Washington, D.C., Feb. 5, 2009 (LAWFUEL) – The Securities and Exchange Commission today charged seven individuals involved in an insider trading ring that generated more than $11.6 million in illegal profits and avoided losses.
The SEC alleges that two mergers and acquisitions professionals, Nicos Achilleas Stephanou at UBS Investment Bank and Ramesh Chakrapani at Blackstone Advisory Services, L.P., tipped five individuals including Joseph Contorinis, a portfolio manager for a Jefferies Group, Inc. hedge fund, with material nonpublic information about three impending corporate acquisitions.
“The Commission and the public expect Wall Street professionals to act with the highest degree of ethics and integrity. It is unconscionable when these highly paid individuals abuse their access to sensitive information and enrich themselves at the expense of others,” said Scott W. Friestad, Deputy Director of the SEC’s Division of Enforcement. “As today’s actions demonstrate, we are aggressively working to combat insider trading wherever it occurs and whoever is involved.”
Daniel M. Hawke, Director of the SEC’s Philadelphia Regional Office, said, “These enforcement actions are the direct result of innovative investigative techniques that the SEC is using to identify patterns of unlawful trading and suspicious relationships among traders who, in this case, live around the world. Market professionals who may have engaged in insider trading, or may be tempted to, cannot rest comfortably in the belief that their wrongdoing will go undetected. We will continue to follow leads wherever necessary to unwind intricate schemes and will seek all available remedies against those who engage in unlawful conduct.”
According to the SEC’s complaint, the insider trading ring included:
Nicos Achilleas Stephanou, a resident of the United Kingdom, was an Associate Director of Mergers and Acquisitions at UBS Investment Bank
Ramesh Chakrapani, a resident of the United Kingdom, was a Managing Director in the Corporate and Mergers and Acquisitions group at Blackstone Advisory Services, L.P. and a friend and former colleague of Nicos Stephanou
Joseph Contorinis, a resident of Florida, was a Managing Director at Jefferies & Company, Inc. and portfolio manager for the Jefferies Paragon Fund, and a friend and former colleague of Nicos Stephanou
Achilleas Stephanou, a resident of Cyprus, is Nico Stephanou’s father
George Paparrizos, a resident of Foster City, Calif., is a former classmate of Nicos Stephanou
Konstantinos Paparrizos, a resident of Greece, is the father of George Paparrizos
Michael G. Koulouroudis, a resident of Brooklyn, N.Y., is a close family friend of Nicos Stephanou
Related criminal charges by the U.S. Attorney’s Office for the Southern District of New York were filed today against Chakrapani, Koulouroudis, Contorinis, Achilleas Stephanou, George Paparrizos, and Konstantinos Paparrizos. Simultaneously, criminal charges against Nicos Stephanou were unsealed.
The SEC’s complaint alleges that the illicit trading occurred from at least November 2005 through December 2006 and involved at least the following acquisitions:
Albertson’s Inc. (ABS)
On Monday, Jan. 23, 2006, prior to the opening of trading, ABS issued a press release announcing the acquisition of ABS by a consortium of buyers at $26.29 per share.
Nicos Stephanou had access to material nonpublic information concerning the acquisition of ABS prior to its public release because one of the companies that eventually acquired ABS retained UBS as its financial advisor and Stephanou was a member of the team at UBS that advised the company on the acquisition.
Nicos Stephanou tipped George Paparrizos, Koulouroudis and Contorinis with material nonpublic information about the ABS acquisition, all of whom traded on the basis of that information. Nicos Stephanou also either tipped his father, Achilleas Stephanou, or in an effort to evade detection, Stephanou traded ABS securities in his father’s brokerage account. In addition, Nicos Stephanou either tipped Konstantinos Paparrizos or, in an effort to evade detection, George Paparrizos traded ABS securities in his father’s account.
In particular, after receiving the nonpublic information from Nicos Stephanou, Contorinis caused the Jefferies Paragon Fund to purchase more than 2.6 million shares of ABS at a cost of $59 million.
By virtue of their trading in ABS securities, the defendants made total profits and avoided losses of approximately $7.7 million.
On Dec. 18, 2006, prior to the market open, ELK publicly announced that it had agreed to be acquired by The Carlyle Group for $38.00 per share.
ELK hired UBS as its financial advisor. Through working on the deal himself, through communications with other employees at UBS who advised ELK on the acquisition, and/or by virtue of his access to UBS’ internal files, Nicos Stephanou had access to material nonpublic information regarding ELK’s impending acquisition.
Nicos Stephanou tipped George Paparrizos and Michael Koulouroudis with material nonpublic information about the ELK acquisition. George Paparrizos and Michael Koulouroudis traded on the basis of that information. Nicos Stephanou also either tipped his father, Achilleas Stephanou or, in an effort to evade detection, traded ABS in his father’s brokerage account. In addition, Nicos Stephanou either tipped Konstantinos Paparrizos or, in an effort to avoid detection, George Paparrizos traded ELK securities his in father’s account.
By virtue of this trading in ELK securities, Achilleas Stephanou, George Paparrizos, Konstantinos Paparrizos and Michael Koulouroudis and his family members made total profits of approximately $300,000.
National Health Investors, Inc. (NHI)
On Oct. 10, 2006, NHI publicly announced that its Board of Directors had formed a Special Committee of independent directors, and had retained Blackstone as its financial advisor to evaluate strategic alternatives to enhance shareholder value. NHI also announced that it had received a buyout offer from its CEO offering $30.00 per share in cash, but stated that the offer was inadequate.
Chakrapani had access to material nonpublic information concerning a potential acquisition of NHI as a result of his employment at Blackstone. Chakrapani was a member of the team at Blackstone that advised NHI on its potential acquisition.
Chakrapani tipped Nicos Stephanou with material nonpublic information regarding the potential NHI acquisition, who in turn tipped Koulouroudis with that information. Koulouroudis traded on the basis of this information. Nicos Stephanou also either tipped his father, or in an effort to evade detection, traded NHI in his father’s brokerage account.
By virtue of this trading in NHI securities, Achilleas Stephanou and Koulouroudis and his family members made total profits of $17,000.
Nicos Stephanou, Achilleas Stephanou, George Paparrizos, Konstantinos Paparrizos and Koulouroudis are charged with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Chakrapani and Contorinis are charged with violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC seeks injunctive relief, disgorgement of illicit profits and losses avoided with prejudgment interest, and financial penalties.
On Jan. 13, 2009, the SEC filed a related complaint against Chakrapani alleging, among other things, that he tipped another friend, also an industry professional, with material nonpublic information about the ABS acquisition he learned as a result of his employment. The friend, identified in the complaint as Tippee 1, then traded in his personal account, was responsible for and/or caused trades on behalf of two proprietary trading accounts affiliated with his employer, and tipped or traded on behalf of his parents. The tippees generated a total of approximately $3.6 million in illegal profits. See SEC v. Chakrapani, 09 CV 325 (S.D.N.Y.).
The Commission acknowledges and appreciates the assistance of the U.S. Attorney’s Office and the Federal Bureau of Investigation in connection with this matter.
The Commission’s investigation is continuing.