he knew, or was reckless in not knowing, that, as a result of these communications, Keith Pulling would purchase Justin stock. 121. In conveying material nonpublic information to Keith Pulling, Richard Pulling intended to benefit or make a gift of the nonpublic information to his brother. 122. By reason of the foregoing acts, practices, and courses of business, Richard Pulling violated Exchange Act Section 10(b) and Rule 10b-5 [15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5], and unless restrained and enjoined will continue to do so. FOURTH CLAIM FOR RELIEF
123. Plaintiff realleges and incorporates by reference paragraphs 1 through 122 above. 124. Between on or about June 14, 2000 and June 20, 2000, Keith Pulling, directly and indirectly, by use of the means and instrumentalities of interstate commerce, of the mails or of the facilities of a national securities exchange, in connection with the purchase or sale of Justin securities, with scienter: (1) employed devices, schemes, or artifices to defraud; (2) made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (3) engaged in acts, practices or courses of business which have operated as a fraud or deceit upon purchasers or sellers of securities or upon other persons. 125. Richard Pulling conveyed material, nonpublic information concerning Justin to Keith Pulling. Keith Pulling used the nonpublic information when he traded in Justin securities while in possession of and on the basis of that information. 126. In conveying material nonpublic information to Keith Pulling, Richard Pulling intended to benefit or make a gift of the nonpublic information to his brother. 127. Keith Pulling knew, or was reckless in not knowing, that the information concerning Justin conveyed by Richard Pulling was nonpublic and confidential, and that the disclosure of information to Richard Pulling was improper and in breach of fiduciary duties. 128. By reason of the foregoing acts, practices, and courses of business, Keith Pulling violated Exchange Act Section 10(b) and Rule 10b-5 [15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5], and unless restrained and enjoined will continue to do so. FIFTH CLAIM FOR RELIEF
129. Plaintiff realleges and incorporates by reference paragraphs 1 through 128 above. 130. Between on or about August 7, 2000 and August 11, 2000, Jeffrey Kramer, directly and indirectly, by use of the means and instrumentalities of interstate commerce, of the mails or of the facilities of a national securities exchange, in connection with the purchase or sale of Republic securities, with scienter: (1) employed devices, schemes, or artifices to defraud; (2) made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (3) engaged in acts, practices or courses of business which have operated as a fraud or deceit upon purchasers or sellers of securities or upon other persons. 131. Jeffrey Kramer, through breach of fiduciary duties owed to ICA and First Union, or a duty arising out of a relationship of trust and confidence, or other wrongful acts, and with scienter, misappropriated material nonpublic information concerning Republic, and used the nonpublic information when he traded in Republic stock while in possession of and on the basis of that information. 132. Jeffrey Kramer, through breach of fiduciary duties owed to ICA and First Union, or a duty arising out of a relationship of trust and confidence, or other wrongful acts, with scienter, disclosed material nonpublic information involving Republic to John Kramer and Richard Pulling. When Jeffrey Kramer conveyed this information to John Kramer and Richard Pulling he knew, or was reckless in not knowing, that, as a result of these communications, they would purchase Republic stock. In conveying material nonpublic information to John Kramer and Richard Pulling, Jeffrey Kramer intended to benefit or make a gift of the nonpublic information to them. 133. By reason of the foregoing acts, practices, and courses of business, Jeffrey Kramer violated Exchange Act Section 10(b) and Rule 10b-5 [15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5], and unless restrained and enjoined will continue to do so. SIXTH CLAIM FOR RELIEF
134. Plaintiff realleges and incorporates by reference paragraphs 1 through 133 above. 135. Between on or about August 7, 2000 and August 11, 2000, John Kramer, directly and indirectly, by use of the means and instrumentalities of interstate commerce, of the mails or of the facilities of a national securities exchange, in connection with the purchase or sale of Republic securities, with scienter: (1) employed devices, schemes, or artifices to defraud; (2) made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (3) engaged in acts, practices or courses of business which have operated as a fraud or deceit upon purchasers or sellers of securities or upon other persons. 136. Jeffrey Kramer conveyed material, nonpublic information concerning Republic to John Kramer. John Kramer used the nonpublic information when he traded in Republic securities while in possession of and on the basis of that information. 137. In conveying material nonpublic information to John Kramer, Jeffrey Kramer intended to benefit or make a gift of the nonpublic information to his father. 138. John Kramer knew, or was reckless in not knowing, that the information concerning Republic conveyed by Jeffrey Kramer was nonpublic and confidential, and that the disclosure of information by Jeffrey Kramer to him was improper and in breach of fiduciary duties owed by Jeffrey Kramer to ICA and First Union. 139. By reason of the foregoing acts, practices, and courses of business, John Kramer violated Exchange Act Section 10(b) and Rule 10b-5 [15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5], and unless restrained and enjoined will continue to do so. SEVENTH CLAIM FOR RELIEF
