23 August – LAWFUEL – The Law News Network – An Arcadia man who obtained inside information concerning mergers and acquisitions of publicly traded companies has been sentenced to 18 months in federal prison for misusing that information to make stock transactions that garnered him approximately $785,000 in illegal profits.
Ernesto V. Sibal, 33, a former associate at the investment banking firm Chanin & Company LLC, was sentenced late Monday afternoon by United States District Judge Audrey B. Collins. In addition to the prison term, Judge Collins ordered Sibal to pay a $7,500 fine. Previously, Sibal agreed to forfeit to the government more than $800,000 in ill-gotten gains and to pay a $150,000 civil penalty to the Securities and Exchange Commission.
Sibal pleaded guilty in June to conspiring to commit securities fraud and wire fraud. He and four other men participated in an insider trading scheme that used non-public information obtained from two investment banking firms to trade stocks and collectively earn profits of more than $970,000.
In addition to engaging in the insider trading scheme, government prosecutors alleged in court papers that Sibal obstructed justice by lying to the SEC, which was investigating him for insider trading. While under oath in an SEC proceeding, Sibal failed to disclose that he had inside information and instead testified that he purchased shares of two companies after overhearing people discuss upcoming corporate acquisitions at a Starbucks in Pasadena and another in New York, according to the court papers.
Three other defendants in the case, who also pleaded guilty to conspiring to commit securities fraud and wire fraud, are:
* Doseph Joshua Shin, 31, of Las Vegas, Nevada, who was an analyst at Chanin;
* Benjamin Y. Chiu, 32, of Northridge, who was an associate at Houlihan Lokey Howard & Zukin; and
* Chae-Hyon “Jason” Chin, 27, a Los Angeles a small-business owner.
* Judge Collins is scheduled to sentence Shin on September 19. Chiu and Chin are scheduled to be sentenced on October 3.
* A fifth defendant in the case – Robert Yuen Joo, 27, of La Palma, California, who was an analyst at Houlihan – pleaded guilty to conspiracy to commit securities fraud and obstruction of justice. Joo is scheduled to be sentenced by Judge Collins on October 24.
* The insider trading scheme relates to mergers involving three of Houlihan’s publicly-traded clients, and a publicly-traded company whose bondholders were represented by Chanin. The four clients are:
* ! Houlihan client The DeWolfe Companies, Inc., a residential real estate brokerage, mortgage banking, insurance, moving and relocation company, which was acquired by NRT Incorporated, a subsidiary of Cendant Corporation, in a deal announced on August 12, 2002;
* ! Houlihan client Prime Retail, Inc., once the largest owner of factory outlet centers in the United States, which was acquired by the Lightstone Group in a deal announced on July 8, 2003;
* ! Houlihan client Airborne, Inc., the third largest overnight air carrier in the United States, the ground operations of which were acquired by DHL Worldwide Express B.V. in a deal announced on March 25, 2003; and
* ! NCS Healthcare, Inc., a leading provider of pharmacy and related services, whose bondholders were represented by Chanin in connection with a potential acquisition by Genesis Health Ventures Inc., first announced on July 29, 2002.
* During the course of the scheme, Joo misappropriated material, non-public information from Houlihan concerning the DeWolfe, Prime Retail and Airborne deals, and shared some of the information with his then-roommate Shin and others. Shin traded on the inside information he had received from Joo, making substantial profits and paying kickbacks to Joo. Shin also tipped others, including Sibal and Chin, with the inside information he had received from Joo. Sibal and Chin traded on the inside information, making substantial profits and sharing their profits with Shin and Joo.
* Shin misappropriated material non-public information from Chanin concerning the NCS transaction and shared it with his then-roommate Joo. Joo shared the inside information with Chiu, who subsequently made stock trades. Out of his profits, Chiu paid a kickback to Joo and Shin.
* The criminal case was investigated by the Federal Bureau of Investigation.