The Securities and Exchange Commission has charged a former Ernst & Young partner, an investment banker and her father with insider trading involving information about potential M&A transactions.
The SEC said the scheme resulted in nearly $600,000 in illicit profits. In the complaint, the SEC alleges that from approximately summer 2006 through fall 2007, James E. Gansman, a former partner in Ernst & Young's Transaction Advisory Services department, tipped his friend Donna Murdoch, managing director of a Philadelphia-based investment business, about the identities of at least seven different acquisition targets of clients who sought valuation services from E&Y.
The SEC said that Murdoch used the information to trade in the securities of the target companies, passed the information on to her father, Gerald E. Brodsky, and made recommendations to two other individuals, who also made trades in the companies.
The companies targeted include Freescale Semiconductor and ATI Technologies. Murdoch allegedly provided information on a pending acquisition of Freescale by E&Y's client the Blackstone Group to Brodsky. The SEC said Brodsky traded on the information and made a profit of $63,400. The complaint also alleged that Murdoch recommended trading in Freescale and ATI to other individuals who made profits of $140,760. ATI was acquired by Advanced Micro Devices, another E&Y client.
Ernst & Young did not immediately respond to a request for comment. Gansman's lawyer, Barry Bohrer, did not immediately respond either, but he told the Associated Press that his client did not participate in any wrongful conduct.
Murdoch's lawyer, Barry Pollack, was surprised that the SEC had pressed charges. "We’re very disappointed that they’ve chosen to proceed on the suit, given that there is ample evidence that Ms. Murdoch has not engaged in insider trading," said Pollack. "We’ve had a number of conversations with the SEC, which is why we were surprised that they would move forward with this case."
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