The brother-in-law of a former Caxton-Iseman Capital executive has settled a complaint filed by the Securities and Exchange Commission that alleges he stole insider information from the private equity executive’s computer and used it to realise more than $22,000 (€13,752) in stock profits.
Without admitting or denying the allegations, Ohio day trader Michael Stummer agreed to pay more than $46,000 in penalties, representing the disgorgement of his illegal trading profits and a civil penalty equal to the profits. The settlement awaits final approval in Manhattan federal court.
CI Capital Partners, formerly Caxton-Iseman until spinning out of Caxton Associates in 2007, could not be reached for comment.
The charges relate to Stummer’s trading activity immediately preceding the 2006 acquisition of Ryan’s Restaurants by Caxton-Iseman portfolio company Buffet Holdings.
According to the SEC complaint, during a weekend Stummer and his family spent in July 2006 at his brother-in-law’s New York residence, Stummer snuck into his brother-in-law’s bedroom office without permission and correctly guessed the office computer password.
The SEC said Stummer subsequently opened several emails containing privileged information concerning the $847 million acquisition. He allegedly accessed a confidentiality agreement, an enterprise value calculation and a 2 June 2006 confidential memo to Ryan proposing a 45-day negotiation period in advance of a possible transaction to combine business operations.
On 21 July and 24 July, Stummer allegedly went on to purchase 5,500 shares of Ryan stock on NASDAQ, just days before the 25 July public announcement of the deal. Immediately after the announcement, Stummer sold his entire position in Ryan for a total profit of $22,351, according to the SEC complaint.
Although the SEC complaint did not disclose the identity of the Caxton-Iseman executive, it did say that the executive served on Buffet Holdings board of directors. Caxton chairman Frederick Iseman, president Steven Lefkowitz, and managing director Robert Ferris all served on Buffet Holdings’ board.
According to CI Capital Partners’ website, Lefkowitz is originally from Columbus, Ohio, where Stummer currently lives. The website of business magazine Conde Nast Portfolio named Lefkowitz as the Caxton executive in the SEC complaint.