The Securities and Exchange Commission today charged a former director of a Long Island-based vitamin company and others in his family circle with insider trading ahead of the company’s sale to a private equity firm.
The SEC alleges that board member Glenn Cohen learned that NBTY Inc. was negotiating a sale to The Carlyle Group and tipped his three brothers and a brother’s girlfriend with the confidential information. Craig Cohen, Marc Cohen, Steven Cohen, and Laurie Topal all traded on the inside information that Glenn Cohen provided and reaped illicit profits totaling $175,000.
The four Cohens and Topal agreed to settle the SEC’s charges by paying a total of more than $500,000.
“As a board member at NBTY for more than 20 years, Glenn Cohen knew the importance of maintaining the confidentiality of company information. Unfortunately, when presented with exclusive details about an impending sale, he breached his duty to NBTY shareholders in order to enrich his own family members,” said Amelia A. Cottrell, associate director in the SEC’s New York Regional Office. “Directors of public companies who abuse their access to confidential company information at shareholder expense must be held accountable.”
According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Glenn Cohen first learned in May 2010 that NBTY management was negotiating to sell the company. He shared the nonpublic information with his three brothers and Topal, who is the girlfriend of Marc Cohen. All four purchased NBTY shares as a result. The next month, Glenn Cohen attended additional board meetings as negotiations between NBTY and Carlyle progressed. As more information became available to the board, Steven and Craig Cohen purchased additional NBTY shares. On July 15, Carlyle announced its acquisition of NBTY at a per-share price that was 47 percent above the prior day’s closing price, enabling the Cohens and Topal to profit significantly when they all sold their NBTY shares that same day.
The SEC’s complaint charges the Cohens and Topal with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In a settlement that would permanently enjoin them from violations of Section 10(b) and Rule 10b-5, they agreed to the following sanctions:
- Glenn Cohen: penalty of $153,613.25 and barred from serving as an officer or director of a public company.
- Craig Cohen: disgorgement of $71,932, prejudgment interest of $9,606, and a penalty of $71,932.
- Marc Cohen: disgorgement of $21,454, prejudgment interest of $2,865, and a penalty of $21,454.
- Steven Cohen: disgorgement of $60,226, prejudgment interest of $8,042, and a penalty of $60,226.
- Laurie Topal: disgorgement of $21,780, prejudgment interest of $2,908, and a penalty of $21,780.
The Cohens and Topal neither admitted nor denied the charges in the settlement, which is subject to court approval.
The SEC’s investigation has been conducted by Daniel Marcus of the SEC’s Market Abuse Unit in New York along with Alexander Vasilescu and Jacqueline Fine of the New York Regional Office. The case was supervised by Ms. Cottrell and Daniel M. Hawke, chief of the SEC Enforcement Division’s Market Abuse Unit. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of New York, Federal Bureau of Investigation, and Financial Industry Regulatory Authority.