Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, November 16, 2011

Two Defendants in Expert Networks Insider Trading Case Settle SEC Charges

The SEC wrapped up enforcement actions against two of the defendants in an alleged "expert networks" insider trading scheme brought earlier this year.  The SEC announced that the federal district court in S.D.N.Y. recently entered Final Judgments on Consent as to Mark Anthony Longoria and as to Donald Longueuil in the SEC’s insider trading case, SEC v. Mark Anthony Longoria, et al., 11-CV-0753 (SDNY) (JSR).

The SEC filed its Complaint on February 3, 2011, charging two expert network employees and four consultants with insider trading for illegally tipping hedge funds and other investors. On February 8, 2011, the SEC filed an Amended Complaint, charging a New York-based hedge fund and four hedge fund portfolio managers and analysts who illegally traded on confidential information obtained from technology company employees moonlighting as expert network consultants. The scheme netted more than $30 million from trades based on material, nonpublic information about such companies as Advanced Micro Devices (“AMD”), Seagate Technology, Western Digital, Fairchild Semiconductor, and Marvell Technology Group Ltd. (“Marvell”). The charges were the first against traders in the SEC's ongoing investigation of insider trading involving expert networks.

The SEC alleged that Longoria, a Supply Chain Manager at AMD, was privy to confidential information about AMD’s internal sales figures and other confidential information and, from 2006 to 2010, Longoria regularly provided Primary Global Research LLC (“PGR”) and PGR clients with this inside information so it could be used to trade securities. Longoria received a total of $178,850 for talking to PGR and its clients.

The Final Judgment entered against Longoria orders him liable for disgorgement of ill-gotten gains of $178,850, together with prejudgment interest of $18,328.94, for a total of $197,178.94. Based on Longoria’s agreement to cooperate with the SEC, the Commission did not seek a civil penalty.

With respect to Longueuil, the SEC alleged that in May 2008, while Longueil was working as a managing director at Empire Capital Management LLC (“Empire Capital”), Longueuil received material nonpublic information regarding an earnings report about to be issued by Marvell. Longueuil caused Empire Capital to purchase more than 800,000 shares of Marvell stock. Days later, when Marvell announced better-than-expected quarterly results, Empire reaped a total of more than $2.5 million in profits.

The Final Judgment entered against Longueuil orders him to pay disgorgement in the amount of $250,000, plus prejudgment interest in the amount of $102,832.60, for a total of $352,832.60. Based on Longueuil’s agreement to cooperate with the SEC, the Commission did not seek a civil penalty.

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