Among recent enforcement actions by the Securities and Exchange Commission were charges against a day trader and his analyst girlfriend for trading on a tip she gave him and against three more individuals in a penny stock manipulation case filed last year.
In addition, the Department of Labor filed suit against a Washington-area government contractor and its employee benefit plan service providers over millions of dollars in excess fees.
Salsa-Dancing Day Trader, Analyst Charged for Insider Trading
A day trader-analyst couple were charged with securities fraud after the trader took advantage of an insider tip from his analyst girlfriend.
According to the agency, Vlad Spivak, the day trader, persuaded Shirmila Doddi, a financial analyst in the commercial banking group of Wells Fargo Bank, whom he met at a salsa dancing class, to tell him about the possible acquisition of American Dental Partners Inc. by JLL Partners Inc., a private equity firm.
Spivak and Doddi's salsa-dancing hobby had blossomed into romance, and Spivak had asked Doddi on multiple occasions for information she'd gotten on the job. "Spivak further told Doddi," said the SEC complaint, "that insider trading was not a big deal and that individuals rarely get caught." Wrong. But Doddi told him about the planned acquisition, even though she didn't try to profit from the knowledge herself.
From mid-October through Nov. 1, 2011, Spivak bought shares of ADPI in both his own and his mother's brokerage accounts, based on the information he'd gotten from Doddi, according to the SEC. On Nov. 7, a merger agreement was announced that raised the stock price by 79%. Spivak sold all the shares he'd bought, making a profit of $222,357.
Doddi settled with the SEC without confirming or denying the charges for an amount yet to be determined. Spivak did not settle. The SEC is seeking disgorgement, with prejudgment interest, of all illicit trading profits, as well as a civil monetary penalty.
DOL Sues Government Contractor, Plan Services Providers
The DOL has sued Chimes District of Columbia Inc., affiliated companies, company executives and employee benefit plan service providers over allegations that an employee benefit plan sponsored by Chimes DC paid millions of dollars in excessive fees. The nonprofit Chimes DC employs disabled workers who provide janitorial and custodial services under multiple taxpayer-funded government contracts.
According to the agency, an investigation by the department's Employee Benefits Security Administration found that Chimes DC; its parent company, Chimes International; and executives Martin Lampner and Albert Bussone violated the Employee Retirement Income Security Act when they caused a health and welfare plan established for Chimes DC employees to pay millions in excessive fees.
Some of those fees were paid to the plan's third-party administrator, FCE Benefits Administrators Inc., and to another company, Benefits Consulting Group. FCE, with the knowledge and participation of principal owners Gary Beckman and Stephen Porter, caused the plan to engage in transactions for their own benefit, and also exercised control over the plan's contracts with other service providers to boost FCE's compensation through undisclosed commissions and fees, DOL said.
Bussone and Lampner solicited hundreds of thousands of dollars from FCE and BCG, DOL said. The two supposedly asked for the money as donations to The Chimes Foundation, a charitable fundraising arm of Chimes International.
In a statement, FCE attorney Robert Eassa said the DOL's charges against it were without merit and that no one from the firm had been contacted during the investigation.
FCE and BCG jointly pledged $330,000 to the foundation in 2009, and in the pledge noted that an "additional $55,000 will be paid for a one-year option of continuing benefit services to our Chimes partner." Between 2009 and 2014, FCE paid more than $400,000 to The Chimes Foundation while BCG paid at least $282,500. Lampner also got FCE to employ his child, and BCG's owner provided discounts to Chimes DC on other nonplan work.