140. Plaintiff realleges and incorporates by reference paragraphs 1 through 139 above. 141. Between on or about August 8, 2000 and August 11, 2000, Richard Pulling, directly and indirectly, by use of the means and instrumentalities of interstate commerce, of the mails or of the facilities of a national securities exchange, in connection with the purchase or sale of Republic securities, with scienter: (1) employed devices, schemes, or artifices to defraud; (2) made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (3) engaged in acts, practices or courses of business which have operated as a fraud or deceit upon purchasers or sellers of securities or upon other persons. 142. Jeffrey Kramer conveyed material, nonpublic information concerning Republic to Richard Pulling. Richard Pulling used the nonpublic information when he traded in Republic securities while in possession of and on the basis of that information. 143. In conveying material nonpublic information to Richard Pulling, Jeffrey Kramer intended to benefit or make a gift of the nonpublic information to his friend Richard Pulling. 144. Richard Pulling knew, or was reckless in not knowing, that the information concerning Republic conveyed by Jeffrey Kramer was nonpublic and confidential, and that disclosure of this information by Jeffrey Kramer to him was improper and in breach of fiduciary duties owed by Jeffrey Kramer to ICA and First Union. 145. Richard Pulling disclosed nonpublic, confidential information concerning Republic obtained from Jeffrey Kramer to Keith Pulling. When Richard Pulling conveyed this information to Keith Pulling he knew, or was reckless in not knowing, that, as a result of these communications, Keith Pulling would purchase Republic stock. 146. In conveying material nonpublic information to Keith Pulling, Richard Pulling intended to benefit or make a gift of the nonpublic information to his brother. 147. By reason of the foregoing acts, practices, and courses of business, Richard Pulling violated Exchange Act Section 10(b) and Rule 10b-5 [15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5], and unless restrained and enjoined will continue to do so. EIGHTH CLAIM FOR RELIEF
148. Plaintiff realleges and incorporates by reference paragraphs 1 through 147 above. 149. Between on or about August 9, 2000 and August 11, 2000, Keith Pulling, directly and indirectly, by use of the means and instrumentalities of interstate commerce, of the mails or of the facilities of a national securities exchange, in connection with the purchase or sale of Republic securities, with scienter: (1) employed devices, schemes, or artifices to defraud; (2) made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (3) engaged in acts, practices or courses of business which have operated as a fraud or deceit upon purchasers or sellers of securities or upon other persons. 150. Richard Pulling conveyed material nonpublic information concerning Republic to Keith Pulling. Keith Pulling used the nonpublic information when he traded in Republic securities while in possession of and on the basis of that information. 151. In conveying material nonpublic information to Keith Pulling, Jeffrey Kramer intended to benefit or make a gift of the nonpublic information to his brother. 152. Keith Pulling knew, or was reckless in not knowing, that the information concerning Republic conveyed by Richard Pulling was nonpublic and confidential, and that the disclosure of information to Richard Pulling was improper and in breach of fiduciary duties. 153. By reason of the foregoing acts, practices, and courses of business, Keith Pulling violated Exchange Act Section 10(b) and Rule 10b-5 [15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5], and unless restrained and enjoined will continue to do so. NINTH CLAIM FOR RELIEF
154. Plaintiff realleges and incorporates by reference paragraphs 1 through 153 above. 155. Between on or about June 9, 2000 and June 20, 2000, Jeffrey Kramer, in connection with ICA's tender offer for Justin stock, with scienter: (1) made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (2) engaged in fraudulent, deceptive, or manipulative acts or practices. 156. After ICA had taken a substantial step to commence a tender offer for Justin stock, and at a time when he was in possession of material information relating to the tender offer which he knew or had reason to know was nonpublic and had been acquired from ICA and persons acting on its behalf, Jeffrey Kramer purchased Justin securities. 157. Additionally, at a time when he was acting on behalf of ICA, and at a time when he was in possession of material information relating to ICA's tender offer for Justin stock which he knew or had reason to know was nonpublic and acquired directly or indirectly from ICA and persons acting on its behalf, Jeffrey Kramer communicated material, nonpublic information relating to ICA's tender offer to John Kramer and Richard Pulling under circumstances where it was reasonably foreseeable to result in a violation of Exchange Act Section 14(e) or Rule 14e-3. 158. By reason of the foregoing acts, practices, and courses of business, Jeffrey Kramer violated Exchange Act Section 14(e) and Rule 14e-3 [15 U.S.C. § 78n(e) and 17 C.F.R. § 240.14e-3], and unless restrained and enjoined will continue to do so. TENTH CLAIM FOR RELIEF
