U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19217 / May 4, 2005
Securities and Exchange Commission v. Leon Levy, et al., Civil Action No. 3-04-CV-0351-N, United States District Court for the Northern District of Texas (Dallas Division).
SEC ANNOUNCES $1.3 MILLION SETTLEMENT OF INSIDER-TRADING CHARGES AGAINST THREE FOREIGN NATIONALS
The Securities and Exchange Commission announced a settlement today of an emergency action to freeze proceeds of insider trading by foreign nationals residing in the Republic of Panama. Without admitting or denying wrongdoing, defendants Leon Levy, Yanni Abecassis and Ilan Sabbah and relief defendant Atlantic 1 Corp. have agreed to settle the enforcement proceeding by paying approximately $1.3 million in disgorgement, prejudgment interest and civil money penalties. Leon Levy, Abecassis and Sabbah have also consented to entry of permanent injunctions against future violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The settlement, which is subject to court approval, will result in recovery of 100% of the proceeds of the insider-trading scheme.
The Commission also announced an agreement to dismiss its claims against the remaining three defendants: Henry, Hertsel and Jacqueline Levy. Information developed during litigation has caused the Commission to determine that dismissal was warranted.
On February 19, 2004, the Commission filed a complaint against the defendants in the United States District Court for the Northern District of Texas, Dallas Division, SEC v. Leon Levy, et al. Civ. No. 3:04-CV-0351-N (N.D. Tex.). The Commission's complaint alleged that defendants engaged in insider trading in the common stock of Texas-based, Over-the-Counter-Bulletin-Board-traded iDial Networks, Inc., shortly before the August 27, 2003 announcement of iDial's agreement to merge with GlobalNet, Inc. On August 4, 2003, Yanni Abecassis and Leon Levy were present, as consultants to iDial, at iDial-GlobalNet merger negotiations in Panama. According to the complaint, they received material non-public information about the merger and instructions to keep the information confidential. Between August 4 and the August 27 merger announcement, Leon Levy and Ilan Sabbah each opened brokerage accounts with an Irving, Texas-based broker-dealer and purchased several million shares of iDial common stock through those accounts. Leon Levy and Sabbah shared a residence in Panama with Abecassis during this period.
The complaint alleged that Leon Levy traded on the basis of material non-public information concerning the merger, in breach of a duty of confidentiality that he owed to iDial and its shareholders; that Leon Levy and Abecassis tipped their housemate Sabbah about the merger, in breach of the same duty; and that Sabbah knew, or was severely reckless in not knowing, that the information was confidential and the tip improper, when he traded in iDial securities on the basis of the material non-public information.
The complaint further charged that Abecassis established a Panamanian shell company, Atlantic 1, to receive proceeds of insider trading. Between September 30 and November 26, 2003, Sabbah and Leon Levy disposed of their iDial shares by: (a) liquidating certain shares at prices resulting in substantial profits; (b) transferring shares to the Atlantic 1 brokerage account; and (c) transferring iDial sales proceeds to the Atlantic 1 brokerage account.
Upon the filing of the action, the district court entered an asset freeze and order for accounting, repatriation, document preservation and expedited discovery. To effectuate the asset freeze, the Commission staff worked closely with the Department of Justice to submit an asset freeze request under the Mutual Legal Assistance Treaty with Panama, which resulted in the Panamanian banks honoring the U.S. court's freeze order.
Defendants Leon Levy, Ilan Sabbah and Yanni Abecassis and relief defendant Atlantic 1 Corp. have agreed to a final judgment requiring, jointly and severally, disgorgement of $529,074, plus prejudgment interest of $15,141. Additionally, Leon Levy, Sabbah and Abecassis have each consented to the entry of a final judgment ordering them to pay a civil money penalty of $264,537 and enjoining them from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
The Commission gratefully acknowledges the assistance of the National Association of Securities Dealers, which referred the matter to the Commission, as well as the Department of Justice, the Federal Bureau of Investigation and the Panamanian Comision Nacional de Valores and Ministerio Publico.
Contact: Harold F. Degenhardt, District Administrator, Fort Worth Office (817) 978 3821
Toby M. Galloway, Trial Counsel, Fort Worth Office (817) 978-6447