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Univ. of Toledo College of Law

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Tuesday, October 7, 2008

SEC Charges Former Restoration Hardware Executive with Tipping Friends

The SEC charged a former vice president of national home furnishing retailer Restoration Hardware with insider trading for tipping three friends that the company was about to be acquired, enabling them to make more than $900,000 in unlawful profits when public announcement of the subsequent merger caused the stock price to soar.  The SEC alleges that Ciriaco "Eric" Rivor, who was Vice President of Treasury at Restoration Hardware, learned in mid-2007 that the company was about to be acquired by a private equity firm at a substantial premium. Rivor allegedly passed the confidential, non-public information to friends Emmanuel Axiaq. and Steven Lusardi and told Emmanuel Axiaq to pass the information to his father, Francis Axiaq.  The SEC's complaint alleges that Emmanuel Axiaq and Lusardi profited by $29,539 and $4,398, respectively, on their stock purchases, while Francis Axiaq had an illicit potential profit of nearly $900,000.

Rivor, Lusardi, and Emmanuel Axiaq, without admitting or denying the allegations in the SEC's complaint, have agreed to a permanent injunction from further violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Rivor, who did not personally trade on the information, has agreed to pay a $68,000 penalty. Lusardi has agreed to pay a total of $8,901, including disgorgement of his trading profits, prejudgment interest and a penalty equal to his trading profits. Emmanuel Axiaq has agreed to pay a total of $90,249, including $30,249 in disgorgement of his trading profits and prejudgment interest and a penalty of $60,000.

In a non-settled enforcement action, Francis Axiaq is charged with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking a permanent injunction, disgorgement, financial penalties, and other relief.

http://lawprofessors.typepad.com/securities/2008/10/sec-charges-for.html

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