| NEW YORK
NEW YORK May 19 A lawyer for the U.S.
Securities and Exchange Commission told jurors Monday a New York
fund manager had made a "jackpot" $1.3 million trading on inside
information days before a 2001 merger.
At the start of a civil trial in New York federal court
against Nelson Obus, SEC lawyer Paul Kisslinger said the
Wynnefield Capital Inc fund manager made the illegal profits
trading off a tip ahead of the takeover of industrial products
supplier SunSource Inc.
The tip originated with Thomas Strickland, a former employee
at General Electric Co's GE Capital working on the deal,
Kisslinger said. Strickland told his friend Peter Black, an
analyst at Wynnefield, who then told Obus, he said.
"So as you consider this case, remember four things: Tip,
tip, trade, jackpot," Kisslinger told jurors.
But Joel Cohen, a lawyer for Obus, said for his client to be
liable, he would have to be the "most unskilled and lamest
insider trader in history."
Cohen asked jurors to question SEC claims that Obus told top
executives of SunSource and acquirer Allied Capital Corp about
the alleged tip, noting an insider trader normally would keep
something like that secret.
"The problem is, confessing is the opposite of concealing,"
The trial of Obus, Black and Strickland marks the latest
test for the securities regulator amid a push by SEC Chair Mary
Jo White to strengthen enforcement and take more cases to trial.
On May 12, a federal jury sided with the SEC, finding Texas
businessman Samuel Wyly and the estate of his brother, Charles,
liable for fraud in connection with undisclosed stock trading in
Filed in 2006, the lawsuit in the Obus case centers on the
2001 $72 million buyout of SunSource by private equity firm
Allied Capital. GE Capital was a lender to SunSource during the
Kisslinger told jurors Monday that after Strickland began
working on the deal, he called Black, a friend from college, and
told him about it.
After the May 24, 2001, call, Black told Obus, Kisslinger
said. Obus then called SunSource's chief executive, Maurice
Andrien, telling him a "little birdie" at GE said SunSource was
going to be sold.
Obus subsequently on June 8 directed Wynnefield to buy a
large block of SunSource stock, he said, 11 days before the deal
"He knew what horse would win the race before he placed his
bet," Kisslinger said.
But Cohen said Strickland only called Black to ask him about
SunSource's management since Wynnefield was a shareholder.
And while Obus called Andrien, it was to tell him his
concerns the company would engage in a different type of
transaction that would affect shareholders. The idea Obus would
tell Andrien he got a tip about the merger "just makes no
sense," Cohen said.
The trial, which is expected to run two weeks, will continue
Tuesday with further opening statements.
The case is Securities and Exchange Commission v. Obus et
al, U.S. District Court, Southern District of New York, No.
(Reporting by Nate Raymond in New York; Editing by Noeleen
Walder and Eric Walsh)