29 April – LAWFUEL – The Law News Network – Five men who participated in an insider trading ring that used non-public information obtained from two investment banking firms to trade stocks and collectively earn profits of more than $970,000 have been charged with conspiring with each other to commit fraud.
The cases filed in United States District Court in Los Angeles allege an insider trading ring that centered around two Los Angeles-based investment banks – Houlihan Lokey Howard & Zukin and Chanin & Company LLC.
The defendants facing criminal charges are:
* Robert Yuen Joo, 27, of La Palma, California, who was an analyst at Houlihan;
* Doseph Joshua Shin, 31, of Las Vegas, Nevada, who was an analyst at Chanin;
* Ernesto V. Sibal, 33, of Arcadia, California, who was an associate at Chanin;
* Benjamin Y. Chiu, 32, of Northridge, California, who was an associate at Houlihan; and
* Chae-Hyon “Jason” Chin, 27, a Los Angeles, California, a small business owner.
* Joo was indicted Tuesday by a federal grand jury in Los Angeles. The eight-count indictment accuses Joo of conspiracy to commit securities fraud and wire fraud, four substantive counts of securities fraud, conspiracy to obstruct the SEC’s investigation of this matter and two counts of making material false statements under oath to the SEC and FBI.
* Sibal, Shin, Chiu and Chin all have agreed to plead guilty to conspiring to commit securities fraud and wire fraud, and they will be directed to appear in court in the coming weeks.
* 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.
* The criminal charges allege that 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.
* It is further alleged that 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.
* Joo, who surrendered this morning to federal authorities, is expected to make his initial court appearance this afternoon in federal court in Los Angeles. If convicted of the eight charges in the indictment, Joo faces up to 55 years in federal prison.
* An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
* Sibal, Shin, Chiu and Chin have agreed to plead guilty to a conspiracy count that carries a maximum penalty of five years in federal prison and a fine of up to approximately $2 million. During the course of the investigation, the government seized a number of assets from Sibal, including his Charles Schwab brokerage accounts, valued at approximately $650,000, and a BMW X-5 automobile. As part of his plea agreement with prosecutors, Sibal has agreed to forfeit these items to the government. All four defendants also have agreed to pay full restitution to the victims of the offense.
* The criminal case was investigated by the Federal Bureau of Investigation.
* In a related move, the United States Securities and Exchange Commission filed suit against the five criminal defendants and a sixth man. All of the defendants, except Joo, have agreed to settle the SEC’s lawsuit and have consented to the entry of permanent injunctions prohibiting them from further violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The settling defendants have agreed to pay a total of $1,111,515 in disgorgement, prejudgment interest and penalties.
* CONTACT: Assistant United States Attorney Douglas Axel
* (213) 894-0689
* Release No. 05-066