Five Florida Residents Charged by the SEC With Insider Trading
The Securities and Exchange Commission (SEC) on September 28, 2015 charged five Florida residents, including a lawyer and an accountant with insider trading before the acquisition of Pharmasset Inc. by Gilead Sciences Inc.
The SEC filed a complaint claiming that attorneys Robert Spallina and Donald Tescher and accountant Steven Rosen illegally traded private information acquired from a mutual client who served on the board of directors of a company named Pharmasset.
According to the insider trading complaint, on November 8, 2011 during a meeting regarding year-end personal tax and estate planning, the Pharmasset board member and his advisers, including Spallina, Tescher, and Rosen, discussed the fact that the Pharmasset board was trying to reach an agreement to sell the company at a significant premium. Right after this meeting, Spallina, Tescher, and Rosen supposedly breached their duties of trust and confidence to their client by buying Pharmasset securities. The complaint also states that Spallina told Thomas Palermo, who was a financial adviser at a brokerage firm, and Brian Markowitz, Spallina’s next-door neighbor at the time, about the negotiations to sell the company. Both bought Pharmasset securities using the information they got from Spallina’s tips.
After the public announcement of the acquisition by California-based Gilead Sciences, based in California, on November 21, 2011, the price of Pharmasset stock rose by 84 percent and the five defendants liquidated their holdings and allegedly reaped more than $234,000 of illicit earnings. In the complaint, the SEC stated that the defendants violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14e-3 thereunder.
Spallina, Tescher, Rosen, Palermo and Markowitz collectively agreed to pay approximately $489,000 to settle the charges for the insider trading. The settlements are subject to court approval.
Spallina, of Parkland, Florida, agreed to return $39,156 of allegedly illegally obtained gains, plus prejudgment interest of $1,794, and pay a civil penalty of $39,156. The other defendants each agreed to settle the charges and pay disgorgement, prejudgment interest, and civil penalties without confessing to or denying the SEC’s claims about the insider trading. Tescher agreed to return $9,937, plus prejudgment interest of $690, and pay a $9,937 penalty. Rosen agreed to return $27,634, plus prejudgment interest of $1,991, and pay a $27,634 penalty. Palermo agreed to return $124,528, plus prejudgment interest of $14,067, and pay a $124,528 penalty, and Markowitz agreed to repay $32,931, plus prejudgment interest of $2,640, and pay a $32,931 civil penalty.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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Brenda Hamilton, Securities Attorney
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Boca Raton, Florida 33432
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