SEC Cracks Down on Insider Trading in State
In one of its most aggressive crackdowns on insider trading in California, the Securities and Exchange Commission on Wednesday announced five enforcement actions against 11 people, including a rare criminal case filed against a former director of Koo Koo Roo Inc.
The SEC accused the insiders--including a company controller, an attorney and two outside consultants--of using information that had not been publicly released to buy and sell stock in three companies, pocketing total profits of $300,000.
The three California companies--which were not accused of wrongdoing themselves--included restaurant chain Koo Koo Roo Inc., medical device maker Trimedyne Inc. and medical supplies provider Bio-Dental Technologies Corp.
Valerie Caproni, regional director of the SEC’s Pacific office in Los Angeles, said Wednesday that the actions underscore her commitment to move aggressively against insider trading, which she identified as a top priority when she took the job a year ago.
“It’s my hope that you will see more of these types of actions, both criminal and civil,” Caproni said.
The most serious charges announced Wednesday involve Donald B. Wohl, a Los Angeles investor and former director of Koo Koo Roo, who is accused of making $65,000 in illegal profits.
According to a criminal indictment filed this week, Wohl learned at a March 1998 board meeting that Koo Koo Roo (now based in Irvine and known as Prandium Inc.) was about to name former Chrysler Corp. Chief Executive Lee Iacocca as its new chairman. The announcement would lift Koo Koo Roo’s stock by 70%.
Wohl used the information to buy 50,000 shares three days before Iacocca’s appointment was announced, using brokerage accounts of family members and business associates, according to the indictment.
An attorney for Wohl said he will plead not guilty to the charges at his arraignment July 6.
“He will vehemently and categorically deny any intentional trading on nonpublic information,” said Harriet Leva, an attorney at O’Neill, Lysaght & Sun in Santa Monica. “He believed honestly and in good faith that the news of the change in management had already been made public.” Wohl faces as much as 40 years in prison and $4 million in fines, according to Paul Watford, assistant U.S. attorney in Los Angeles.
The second case involves trading in Irvine-based Trimedyne, whose stock increased nearly fivefold in March 1996 after the company said it had received approval from the Food and Drug Administration for a promising medical laser to treat enlarged prostates.
The SEC charged that Michelle Nguyen, 39, the company’s former controller, learned of the FDA approval before it was publicly announced and bought 4,100 shares, making a profit of $42,000 by selling the stock after the news become public. The complaint also alleges that Nguyen--who was fired in 1996 after the SEC began its investigation--tipped off her brother and sister, who made $41,000 in profits.
Nguyen denies any wrongdoing and says she had no inside information about the FDA approval, according to Scott Wellman, her Irvine attorney. Wellman, who also represents Nguyen’s sister, said he plans to settle both cases and repay the money.
In a related case, the SEC filed civil charges against Raymond G. Kolts, 48, a Glendale attorney who had been doing legal work for Trimedyne when he allegedly learned about the FDA approval, according to the SEC complaint.
Neither Kolts nor his attorney could be reached for comment.
The SEC says Kolts made about $30,000 by buying Trimedyne stock one week before the FDA announcement, then selling the day after the news broke.
The final insider-trading case involves Bio-Dental Technologies, a Rancho Cordova-based dental-supplies manufacturer that was acquired in 1997 by Zila Inc.
According to the SEC complaint, Rocco Anselmo, an executive at Zila, used advance knowledge of the acquisition to buy and sell 10,000 shares in Bio-Dental, making $23,000. He also allegedly told three friends, who also bought shares and pocketed $67,000 in illegal profits, according to the complaint.
The SEC also sued two Zila consultants, William Sklar and John Manion, who allegedly learned about the pending deal and realized profits of $20,000 and $28,000, respectively.
All, except Manion, agreed to settle the charges without admitting wrongdoing, repaying a total of $250,000.
Manion’s attorney denied the allegations.
*
Times staff writer Jeff Leeds contributed to this report.
