Nine Defendants Indicted in $866,000 Insider Trading Conspiracy
CHICAGO — Nine defendants, including four Chicago-area men, have been indicted on fraud charges for allegedly using inside information about an impending corporate acquisition to earn illegal trading profits.
The indictment alleges that SHANE FLEMING, a vice president of corporate sales at Minnesota-based Life Time Fitness Inc., obtained material, non-public information about the potential sale of the company to two private equity firms in 2015. Fleming learned that the sale would likely cause an increase in the company’s stock price, and he shared the inside information with BRET BESHEY, a longtime friend and business partner, the indictment states. Beshey and Fleming agreed to use the information to execute financial trades, and further agreed to share the profits, the indictment charges. Beshey then allegedly shared the information with his girlfriend CHASITY CLARK, his friend and business partner PETER KOURTIS, and Clark’s friend CHRISTOPHER BONVISSUTO.
Kourtis and Bonvissuto agreed to use the information to purchase Life Time Fitness stock options and share the profits with Beshey and Clark, the indictment states. Kourtis then shared the material, non-public information with friends ERIC WELLER, AUSTIN MANSUR, ALEX CARLUCCI and DIMITRI KANDALEPAS, all of whom knew the information came from an insider at Life Time Fitness, and they agreed to use the information to make trades, according to the charges.
The securities purchases were executed before news of the potential sale became public via a media report, which caused the stock price to increase substantially, the indictment states. The defendants earned approximately $866,629 in illegal profits from the trades, the indictment states.
The indictment was returned Sept. 28, 2017, in federal court in Chicago. It charges all nine defendants with conspiracy to commit securities fraud. Arraignments have not yet been scheduled.
“Our economy relies on the integrity of the markets, which is a core principle upon which the American financial system is built,” said Joel R. Levin, Acting United States Attorney for the Northern District of Illinois. “The U.S. Attorney’s Office is committed to aggressively using federal securities laws to hold insiders and investors accountable for using market-moving information to line their own pockets.”
Acting U.S. Attorney Levin announced the charges along with Michael J. Anderson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The U.S. Securities and Exchange Commission provided valuable assistance.
Charged in the conspiracy are Fleming, 54, of Chanhassen, Minn.; Beshey, 44, of Puerto Vallarta, Mexico; Clark, 34, of Puerto Vallarta, Mexico; Bonvissuto, 41, of Buffalo, N.Y.; Kourtis, 51, of Niles, Ill.; Weller, 52, of Hermosa Beach, Calif.; Mansur, 46, of Chicago, Ill.; Carlucci, 51, of Clarendon Hills, Ill.; and Kandalepas, 28, of Schaumburg, Ill.
Each of the defendants also faces individual counts of securities fraud. Fleming and Beshey are each charged with nine counts; Kourtis eight; Weller three; Mansur two; and one each for Clark, Bonvissuto, Carlucci and Kandalepas.
Life Time Fitness owned a chain of fitness centers in the United States and Canada. The company’s common stock traded on the New York Stock Exchange, and options in its stock were traded on the Chicago Board Options Exchange. According to the indictment, Fleming learned on Feb. 23, 2015, that the company was in advanced acquisition negotiations with the private equity firms. Fleming shared the information with Beshey later that day, the indictment states. As other conspirators became aware of the inside information, they made arrangements to execute securities transactions and pay a portion of the proceeds to the fellow conspirator who passed them the tip, the indictment states.
From Feb. 25, 2015, to March 3, 2015, the defendants purchased hundreds of call options in Life Time Fitness stock, the indictment states. On March 5, 2015, the company’s share price was $57.67. After markets closed for the day, the Wall Street Journal published an article about the acquisition discussions. On March 6, 2015, the share price increased to a high of $69.13. On March 16, 2015, Life Time Fitness issued a news release announcing that two private equity firms were purchasing all of the company’s shares for $72.10 per share.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The conspiracy charge carries a maximum sentence of five years in prison. Each count of securities fraud is punishable by up to 20 years in prison. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The government is represented by Assistant U.S. Attorneys John D. Mitchell and William R. Hogan.