Guilty Plea Entered to Insider Trading Charges
An executive of a Newbury Park company that makes emergency preparedness kits has pleaded guilty to felony insider-trading charges that could send him to prison for 15 years and bring a fine of more than $1 million.
Kenneth E. Rottenberg, vice president of Survivor Industries Inc., which produces packages for survivors of earthquakes and other disasters, admitted in federal court in Los Angeles last month that he made more than $120,000 in illegal profits on a tip from a friend who was a psychotherapist counseling a top Lockheed Corp. executive.
Rottenberg pleaded guilty to one count of securities fraud and one count of perjury for lying to the Securities and Exchange Commission when questioned under oath about his trading last year before Lockheed’s merger with Martin Marietta Corp.
In addition to a possible prison sentence, he faces a fine of as much as $1.1 million, David Seide, assistant U.S. attorney in Los Angeles, told Reuters news service. Rottenberg is scheduled to be sentenced by U.S. District Court Judge Stephen Wilson on March 11.
A resident of Thousand Oaks, Rottenberg admitted he traded on inside information received from a friend, Santa Monica psychotherapist Mervyn Cooper.
Rottenberg spent $7,000 to purchase 189 Lockheed call options on Aug. 24, 1994, on Cooper’s instruction. Call options allow the holder to buy a stock at a predetermined price before a preset deadline.
Cooper told Rottenberg that he was treating a patient who was a high-level Lockheed executive. The patient, who was not identified in court, had confided to the therapist that Lockheed was about to announce a significant corporate development.
Cooper gave Rottenberg $2,000, and Rottenberg put up $5,000 himself. The men agreed that Rottenberg would open an account in his name alone to make the trade, ensuring that it was concealed from the patient.
By Aug. 31, 1994, after Martin Marietta announced plans to merge with Lockheed, the 189 call options were valued at about $127,500. Rottenberg allegedly also bought 250 common shares of Lockheed.
Rottenberg did not return a phone call to discuss the case. Cooper, who pleaded guilty to insider trading, faces up to 10 years in prison and a $1-million fine.
The SEC has alleged that the two men made a total of $177,000 in illegal profits. Cooper settled the SEC charges without admitting or denying guilt.
Martin Marietta, a Bethesda, Md., defense contractor, completed its acquisition of Lockheed in March 1995. The combined companies are now called Lockheed Martin Corp.
