Broker/Dealer and Investment Advisor Fraud, Mismanagement and Misrepresentation FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.
SEC v. Mark Anthony Longoria, et al., Civil Action No. 11-CV- 0753 (SDNY) (JSR)
SEC Obtains Final Judgments on Consent against Jason Pflaum and Walter Shimoon
The SEC recently announced that the Honorable Jed S. Rakoff, United States District Judge, United States District Court for the Southern District of New York, entered a Final Judgment on Consent as to Jason Pflaum (“Pflaum”) on February 21, 2012, and a Final Judgment on Consent as to Walter Shimoon (“Shimoon”) on February 24, 2012, 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 employees of the so-called “expert network” firm, Primary Global Research LLC (“PGR”), 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, Seagate Technology, Western Digital, Fairchild Semiconductor, and Marvell Technology Group. The charges were the first against traders in the SEC’s ongoing investigation of insider trading involving expert networks.
The SEC alleged that from approximately 2008 through 2010, Pflaum, a former analyst at Barai Capital Management (“Barai Capital”), received material nonpublic information regarding several publicly traded securities and, along with co-defendant Samir Barai, caused Barai Capital to execute securities trades based on that information. In December 2010, Pflaum pleaded guilty to conspiracy and securities fraud in a parallel criminal case, United States v. Pflaum, 11 Cr. 01265 (JGK), arising from the same conduct. Pflaum has been cooperating with the Government and the SEC in connection with the criminal and civil prosecution of several former employees and clients of PGR and other related investigations.
The Final Judgment against Pflaum: (1) permanently enjoins him from violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and Exchange Act Rule 10b-5; and (2) orders him to pay disgorgement in the amount of $101,943.00 plus prejudgment interest thereon in the amount of $11,872.38, for a total of $113,815.38. Based on Pflaum’s agreement to cooperate with the SEC, the SEC did not seek a civil penalty. Separately, Pflaum has also consented to the entry of an order by the SEC instituting administrative proceedings pursuant to Section 203(f) of the Investment Advisers Act of 1940 and barring Pflaum from association with any investment adviser, broker, dealer, municipal securities dealer, or transfer agent.
With respect to Shimoon, a former Vice President of Business Development at Flextronics International Ltd., and also a paid consultant for PGR, the SEC alleged, among other things, that from at least the second half of 2008, Shimoon provided detailed material nonpublic information concerning Flextronics and its customers to co-defendant Bob Nguyen (a PGR employee) and to PGR’s hedge fund clients. The SEC further alleged that PGR’s hedge fund clients traded on the basis of the information Shimoon provided. In July 2011, Shimoon pleaded guilty to conspiracy and securities fraud in a parallel criminal case, United States v. Shimoon, 11 Cr. 00032 (JSR), arising from the same conduct. Shimoon has been cooperating with the Government and the SEC in connection with the criminal and civil prosecution of several former employees and clients of PGR and other related investigations.
The Final Judgment against Shimoon: (1) permanently enjoins him from violations of Section 10(b) of the Exchange Act, and Exchange Act Rule 10b-5; (2) orders him to pay disgorgement in the amount of $44,175.00, plus prejudgment interest thereon in the amount of $6,099.39, for a total of $50,274.39; and (3) permanently bars him from acting as an officer or director of a public company. Based on Shimoon’s agreement to cooperate with the SEC, the SEC did not seek a civil penalty.