The Securities and Exchange Commission on Tuesday charged a Newport Beach investor and a Pacific Palisades stockbroker with insider stock trading based on information published in advance copies of Business Week magazine.
The civil complaint, filed in U.S. District Court in New York, accuses investor Stephen R. Rasinski and stockbroker Lawrence M. Small of obtaining insider tips from the magazine provided by John L. Petit, a former Newport Beach broker.
The suit seeks to recover more than $195,000 in combined profits Rasinski and Small made on the allegedly improper trades between September, 1986, and July, 1988, and penalties of up to three times that amount.
Rasinski declined comment through his attorney, Donald Buchwald of New York. Small and his attorney could not be reached.
The suit is the latest brought by the SEC in a widening scandal involving the use of advance information from Business Week's "Inside Wall Street" column. Thirteen individuals in several unrelated cases involving the magazine have been charged with wrongdoing.
Petit last week pleaded guilty to criminal charges of insider trading and also settled civil charges brought by the SEC by agreeing to pay more than $195,000 in illegal profits, fines and interest. Petit, who is cooperating with authorities, faces a maximum sentence of 10 years in prison and a $500,000 fine.
Petit and Small were both stockbrokers with Smith Barney, Harris Upham & Co. Petit was Rasinski's stockbroker.
The suit alleges that Rasinski originally tried to obtain advance copies of the magazine from the Torrance printing plant of R.R. Donnelley & Sons Co. Inc., but was turned away by security guards.
He then approached his broker, Petit, and urged him to try, the suit says. Mention of a stock in the Business Week column often moved a stock's price significantly. Petit was able to obtain pre-release copies of the magazine through Shayne Walters, a salesman at the printing plant.
The magazines were exchanged in Smith Barney's parking lot and in the lot of a nearby McDonald's restaurant. Petit at first gave Walters a discount on brokerage commissions, the SEC said. Later, he allegedly paid Walters hundreds of dollars each time he received the magazine.
Rasinski and Small allegedly contributed to the payments for Walters.
Walters has settled an SEC civil case by agreeing to pay back $62,066 in illegal gains and penalties, and pleaded guilty to a criminal securities fraud charge.
Rasinski allegedly made $137,595 in illegal profits by trading securities of at least 75 companies mentioned in Business Week and by sharing the information with his father, Jules Rasinski, who allegedly traded securities in three companies.
Chris Petito, senior special counsel to the SEC, said the elder Rasinski was not charged because his trades were few and it is not clear that he knew the trades were based on insider information.
Small was accused of profiting by $57,560 on trades of at least 23 companies for his own account and 12 companies for a partnership account with Petit.