Rodolfo Luzardo, Elias I. Kodsi, and Alan D. Kodsi

Litigation Release No. 17486 / April 24, 2002

Securities and Exchange Commission v. Rodolfo Luzardo, Elias I. Kodsi, and Alain D. Kodsi, 01 Civ. 9206 (DC) (S.D.N.Y.)

FATHER AND SON PAY $3,200,242 TO SETTLE INSIDER TRADING ACTION ALLEGING USE OF SWISS ACCOUNTS

On April 23, 2002, Judge Denny Chin in the United States District Court for the Southern District of New York, entered a Final Judgment against Elias I. Kodsi and his son, Alain D. Kodsi, both of Brooklyn, New York. The defendants were ordered to pay $3,200,242 in disgorgement, interest and penalties in a Commission action that charged them with insider trading in the securities of BetzDearborn Inc. The Kodsis settled the action without admitting or denying the allegations in the Commission's complaint. The judgment orders Elias and Alain Kodsi, jointly and severally, to pay disgorgement of trading profits totaling $963,750, plus prejudgment interest of $308,992. Each of the defendants was also ordered to pay a separate penalty of $963,750.

The Commission's complaint in this matter, filed in October 2001, alleges that Rodolfo Luzardo, a former employee of J.P. Morgan Securities, Inc., Alain D. Kodsi, a co-owner of a venture capital firm, and Elias I. Kodsi, a retired jewelry distributor, engaged in illegal insider trading in advance of the July 30, 1998 announcement that BetzDearborn Inc. and Hercules Inc. had agreed to merge. The complaint alleges that Luzardo misappropriated confidential information regarding the pending merger from his then-employer, J.P. Morgan, which was the adviser to BetzDearborn. According to the complaint, Luzardo tipped his friend and new employer, Alain Kodsi, who in turn tipped his father, Elias Kodsi. The complaint further alleges that Elias Kodsi purchased 30,000 shares of BetzDearborn common stock through two numbered Swiss accounts the day before the merger was announced at a cost of over $1 million, and that after the announcement on July 30, Elias Kodsi sold the shares for unlawful profits of $963,750. The complaint alleges that as a result of the conduct described above, Elias Kodsi, Alain Kodsi, and Luzardo violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder.

Elias I. Kodsi and Alain D. Kodsi consented, without admitting or denying the allegations of the complaint, to the entry of a final judgment that permanently enjoins them from violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Judge Chin ordered the defendants to pay the following: (1) Elias I. Kodsi and Alain D. Kodsi, jointly and severally, $963,750 disgorgement, and $308,992 in prejudgment interest; and (2) Elias I. Kodsi and Alain D. Kodsi to each pay $963,750 in civil penalties. The Commission's case against defendant Luzardo is continuing.

See also Litigation Release No. 17197 (October 18,2001). See also the following related matters: SEC v. Joseph F. Doody IV, et al., 01 Civ. 9879 (JK) (S.D.N.Y.) (filed November 8, 2001) (Litigation Release No. 17225); SEC v. Bugenhagen, et al., 01 Civ. 6538 (E.D.PA.) (filed December 18, 2001) (Litigation Release No. 17278); and SEC v. Litvinsky, et al., 02 Civ. 0312 (LMM) (S.D.N.Y.) (filed January 14, 2002) (Litigation Release No. 17306). To date, in the four insider trading cases concerning trading before the merger of BetzDearborn and Hercules, the Commission has obtained over $3.7 million in disgorgement, prejudgment interest, and penalties.