UPDATE 2-SEC loses insider trading case against NY fund manager

Fri May 30, 2014 6:13pm EDT

(Updates with comment from SEC, paragraphs 6, 7)

By Nate Raymond

NEW YORK May 30 (Reuters) - The U.S. Securities and Exchange Commission suffered a loss on Friday when a jury cleared a New York hedge fund manager and two others accused of engaging in a $1.3 million insider trading scheme in 2001.

A federal jury in Manhattan found Nelson Obus, a fund manager at Wynnefield Capital Inc, not liable on an SEC claim he traded on inside information about a takeover of industrial products supplier SunSource Inc.

The jury also found Peter Black, a Wynnefield analyst, and Thomas Strickland, a former employee at General Electric Co's GE Capital who worked on the deal, not liable on insider trading charges.

Obus hugged his lawyer after the verdict was read. Outside the courtroom, he criticized the SEC for engaging in a "12-year campaign of regulatory overreach." He promised to push for policy changes "to ensure this doesn't happen again."

"There's no better use of one's wealth than to clear one's name and reputation," he said.

Mark Cohen, Black's lawyer, said his client was "looking forward to getting on with his life."

John Nester, a spokesman for the SEC, said the agency was "disappointed" but respected the verdict.

SEC Chair Mary Jo White has been pushing to strengthen enforcement and take more cases to trial. This fiscal year, the SEC has already finished 23 trials including the Obus case, compared to 16 all of last year.

On May 12 in the same Manhattan courthouse, a jury found Texas businessman Samuel Wyly and the estate of his brother, Charles, liable for fraud in connection with undisclosed stock trading in offshore trusts.

The SEC filed its lawsuit against Obus, Black and Strickland in 2006 after years of investigation focused on the $72 million buyout of SunSource by private equity firm Allied Capital Corp.

GE Capital was a lender to SunSource on the deal. After Strickland was assigned to it, he called Black, a college friend, on May 24, 2001.

The SEC says on the call, Strickland disclosed the deal to Black, who in turn told Obus, who already had funds invested with SunSource.

Obus then called SunSource's chief executive, Maurice Andrien. During trial, Andrien testified that when he called back, Obus told him a "little birdie" said SunSource was going to be sold.

The SEC said Obus relied on that tip in directing Wynnefield to buy a large block of SunSource stock on June 8. The merger was announced 11 days later.

The defendants argued that Strickland called Black not to provide a tip but to ask about SunSource's management after he noticed his friend's fund had a large stake in it.

The defendants said Obus called Andrien after learning GE was looking to do business with SunSource to express concerns about the company taking on debt, not to discuss merger plans.

The case is Securities and Exchange Commission v. Obus et al, U.S. District Court, Southern District of New York, No. 06-03150. (Reporting by Nate Raymond in New York; Editing by Noeleen Walder, Jonathan Oatis and David Gregorio)

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Comments (4)
digressor wrote:
That just wouldn’t do to put a thief and a liar in jail. He’s a banker for God’s sake. You can’t put a rich banker in jail. this country has to respect it’s royalty. They are immune from prosecution. It’s God’s law. They’re better than us.

May 30, 2014 10:18pm EDT  --  Report as abuse
digressor wrote:
That just wouldn’t do to put a thief and a liar in jail. He’s a banker for God’s sake. You can’t put a rich banker in jail. this country has to respect it’s royalty. They are immune from prosecution. It’s God’s law. They’re better than us.

May 30, 2014 10:18pm EDT  --  Report as abuse
Bfstk wrote:
It’s clear the lawyers for the government are no match for a well paid team Nelson Obus having vast resources unlike most people. The government only winds in cases where it can pick on those much lower in the food chain. And so big money triumphs again. He is just misunderstood but a nice chap who used insider info to make a gzillion dollars. We’ve heard this mantra before and we’ll be hearing it again. Meanwhile, virtually none of the key players whonearly destroyed the American economy are in jail. They are back making more money than ever and fooling people into buying more stocks when there are scant profits to support the prices. Georg Bernard Shaw pointed out how this works in Major Barbara many years ago and if you haven’t read or seen do so soon.

Jun 01, 2014 2:20am EDT  --  Report as abuse
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