NEW YORK (Reuters) - A former NBTY Inc director and four co-defendants have agreed to pay more than $500,000 to settle charges that they used illegal tips to trade in the vitamin maker’s stock before it was acquired by Carlyle Group LP for $4 billion in 2010.
The deal resolves allegations brought by the U.S. Securities and Exchange Commission that Glenn Cohen, a former NBTY board member, learned that Carlyle was in negotiations to buy the company and shared the information with his brothers and a brother’s girlfriend.
The five defendants reaped $175,000 in illicit profits as a result of insider trading, according to the SEC.
Besides Glenn Cohen, the SEC sued his brothers, Craig, Marc and Steven, as well as Laurie Topal.
The defendants did not admit or deny wrongdoing as part of the settlement, which still requires approval from U.S. District Judge John Keenan in Manhattan federal court.
Robert Knuts, a lawyer for Glenn Cohen, did not immediately comment on the settlement. Jeffrey Plotkin, a lawyer for Steven Cohen, and Michael Considine, a lawyer for Craig Cohen, both said their clients were pleased to have the matter resolved.
David Gourevitch, a lawyer for Topal, declined to comment, while Steven Feldman, a lawyer for Marc Cohen, did not immediately respond to a call for comment.
According to the SEC’s complaint, Glenn Cohen learned of the potential Carlyle deal during a board meeting on May 21, 2010, and tipped off his brothers. The brothers and Topal then acquired NBTY stock in a series of trades over the next few weeks. They sold their shares in July after the deal’s announcement sent the stock price up more than 40 percent, according to the regulator.
“As a board member at NBTY for more than 20 years, Glenn Cohen knew the importance of maintaining the confidentiality of company information,” Amelia Cottrell, an associate director in the SEC’s New York office, said in a statement. “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.”
The defendant Steven Cohen is not the same person as the hedge fund manager with the same name who runs Point72 Asset Management, formerly known as SAC Capital Advisors.
The case is Securities and Exchange Commission v. Cohen et al., U.S. District Court for the Southern District of New York, No. 14-3655.
Reporting by Joseph Ax; Editing by Lisa Von Ahn