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 individuals, including a seldom-seen criminal case against a former director of Koo Koo Roo Inc.
The SEC accused the insiders--including a former controller at Irvine-based Trimedyne Inc.--of using information that had not been publicly released to buy and sell stock in three separate companies, pocketing a total of $300,000 in profit.
The companies--which were not accused of any wrongdoing themselves--included restaurant chain Koo Koo Roo, which is now part of Irvine-based Prandium Inc., medical device maker Trimedyne, and medical supplies provider Bio-Dental Technologies Corp., based in Northern California.
Valerie Caproni, regional director for the SEC’s Pacific office in Los Angeles, said the statewide enforcement actions underscore her commitment to acting aggressively against insider trading, which she identified as a top priority when moving into 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 Wednesday, adding that she plans to work closely with U.S. Atty. Alejandro N. Mayorkas in bringing additional criminal insider trading cases. “It’s very important to us to make sure that the market is fair.”
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 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. “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.
A separate civil case against Wohl was settled after he agreed to pay $133,000 in profits and fines, SEC officials said.
The second case involves trading in 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 new medical laser for the treatment of prostate enlargement.
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, earning a profit of $42,000 by selling the stock after the news became public. The complaint also alleges that Nguyen--an Orange resident who was fired in 1996 after the SEC began its investigation--tipped off her brother and sister, who earned $41,000 in profits through similar buying and selling.
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 some 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 earned about $30,000 by buying Trimedyne stock one week before the FDA announcement and then selling the shares 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 his 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 of the individuals in the case, except Manion, agreed to settle the charges without admitting any wrongdoing, repaying a total of $250,000.
Manion’s attorney denied the allegations. “Mr. Manion did not use any inside information to conduct any securities transaction,” attorney John Schlie said. Separately, Manion was indicted last week in New York for securities fraud involving microcap stocks.
Times staff writer Jeff Leeds contributed to this story.
Times staff writer Edmund Sanders can be reached at edmund.sanders@latimes.com.