159. Plaintiff realleges and incorporates by reference paragraphs 1 through 158 above. 160. Between on or about June 9, 2000 and June 20, 2000, John Kramer, in connection with ICA's tender offer for Justin stock, with scienter: (1) made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (2) engaged in fraudulent, deceptive, or manipulative acts or practices. 161. After ICA had taken a substantial step to commence a tender offer for Justin stock, and at a time when he was in possession of material information relating to the tender offer which he knew or had reason to know was nonpublic and had been acquired from ICA and persons acting on its behalf, John Kramer purchased Justin securities. 162. By reason of the foregoing acts, practices, and courses of business, John Kramer violated Exchange Act Section 14(e) and Rule 14e-3 [15 U.S.C. § 78n(e) and 17 C.F.R. § 240.14e-3], and unless restrained and enjoined will continue to do so. ELEVENTH CLAIM FOR RELIEF
163. Plaintiff realleges and incorporates by reference paragraphs 1 through 162 above. 164. Between on or about June 14, 2000 and June 20, 2000, Richard Pulling, in connection with ICA's tender offer for Justin stock, with scienter: (1) made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (2) engaged in fraudulent, deceptive, or manipulative acts or practices. 165. After ICA had taken a substantial step to commence a tender offer for Justin stock, and at a time when he was in possession of material information relating to the tender offer which he knew or had reason to know was nonpublic and had been acquired from ICA and persons acting on its behalf, Richard Pulling purchased Justin securities. 166. Additionally, at a time when he was in possession of material information relating to ICA's tender offer for Justin stock which he knew or had reason to know was nonpublic and acquired directly or indirectly from ICA and persons acting on its behalf, Richard Pulling communicated material, nonpublic information relating to ICA's tender offer to Keith Pulling under circumstances where it was reasonably foreseeable to result in a violation of Exchange Act Section 14(e) or Rule 14e-3. 167. By reason of the foregoing acts, practices, and courses of business, Richard Pulling violated Exchange Act Section 14(e) and Rule 14e-3 [15 U.S.C. § 78n(e) and 17 C.F.R. § 240.14e-3], and unless restrained and enjoined will continue to do so. TWELFTH CLAIM FOR RELIEF
168. Plaintiff realleges and incorporates by reference paragraphs 1 through 167 above. 169. Between on or about June 14, 2000 and June 20, 2000, Keith Pulling, in connection with ICA's tender offer for Justin stock, with scienter: (1) made untrue statements of material fact, or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (2) engaged in fraudulent, deceptive, or manipulative acts or practices. 170. After ICA had taken a substantial step to commence a tender offer for Justin stock, and at a time when he was in possession of material information relating to the tender offer which he knew or had reason to know was nonpublic and had been acquired from ICA and persons acting on its behalf, Keith Pulling purchased Justin securities. 171. By reason of the foregoing acts, practices, and courses of business, Keith Pulling violated Exchange Act Section 14(e) and Rule 14e-3 [15 U.S.C. § 78n(e) and 17 C.F.R. § 240.14e-3], and unless restrained and enjoined will continue to do so. THIRTEENTH CLAIM FOR RELIEF
172. Plaintiff realleges and incorporates by reference paragraphs 1 through 171 above. 173. Relief Defendants Nancy Kramer, Elizabeth Kramer Whitney, Lucien D. Yokana, Northeast and Vermont Capital have obtained illegal profits as a result of unlawful trades in Justin and Republic stock directed by Defendant John Kramer in securities trading accounts they control or which are in their names or for their benefit. Thus, they hold illegally obtained profits to which they have no legitimate claim. 174. Relief Defendants Nancy Kramer, Elizabeth Kramer Whitney, Lucien D. Yokana, Northeast and Vermont Capital should be required to disgorge all illegal trading profits which inured to their benefit under the equitable doctrines of disgorgement, unjust enrichment and constructive trust. PRAYER FOR RELIEF WHEREFORE, the Commission respectfully requests that the Court: I. Find that the defendants, and each of them, committed the violations alleged. II. Enter injunctive relief permanently restraining and enjoining John Kramer, Jeffrey Kramer, Richard Pulling and Keith Pulling from, directly or indirectly to the full extent provided by Rule 65(d) of the Federal Rules of Civil Procedure, violating the provisions of law and rules alleged in this Complaint. III. Order all Defendants and Relief Defendants to disgorge and pay over, as the Court may direct, all ill-gotten gains received or benefits in any form derived from the illegal conduct alleged in this Complaint, together with pre-judgment and post-judgment interest as provided by law. The Commission requests that the Court order:
IV. Order Jeffrey Kramer, John Kramer, Richard Pulling and Keith Pulling to pay civil money penalties pursuant to Section 21A of the Exchange Act. V. Grant such other relief as this Court may deem just or appropriate.
http://www.sec.gov/litigation/complaints/complr17391.htm
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