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Friday, December 19, 2008

Lawyer Charged with Insider Trading

Associate Charged With Insider Trading
The New York Law Journal by Mark Hamblett - December 19, 2008

A Paul Hastings associate was among four people charged yesterday in a $4.8 million insider trading scheme involving a former Lehman Brothers representative and his wife, who worked at a public relations firm that had information on impending corporate deals. Eric A. Holzer, 34, a Paul Hastings tax associate, was allegedly caught on tape discussing the scheme with Matthew C. Devlin, 35, of Lehman Brothers, whose wife, Nina Devlin, is a partner at the public relations firm Brunswick Group LLC. Mr. Devlin has already pleaded guilty in the case and is cooperating with prosecutors. The criminal complaint against Mr. Holzer was one of three unsealed yesterday in the Southern District charging conspiracy and securities fraud, complaints that allege insider trading on information on 12 impending corporate transactions obtained by Mr. Devlin from Ms. Devlin, who is not charged in the case and is reported by her lawyer to be "devastated" by the revelations. A companion civil suit filed by the Securities and Exchange Commission in the Southern District details illegal trading on 13 impending transactions that Mr. Devlin learned about from his wife. (See the SEC's press release and complaint.) Mr. Devlin allegedly referred to his wife as the "golden goose" for the information she provided, information the SEC said he used to curry "favor with his friends and business associates and received in return cash, luxury items and other benefits."

A second lawyer was named as a relief defendant in the SEC suit, Lee H. Corbin of Kurzman Eisenberg Corbin & Lever. A relief defendant is someone who has obtained funds as part of the alleged securities violations by the named defendants "under circumstances in which it is not just, equitable or conscionable for them to retain the illegal profits." Relief defendants are not charged criminally, but Mr. Corbin's son, 32-year-old Daniel A. Corbin of Miami Beach, was charged. A call to Lee Corbin and his firm was not returned. Daniel Corbin allegedly provided information to his father that he obtained from Mr. Devlin on three corporate acquisitions and one company's stock repurchase. Also charged in the criminal complaints unsealed yesterday were Jamil A. Bouchareb, 27, of Miami Beach. Daniel Corbin and Mr. Bouchareb were described in the complaint as being day traders. Frederick E. Bowers, 40, a Lehman broker, was also charged. The SEC civil complaint states that the Corbins, Mr. Bouchareb, Mr. Bouchareb's parents and another defendant in that civil case reaped illegal profits of more than $4.2 million on the information. Mr. Holzer is accused in the criminal complaint of buying shares in three different companies between 2004 and 2005 - InVision Technologies Inc., Eon Labs and Abgenix Inc. The trading was done on three accounts, two in Mr. Holzer's name and a third in the name of his parents that was maintained for Mr. Holzer's benefit.

Criminal Complaint

FBI Special Agent Michael T. Ryan said in the criminal complaint that Mr. Holzer purchased stock in three companies and then cashed in on the good news he knew would soon be announced. All told, Agent Ryan said Mr. Holzer and his parents made $175,000. Mr. Holzer was accused of proposing a scheme to pay Mr. Devlin for the information by buying and selling stocks on his behalf, and, on at least one occasion, paid him $1,000 in cash from trades. Mr. Devlin, listed as only Confidential Witness-1 (CW-1) in the criminal complaint, informed Mr. Holzer that Mr. Holzer's name had appeared on a watch list at Brunswick, a list of people whose trading had attracted attention. At that point, Agent Ryan said, they agreed Mr. Holzer would stop receiving inside information. Agent Ryan said that in a taped conversation on Sept. 4, in which Mr. Devlin wore a wire, Mr. Devlin brings up the watch list and said to Mr. Holzer, "Remember, and that's why we stopped?" "Yeah?" Mr. Holzer replied. Then Mr. Devlin said he wanted to make sure "you have a backstory if anybody ever comes to you and says why you bought X, Y, Z." After a brief exchange, Mr. Holzer said, "Oh yeah, I've got a backstory. Oh yeah, I'm not worried about it, my heart almost dropped." Mr. Holzer then said, "That was probably over two years ago, right? That was a long time ago."

A spokeswoman for Paul Hastings released a brief statement saying, "We learned today of allegations against an associate of the firm, which have no connection to any firm or client matters. We will cooperate fully with the authorities in any investigation." Ms. Devlin is represented by James Benjamin of Akin Gump Strauss Hauer & Feld. "Nina Devlin is devoted to her clients and colleagues and has always sought to uphold the highest standards of professionalism in her work," Mr. Benjamin said. "She was completely unaware that confidential information about her job was being used as the basis for securities trading. She is devastated by this terrible situation." Mr. Holzer and the three criminal defendants were also named in the SEC suit along with Mr. Devlin, broker-dealer Thomas R. Faulhaber, 44, of New York, broker-dealer Jeffrey R. Glover, 46, of Texas, and Corbin Investment Holdings LLC and Augustus Management LLC. Mr. Bowers made his initial appearance before Southern District Magistrate Judge Gabriel Gorenstein late yesterday. Mr. Holzer had yet to appear in court by press time. The case is being handled by Assistant U.S. Attorneys Joan M. Loughnane and Reed M. Brodsky.


Anonymous said...

No surprise here. The shock will be when 'officers of the court' STOP things like this from happening.

Anonymous said...

All of a sudden Bernie Madoff hits the front page and now we start to hear about these other small time bums, there are many more Madoff's out there, go get them! Stop with the press releases to make yourself look good, we see right through it all!

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