Four Defendants, Including Two Cpas and a Lawyer, Sentenced for Insider Trading in the Options of Their Client Companies and Employer
Ringleader Receives a Five-Year Prison Year Sentence
Today in federal court in Brooklyn, United States District Judge John Gleeson sentenced ZVI ROSENTHAL, AMIR ROSENTHAL, and DAVID HEYMAN for trading in the securities of three publicly held companies using misappropriated confidential information. ZVI ROSENTHAL, a former vice president at Taro Pharmaceutical Industries, Ltd. (“Taro”) was sentenced to five years in prison and a $100,000 fine. His son, AMIR ROSENTHAL, an attorney in New York City, received thirty-three months in prison and a $75,000 fine. DAVID HEYMAN, formerly an accountant at Ernst & Young, received a fifteen month sentence. On May 30, 2007, AYAL ROSENTHAL, another son of ZVI ROSENTHAL and former PricewaterhouseCoopers accountant, received a two month sentence. The defendants pled guilty on February 8, 2007.
“When licensed professionals or corporate insiders abuse their positions of trust for personal profit, they will face prompt investigation and prosecution,” stated Roslynn R. Mauskopf, United States Attorney for the Eastern District of New York. “We are committed to combating insider trading and bringing to justice those who choose to defraud the financial markets.” Ms. Mauskopf expressed her grateful appreciation to the Federal Bureau of Investigation, the U.S. Securities and Exchange Commission, and the Chicago Board Options Exchange for their assistance in the case.
The government’s investigation revealed that the ROSENTHALS and HEYMAN operated an insider-trading ring in which they stole confidential information from certain of their employers and used it to profit in the securities markets. While working at Taro, ZVI ROSENTHAL had regular access to confidential information concerning the expected approval of Taro’s application to the Federal Drug Administration (“FDA”) to market a new generic drug and Taro’s forthcoming quarterly earnings announcements. ZVI ROSENTHAL passed this information to his son AMIR ROSENTHAL, who quickly executed transactions in Taro options before the FDA’s approval and the company’s financial results were made public. AMIR ROSENTHAL passed this inside information to his friend, DAVID HEYMAN, who likewise placed profitable options trades before the public release of the information. Subsequent publicly disseminated news of the FDA approval and the company’s financial results caused substantial fluctuations in the price of Taro’s securities.
The investigation also disclosed that when HEYMAN, as part of his work at Ernst & Young, learned that two large, publicly held corporations were contemplating an imminent merger, he communicated this information to AMIR ROSENTHAL, who promptly executed options trades with the hope of profiting when the share price of one of the merger partners rose. Similarly, when AYAL ROSENTHAL, while working at PricewaterhouseCoopers, received confidential information that two other companies were contemplating a merger, he immediately informed AMIR ROSENTHAL, who again executed options trades to profit if the share price of one of the merger parties rose.
The defendants collectively reaped more than $2 million in profits from the insider trading scheme.
The United States Securities & Exchange Commission filed a related civil case against the defendants and others in February 2007.
The government’s criminal case was prosecuted by Assistant United States Attorneys Paul Weinstein and Sean Casey.
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