A former Ernst & Young partner has settled insider trading charges after he was accused of tipping off his stockbroker girlfriend about at least seven different acquisition targets that happened to be his firms clients.
Judge P. Kevin Castel of the U.S. District Court for the Southern District of New York, entered final judgments against James E. Gansman and Donna B. Murdoch in SEC v. Gansman, an insider trading case the SEC filed on May 29, 2008.
The SEC charged Gansman, who was an attorney and partner in the Transaction Advisory Services group at Ernst & Young, with having tipped Murdoch, who was a stockbroker and close friend of his, concerning the identities of at least seven different acquisition targets of Ernst & Young valuation services clients.
The complaint alleged that two of the seven acquisitions were tender offers; that Murdoch used Gansmans tips to trade in the securities of all seven of the acquisition targets; and that Murdoch also tipped her father, Gerald Brodsky, concerning one of the acquisitions and recommended trading in two of the acquisition targets to two other persons; and, finally, that all three persons then traded on Murdochs communications.
To settle the SECs charges, Gansman and Murdoch each consented, without admitting or denying the allegations in the SECs complaint, to a separate final judgment that permanently enjoins each, respectively, from violating the securities laws. The final judgment to which Gansman consented further orders him to pay disgorgement of $233,385, together with $16,470 in prejudgment interest, and $145 in post-judgment interest, but allows him one year from the entry of the final judgment to satisfy this payment obligationwith $200,000 due within 10 days, and the remainder due within one year, of the entry of the final judgment.
The final judgment to which Murdoch consented further orders that she is liable for disgorgement of $339,110 together with $64,943.52 in prejudgment interest, but, based on her demonstrated inability to pay, waives payment of disgorgement and prejudgment interest and does not impose a civil penalty.
Because a default judgment was previously entered against the sole other defendant in the SECs case, Gerald Brodsky, the settlements announced Wednesday conclude the litigation in the matter. In addition, Gansman and Murdoch each consented, in related administrative proceedings, to the entry of an SEC order that, in the case of Gansman, suspends him from appearing or practicing before the Commission as an attorney, and in the case of Murdoch, bars her from association with any broker or dealer.
Gansman and Murdoch were also each prosecuted criminally by the U.S. Attorneys Office for the Southern District of New York. In that parallel criminal prosecution, Gansman was convicted by a jury on May 15, 2009, following a two-week trial, on six felony counts of having tipped Murdoch. He was sentenced on Feb. 25, 2010 to a year-and-a-day in prison, six months probation, and a $600 special assessment, and is currently incarcerated.
For her part, Murdoch pled guilty to 17 counts of a superseding information on Dec. 23, 2008including 15 counts of securities fraud, one count of false statements, and one count of obstructing the Commissions investigationand is awaiting sentencing. The SEC said its investigation of the matter is continuing.
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