Press Release from the United States Attorney
Southern District of New York



(212) 637-2600

MICHAEL J. GARCIA, the United States Attorney for the Southern District of New York, announced that MITCHEL GUTTENBERG, a former executive director in the equity research department of UBS Securities LLC (“UBS”), was sentenced today to 78 months’ imprisonment in connection with his participation in a massive insider trading scheme that netted millions of dollars in illegal profits. GUTTENBERG was sentenced in Manhattan federal court by United States District Judge DEBORAH A. BATTS. GUTTENBERG was also ordered to forfeit $15.81 million, reflecting the proceeds of the insider trading scheme. According to the Indictment and court proceedings:

Between December 2001 and August 2006, GUTTENBERG repeatedly sold to DAVID TAVDY and one other individual material, nonpublic information regarding upcoming upgrades and downgrades in UBS analysts’ securities recommendations (the “UBS Inside Information”). Investors, including institutional investors and professional money managers, regularly relied on UBS analysts’ ratings of public companies’ securities. As a result, changes in UBS analysts’ recommendations regarding a particular company’s securities were material to investors and often had a direct effect on the trading price of that company’s stock.

Before UBS publicly releases its analysts’ upgrades and downgrades, they must be reviewed by the UBS Investment Review Committee (“IRC”). GUTTENBERG became a member of the IRC in December 2001 and was entrusted with the UBS Inside Information.

In breach of his duties of trust and confidence to UBS, and in violation of UBS’s written policies, GUTTENBERG sold the UBS Inside Information to DAVID TAVDY and one other individual in exchange for hundreds of thousands of dollars. TAVDY and the other individual separately used the UBS Inside Information to execute hundreds of profitable securities transactions. By using the UBS Inside Information, TAVDY and the other individual earned in excess of $15 million in illegal profits for themselves and for a series of hedge funds with which the other individual was associated.

The insider trading scheme was executed as follows: When GUTTENBERG communicated that UBS was about to announce an upgrade in its recommendation for a company’s stock, the recipient of the UBS Inside Information would purchase the stock. After UBS publicly announced its upgrade, the price of the stock generally would increase. The recipient then would sell the stock to earn a profit. Similarly, when GUTTENBERG communicated that UBS was about to announce a downgrade in its recommendation for a company’s stock, the recipient of the UBS inside information would sell the stock short. After UBS publicly announced its downgrade, the price of the stock generally would fall, after which the recipient would purchase the stock that he had sold short to earn a profit.

On February 27, 2008 , GUTTENBERG pleaded guilty to two counts of conspiracy to commit securities fraud and four counts of securities fraud in connection with the insider trading scheme.

On February 27, 2008 , DAVID TAVDY, GUTTENBERG’s co-defendant, pleaded guilty to one count of conspiracy to commit securities fraud and two counts of securities fraud in connection with the insider trading scheme. TAVDY has not yet been sentenced.

Mr. GARCIA, a member of the President’s Corporate Fraud Task Force, praised the work of the Federal Bureau of Investigation and thanked the United States Securities and Exchange Commission for its assistance in the investigation.

Assistant United States Attorney ANDREW L. FISH is in charge of the prosecution.

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SEC Announces Fiscal 2008 Enforcement Results

Agency Brings Second-Highest Number of Actions Ever; Significant Increase in Insider Trading and Market Manipulation Cases


Washington, D.C., Oct. 22, 2008 — The Securities and Exchange Commission today announced that the second-highest number of enforcement actions in agency history took place in fiscal year 2008. For the second year in a row, the SEC also returned more than $1 billion to harmed investors through Fair Fund distributions.

“The SEC’s role in policing the markets and protecting investors has never been more critical,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “The dedicated enforcement staff has been working around the clock to investigate and punish wrongdoing. The staff’s commitment is unwavering year-in and year-out. We look forward to continuing our vital mission of investor protection in the coming year.”

The SEC brought 671 enforcement actions during the just-completed fiscal year, with the number of insider trading and market manipulation cases up more than 25 percent and 45 percent respectively over the previous year. In addition, the SEC has more than 50 ongoing investigations relating to the subprime market.

The Division of Enforcement also reached preliminary settlements in principle with six of the largest firms in the auction rate securities market. Although not included in these FY 2008 enforcement statistics, these settlements, which are subject to final approval by the Commission, would be the largest in the history of the SEC and would return more than $50 billion to investors.

The SEC took a record number of enforcement actions against market manipulation in FY 2008, including charges against a Wall Street short seller for spreading false rumors, and charging 10 insiders or promoters of publicly traded companies who made stock sales in exchange for illegal kickbacks.

Among the major fraud cases brought by the SEC in FY 2008, the SEC sued two Bear Stearns hedge fund managers for fraudulently misleading investors about the financial state of the firm’s two largest hedge funds. The agency also charged five former employees of the City of San Diego for failing to disclose to the investing public buying the city’s municipal bonds that there were funding problems with its pension and retiree health care obligations and those liabilities had placed the city in serious financial jeopardy.

The SEC brought the highest number ever of insider trading cases in FY 2008, including charging former Dow Jones Board Member David Li and three other Hong Kong residents in a $24 million insider trading enforcement action, and charging the former chairman and CEO of a division of Enron Corp. with illegally selling hundreds of thousands of shares of Enron stock based on nonpublic information.

Combating accounting fraud, including illegal stock option backdating, also was a priority for fiscal year 2008. During the year, the SEC charged eight public companies and 27 executives with providing false information to investors based on improper accounting for backdated stock option grants.

Another growth area is cases against U.S. public companies that use corporate funds to bribe foreign officials, an activity precluded by the Foreign Corrupt Practices Act (FCPA). In fiscal year 2008, the SEC filed 15 FCPA cases. Since January 2006, the SEC has brought 38 FCPA enforcement actions — more than were brought in all prior years combined since FCPA became law in 1977.

Additional data on the SEC’s FY 2008 enforcement results will be available as part of the agency’s Performance and Accountability Report, which is scheduled to be published in mid-November.

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