SEC Settles Case Related to MCA Deal : Investigations: Four men accused of insider trading agree to pay $1.3 million. One is Jonathan Sheinberg, son of MCA’s president.
The son of MCA President Sidney J. Sheinberg and three others agreed Thursday to pay $1.3 million to settle government insider-trading charges related to the 1990 acquisition of MCA by Japan’s Matsushita Electric Industrial Co.
Jonathan J. Sheinberg, 34, an agent with the William Morris Agency, and three associates were charged in a civil complaint filed by the Securities and Exchange Commission on Thursday. They immediately settled without admitting guilt.
The three other defendants are Barry Fogel, 34, of Los Angeles, owner of the trendy Jacopo’s Pizzerias chain of restaurants and a friend of Jonathan Sheinberg’s ex-wife; business manager Richard E. Shephard, 39, of Los Angeles, and Richard G. Ursitti, 58, of Pasadena, who has since become Jonathan Sheinberg’s father-in-law.
Sheinberg’s attorney, Theodore A. Levine, and lawyers for the other defendants maintained that their clients chose to settle because of the high costs involved in fighting the case and the disruption it has brought to their lives.
According to the complaint, Jonathan Sheinberg passed along information that he learned during a visit to his parents’ home on the night of Sept. 21, 1990. While there, the junior Sheinberg overheard his father discussing the merger talks on the phone.
The conversation came two days after an important meeting at which powerful Hollywood agent Michael Ovitz, who helped broker the deal, told Sidney Sheinberg and investment banker Felix Rohatyn that Osaka-based Matsushita would consider buying MCA, the parent of Universal Studios.
After finishing his telephone conversation, the SEC said, Sidney Sheinberg was told by his wife, actress Lorraine Gary, that their son may have overheard all or part of his talk. Sidney Sheinberg then warned his son to keep it to himself and to refrain from trading MCA stock, the complaint says.
But within 72 hours, the SEC alleged, Jonathan Sheinberg told several people about the discussions, including Fogel, Shephard and Ursitti.
All of the purchases were made in the two days before news of the Matsushita-MCA negotiations was first published in the Wall Street Journal, which caused MCA’s stock to shoot up to $54. In a single day, the stock and options the three men bought soared $417,988 in value. Jonathan Sheinberg did not personally profit from the information, the SEC said, but did break the law by passing it on.
Although all the purchases took place in the two days before the talks became public, the SEC in its complaint does not allege that any of the defendants leaked the news. Sources familiar with the case added that they do not believe that any of the defendants leaked it. Matsushita eventually paid $6.6 billion, or $66 a share, for MCA.
The settlement includes disgorged profits, interest and penalties. Jonathan Sheinberg’s penalty is $417,988, the same as the total of trading profits for the others.
