Securities Law Prof Blog

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

Thursday, May 29, 2008

SEC Charges Ernst & Young Partner with Insider Trading

The SEC alleged in an insider trading case filed today that from at least the summer of 2006 through the fall of 2007, James E. Gansman ("Gansman"), a partner at a Big Four accounting firm, tipped his friend concerning the identities of at least seven different acquisition targets of clients who sought valuation services from the partner's firm in connection with those acquisitions. According to the complaint, knowing the confidential nature of this information, the friend used the information to trade in the securities of the target companies, and made recommendations to others who traded as well, resulting in total illegal trading profits of $596,000.

The complaint alleges that Gansman, a lawyer and a former partner in Ernst & Young LLP's ("E&Y's") Transaction Advisory Services ("TAS") department in New York, learned of each of the pending acquisitions, and the identity of the target companies, through his work at E&Y advising the acquirers. According to the complaint, on numerous occasions, Gansman misappropriated the information about pending acquisitions by tipping defendant Donna B. Murdoch ("Murdoch"), a registered securities professional and Managing Director of a Philadelphia-based broker-dealer and investment banking firm. According to the Complaint, Murdoch used the material, nonpublic information Gansman provided to her, by trading in the securities of at least seven companies that were acquisition targets of E&Y's clients, realizing illegal profits totaling at least $392,035; tipping her father concerning one of the pending acquisitions;and recommending trading in the securities of two of the target companies to other persons, who likewise traded.  In all, the alleged illegal profits flowing from Gansman's tipping of Murdoch totaled at least $596,195.

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