UNITED STATES ATTORNEY’S OFFICE
Southern District of New York
U.S. ATTORNEY PREET BHARARA
FOR IMMEDIATE RELEASE CONTACT: Ellen Davis, Carly Sullivan,
Monday, November 28, 2011 Jerika Richardson
Defendant Reaped More Than $1 Million in Illegal Profits
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JOHN BENNETT, a film producer and former investment professional, pled guilty to conspiracy and securities fraud charges in connection with his participation in an insider trading scheme in which he obtained material, non-public information (“Inside Information”) about mergers and acquisitions from a co-conspirator, Scott Allen, a former consultant at a global human resources consulting firm (the “Consulting Firm”). BENNETT gained more than $1 million in illegal profits from the scheme. He pled guilty today before U.S. District Judge Deborah A. Batts.
Manhattan U.S. Attorney Preet Bharara stated: “John Bennett used his friendship with a well-connected insider to make a quick and easy profit, and despite efforts to conceal the
criminal conduct, meticulous investigation uncovered the scheme. Today’s guilty plea proves yet again that we will continue to root out insider trading wherever it goes on.”
According to documents previously filed in Manhattan federal court:
In his role as a principal of the Consulting Firm, Allen allegedly learned Inside Information concerning the April 2008 acquisition of Millennium Pharmaceuticals, Inc. (“Millenium”), by Takeda Pharmaceutical Company Limited, and the September 2009 acquisition of Sepracor, Inc. (“Sepracor”), by Dainippon Sumitomo Pharma Co., Ltd. Prior to
the public announcements of those acquisitions, Allen disclosed the Inside Information to BENNETT, a longtime friend, who used it to execute securities transactions that earned him over $1.1 million in illegal profits.
For example, between February 29, 2008, and April 2, 2008, BENNETT purchased approximately 1,090 Millennium call options at a total cost of about $17,000. Following the public announcement of the Millennium acquisition on April 10, 2008, Millennium’s stock price rose approximately 50%, and BENNETT sold all of his call options for around $619,000.
Additionally, between May 27, 2009, and July 22, 2009, BENNETT purchased approximately 1,700 Sepracor call options at a total cost of about $227,000. Following the public announcement of the Sepracor acquisition on September 3, 2009, Sepracor’s stock price rose approximately 26%, and BENNETT sold all 1,100 of his unexpired call options for around $682,000.
In exchange for providing the Inside Information, BENNETT gave Allen more than
$100,000 in cash payments that he delivered in person over the course of more than 20 occasions between April 2008 and the summer of 2010.
BENNETT and Allen also attempted to conceal the insider trading scheme from authorities and to avoid detection. For example, in October 2010, when interviewed at his home by FBI agents, Allen falsely claimed that he had not spoken to BENNETT in three or four years.
In fact, he had met with and spoken to BENNETT repeatedly through at least July 2010. Rather than use his cell phone or another phone that was traceable to him, Allen repeatedly communicated with BENNETT in person and contacted him by using a public phone at LaGuardia Airport.
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BENNETT, 48, of Norwalk, Connecticut, pled guilty to two counts of securities fraud and one count of conspiracy to commit securities fraud. The securities fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5 million. The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense.
BENNETT is scheduled to be sentenced by Judge Batts on April 23, 2012, at 11:30 a.m.
Mr. Bharara praised the efforts of the FBI. He also thanked the SEC for its assistance in the investigation.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Richard C. Tarlowe and Marissa Molé Bostick are in charge of the
The charges in a separate Indictment filed against Allen are merely accusations, and
Allen is presumed innocent unless and until proven guilty.