Mark K. Schonfeld, Director of the Commission’s Northeast Regional Office said, “It is particularly troubling when accountants or corporate executives, who are entrusted with confidential information, believe they can illegally trade on such information with impunity. This action demonstrates that illegal insider traders should expect a comprehensive and rigorous enforcement response.”
Specifically, the Commission’s complaint alleges the following:
- On or about Sept. 21, 2004, Herwitz learned about the Sirius negotiations and contract offer in the course of his employment with Mahoney Cohen. Mahoney Cohen’s chief executive officer, who was also Stern’s long time personal accountant, told Herwitz that Stern was in negotiations with Sirius, that Sirius had made Stern an offer, and that he was working on the transaction. Herwitz’s colleague admonished him to keep the information confidential. On or about Sept. 23, 2004, the Mahoney Cohen CEO again informed Herwitz that he was still working on the transaction between Sirius and Stern.
- On Sept. 30, 2004, Herwitz purchased 25,000 Sirius shares at $3.19 a share. When Herwitz purchased Sirius shares on Sept. 30, 2004, he was aware of material nonpublic information about Sirius’s negotiations with, and offer to, Stern. Between Nov. 19, 2004, and Jan. 10, 2005, Herwitz sold 22,500 of those Sirius shares for a profit.
- In early September 2004, Stanyer learned from a senior Sirius executive that company executives were in negotiations with Stern. Stanyer learned this information in connection with his corporate duties at Sirius and was specifically cautioned that the negotiations were confidential. On or about Oct. 5, 2004, Stanyer learned from the same executive that Sirius had signed an agreement with Stern.
- On Oct. 5, 2004, Stanyer purchased 29,120 Sirius shares at prices ranging between $3.28 and $3.32 a share. At the time of his purchase, he was aware of material nonpublic information about Sirius’s offer to Stern. On Oct. 7 and 8, 2004, Stanyer sold his 29,120 Sirius shares for a profit.
Herwitz and Stanyer have agreed to settle the Commission’s claims by consenting to the entry of separate judgments that permanently enjoin each of them from violating the antifraud provisions of the federal securities laws. The judgment against Herwitz also orders him to pay $18,163 to disgorge fully his profits plus prejudgment interest and to pay civil penalties in the amount of $34,000. Similarly, the judgment against Stanyer orders him to pay $17,897 to disgorge fully his profits plus prejudgment interest and to pay civil penalties in the amount of $17,357. The judgment against Stanyer also bars him from acting as an officer or director of a public company. This concludes the staff’s investigation of this matter.
The Commission acknowledges the assistance and cooperation of the United States Attorney’s Office for the Eastern District of New York and the Federal Bureau of Investigation in this matter.
Additional materials: Litigation Release 19499
