N.Y. brokers must pay $1.9 million for insider tradingReprints
(Reuters) — Two former New York stockbrokers must pay $1.9 million for trading on confidential tips about an IBM Corp. acquisition, a federal judge ruled on Monday.
U.S. District Judge Jed Rakoff in Manhattan ordered ex-Euro Pacific Capital Inc. brokers Daryl Payton and Benjamin Durant to pay $546,458 and $1.34 million, respectively, after a federal jury found them liable in February on U.S. Securities and Exchange Commission charges.
Judge Rakoff ruled that a civil penalty was appropriate given the jury’s verdict. He rejected arguments by Mr. Durant that he should be forced to pay only $53,000, saying to accept his arguments would grant him “a significant undeserved windfall.”
But Judge Rakoff declined to adopt even steeper penalties sought by the SEC, which asked to have Mr. Payton pay $1.03 million and Mr. Durant pay $2.57 million, citing their “challenging financial circumstances.”
Lawyers for Messrs. Payton and Durant did not immediately respond to requests for comment. Both men, who previously faced criminal charges only to have those dropped last year, are expected to appeal. An SEC spokesman declined to comment.
The SEC alleged that in 2009, an attorney at IBM Corp.’s law firm told his friend, Royal Bank of Scotland Group P.L.C. analyst Trent Martin, that he was working on IBM’s $1.2 billion acquisition of SPSS Inc.
While the lawyer expected Mr. Martin not to tell anyone, Mr. Martin bought SPSS stock and told his roommate, Thomas Conradt, a Euro Pacific employee, the SEC said.
Mr. Conradt then told four Euro Pacific colleagues, including Messrs. Payton and Durant, who made hundreds of thousands of dollars trading before the deal’s announcement, the SEC said.
Federal prosecutors initially brought criminal charges over the case against five people, four of whom including Mr. Payton but not Mr. Durant pleaded guilty.
But after a December 2014 appellate ruling limited the scope of U.S. insider trading laws, a federal judge threw out the guilty pleas and prosecutors dropped the case. The SEC, facing a lower burden of proof, chose to move forward in its case.