U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20152 / June 13, 2007
SEC v. David A. Schwinger, C.A. No. 1:07-CV-01047 (D.D.C.) (RMC)
SEC Files Settled Insider Trading Charges Against Former Managing Partner of National Law Firm's Washington, D.C. Office
The Securities and Exchange Commission today filed a settled civil injunctive action in the United States District Court for the District of Columbia against David A. Schwinger, an attorney and former managing partner of Katten Muchin Rosenman LLP's (KMR) Washington, D.C. office. Schwinger was charged with engaging in illegal insider trading by purchasing shares of Vastera, Inc. (Vastera), a Virginia-based company assisting businesses in tracking information about international shipments, in violation of the antifraud provisions of the federal securities laws. Without admitting or denying the allegations in the Commission's complaint, Schwinger has agreed to settle this matter by consenting to the entry of a final judgment against him which imposes injunctive and monetary relief.
The complaint alleges that Schwinger purchased Vastera common stock on November 5, 2004, on the basis of material, nonpublic information that an acquisition of Vastera was imminent. The complaint further alleges that Schwinger learned of the impending merger while interviewing Vastera's Chief Counsel, who was then seeking to be hired by KMR as a partner. In responding to Schwinger's inquiries during the interview process about the Chief Counsel's reasons for leaving Vastera, the Chief Counsel allegedly disclosed to Schwinger no later than October 27, 2004 that Vastera's acquisition was imminent. On the basis of that material, nonpublic information, the complaint alleges that Schwinger purchased 10,000 shares of Vastera common stock on November 5, 2004 at an average price of $1.70 per share. The complaint further alleges that Schwinger knew that Vastera was a KMR client at the time of the purchase.
According to the complaint, Vastera announced on January 7, 2005 that it was being acquired by JP Morgan Chase Bank N.A. Vastera's share price, which had closed at $2.00 on January 6, rose 50% to $3 a share by the close of the market on January 7 on approximately four times the historical average daily trading volume.
The complaint alleges that Schwinger knew, or was reckless in not knowing, that he purchased Vastera shares based on material, nonpublic information obtained during the interview process and in breach of a fiduciary duty owed to his firm, KMR. Schwinger is alleged to have imputed profits of $13,027. Based on the facts alleged, the Commission charged Schwinger with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
Without admitting or denying the allegations in the complaint, Schwinger has consented to the entry of a final judgment that: (i) permanently enjoins him from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; (ii) requires him to disgorge $13,027 in illicit gains and $1,940 in prejudgment interest thereon; and (iii) orders him to pay a civil penalty of $26,054.
The Commission acknowledges the assistance of the National Association of Securities Dealers in this matter.