U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21629 / August 18, 2010
Securities and Exchange Commission v. James E. Gansman et al., Civil Action No. 08-CV-4918 (S.D.N.Y.) (PKC)
FORMER ERNST & YOUNG PARTNER AND FORMER STOCKBROKER SETTLE SEC INSIDER TRADING CHARGES
The Securities and Exchange Commission announced today that on August 16, 2010, the Honorable P. Kevin Castel of the United States District Court for the Southern District of New York, entered final judgments against James E. Gansman and Donna B. Murdoch in SEC v. Gansman et al., 08-CV-4918, an insider trading case the Commission filed on May 29, 2008. The Commission charged Gansman, who was an attorney and partner in the Transaction Advisory Services group at Ernst & Young, with having tipped Murdoch, who was a stockbroker and close friend of Gansman, concerning the identities of at least seven different acquisition targets of Ernst & Young valuation services clients. The complaint further alleged that two of the seven acquisitions were tender offers; that Murdoch used Gansman’s tips to trade in the securities of all seven of the acquisition targets; and that Murdoch also tipped her father, Gerald Brodsky, concerning one of the acquisitions and recommended trading in two of the acquisition targets to two other persons; and, finally, that all three persons then traded on Murdoch’s communications.
To settle the Commission’s charges, Gansman and Murdoch each consented, without admitting or denying the allegations in the Commission’s complaint, to a separate final judgment that permanently enjoins each, respectively, from violating Exchange Act Sections 10(b) and 14(e) and Rules 10b-5 and 14e-3 thereunder. The final judgment to which Gansman consented further orders him to pay disgorgement of $233,385 together with $16,470 in prejudgment interest thereon, and $145 in post-judgment interest, but allows him one year from the entry of the final judgment to satisfy this payment obligation—with $200,000 due within ten days, and the remainder due within one year, of the entry of the final judgment. The final judgment to which Murdoch consented further orders that she is liable for disgorgement of $339,110 together with $64,943.52 in prejudgment interest thereon, but, based on her demonstrated inability to pay, waives payment of disgorgement and prejudgment interest and does not impose a civil penalty. Because a default judgment was previously entered against the sole other defendant in the Commission’s case, Gerald Brodsky, the settlements announced today conclude this litigation. Additionally, Gansman and Murdoch each consented, in related administrative proceedings, to the entry of a Commission order that, in the case of Gansman, suspends him from appearing or practicing before the Commission as an attorney, and in the case of Murdoch, bars her from association with any broker or dealer.
Gansman and Murdoch were also each prosecuted criminally by the United States Attorney’s Office for the Southern District of New York. In that parallel criminal prosecution, Gansman was convicted by a jury on May 15, 2009, following a two-week trial, on six felony counts of having tipped Murdoch; he was sentenced in February 25, 2010 to a year-and-a-day in prison, six months probation, and a $600 special assessment, and is currently incarcerated. For her part, Murdoch pled guilty to seventeen counts of a superseding information on December 23, 2008—including fifteen counts of securities fraud, one count of false statements, and one count of obstructing the Commission’s investigation—and is awaiting sentencing.
The Commission acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, the Financial Industry Regulatory Authority (“FINRA”), and the Options Regulatory Surveillance Authority (“ORSA”) in this matter. The Commission’s investigation of this matter is continuing.
See also Litigation Rel. Nos. 20603 (May 29, 2008) and 21059 (May 27, 2009).