SEC Alleges Insider Trading, Seeks $4.5 Million : Securities: Agency calls case ‘a classic.’ Fourteen people from the L.A. area are charged.

The Securities and Exchange Commission on Thursday filed charges against 18 people--14 from the Los Angeles area--for allegedly trading in Motel 6 securities based on confidential information about an impending deal to acquire the company.

The commission said it is seeking $4.5 million in “illegal profits” reaped by the defendants and people they tipped through trading in Motel 6 securities in 1990 at the time of the offer. Motel 6 was acquired by Accor, a French company, in August, 1990.

“This is a classic insider trading case involving the breach of fiduciary duty of a high-level corporate insider,” said Richard H. Walker, New York regional administrator of the SEC. He said the case should give pause to those who believe that they are getting a hot stock tip based on inside information.

The source of the inside information, the SEC charged, was Hugh Thrasher, a Dallas-based executive vice president for Motel 6 responsible for development, marketing and corporate communications.

Alleged beneficiaries of the information included Scott Forbes, a co-owner of the West Hollywood disco Studio One, and Gregg R. Shawzin, a Beverly Hills commodities broker who owns a firm called Futures-Link.

Motel 6 said Thursday morning that it had cooperated fully in the SEC investigation. Later in the afternoon, Motel 6 added that Thrasher had been suspended from his duties. Thrasher, along with all the other defendants, couldn’t be reached for comment.

Thrasher allegedly disclosed details of the proposed acquisition, including the timing and proposed price per share, to Carl Harris, a friend who in 1990 was sick with AIDS. Harris died in April.

From Harris, the tip allegedly traveled to other participants in the scheme, many of whom were wrongly led to believe that the source of the information was the son of a Motel 6 insider.

The SEC charged that Thrasher, who financially supported Harris and paid for some of his medical expenses, “benefited directly” from leaking the information to Harris because “the illegal profits to be reaped from his tip was a means of providing Harris with additional financial support.”

Over the years, according to the complaint, Thrasher had given Harris presents of clothing and jewelry, including a $7,000 watch and cash gifts of at least $75,000. He also provided Harris a loan, from a trust set up for Thrasher’s children, of nearly $27,000, with which Harris bought a BMW convertible. Thrasher is divorced.

Harris, according to the SEC, sold or gave information directly to five of the defendants in the case: his roommates, Jeffrey A. Sanker and Angelo Petrotto, his friend, Guillermo (William) Gomez, broker Shawzin and his step-brother, David Schaen.

From Sanker, the information traveled to defendants Jonathan S. Hirsh, disco owner Forbes, Lee Rosenblatt and Roger K. Odwak, the complaint alleged. Shawzin, who pleaded guilty to related criminal charges Thursday in a plea bargain, allegedly passed on the information to his brother, Mark R. Shawzin; to Michael R. Newman, who in turn passed it to Stanley Elbaum, Robert Sacks, Ronald Kusnetsky and Julian Schor, and to Ira Gorman. And David Schaen allegedly tipped Leonard Schoen, Harris’ step-father.

Newman, Kusnetsky, Sacks and Forbes have already agreed to disgorge their profits.