The opinion of the court was delivered by: Wood, U.S.D.J.
Plaintiff the Securities and Exchange Commission ("SEC") moves for default judgments against Defendants Bruno Verinac ("Verinac") and Antun Dilber ("Dilber") pursuant to Rule 55(b) of the Federal Rules of Civil Procedure ("FRCP"). The SEC also moves for permanent injunctions against Verinac and Dilber, and for (1) an award of disgorgement and prejudgment interest against Verinac in the amount of $1,904,873.48; (2) an award of disgorgement and prejudgment interest against Dilber in the amount of $34,981.05; and (4) civil penalties against Verinac and Dilber, pursuant to Section 21(d)(3) of the Securities Exchange Act of 1934 ("Exchange Act").
For the reasons stated below, the Court GRANTS the SEC's motion for (1) default judgments against Verinac and Dilber, (2) permanent injunctions against Verinac and Dilber, and (3) an award of disgorgement and prejudgment interest against Verinac in the amount of $1,904,873.48; (4) an award of disgorgement and prejudgment interest against Dilber in the amount of $34,981.05. The Court DENIES the SEC's motion for civil penalties pursuant to Section 21(d)(3), without prejudice.
The following allegations are set forth in the SEC's Fourth Amended Complaint: This case involves three alleged insider-trading schemes (the "Schemes"), allegedly perpetrated by a group of seventeen individuals located in the United States and Croatia. The Schemes were orchestrated by Defendants David Pajcin ("Pajcin") and Eugene Plotkin ("Plotkin"). Verinac and Dilber, both of whom are Croatian nationals, participated in two of the Schemes: (1) a scheme involving confidential, non-public information obtained from the "Inside Wall Street" column of Business Week magazine (the "Business Week Scheme"); and (2) a scheme involving confidential, non-public information regarding pending corporate mergers and acquisitions, obtained from an employee of Merrill Lynch & Co., Inc. ("Merrill Lynch") (the "Merrill Lynch Scheme").
A. The Business Week Scheme
Verinac and Pajcin met in 2004. Over the following months, Verinac suggested an insider-trading scheme to Pajcin, whereby Pajcin would arrange for the theft of copies of business magazines, prior to their publication, in order to permit Pajcin and others to obtain and trade on confidential, non-public information contained in the magazines.*fn1 Verinac indicated that he had been involved previously in a similar scheme.
Following his discussions with Verinac, Pajcin hired Defendant Nikolaus Shuster ("Shuster") to steal copies of Business Week magazine prior to publication, and provide Pajcin with confidential, non-public information from Business Week's "Inside Wall Street" column.*fn2
Each week, Shuster stole a copy of the upcoming issue of Business Week, before it was released publicly, and informed Pajcin about the contents of the "Inside Wall Street" column.*fn3
Pajcin provided Verinac with the information he obtained from Shuster. Verinac: (1) personally traded on the information, and (2) provided the information to Dilber and to Defendants Zoran Sormaz, Iilja Borac, and Antun Krsic, who also traded on it. Verinac, Dilber, Sormaz, Borac, and Krsic paid to Pajcin a portion of the profits they earned from trading on the information.
In 2004 and 2005, Pajcin obtained confidential non-public information regarding pending mergers and acquisition transactions being handled by Merrill Lynch. Pajcin obtained this information from Defendant Stanislav Shpigelman, a Merrill Lynch employee.*fn4 As with the Business Week Scheme, Pajcin provided the information to Verinac, who (1) personally traded on the information, and (2) provided the information to Dilber, Borac, Sormaz, and Krsic, who also traded on it. Verinac, Dilber, Borac, Sormaz, and Krisic paid Pajcin a percentage of the profits they earned through the Merrill Lynch Scheme.
The SEC has submitted an affidavit establishing that (1) Dilber earned $25, 977.60 from trading on the insider information provided by Verinac; and (2) Borac, Sormaz, and Krisic earned a totally of $1,388,618.19, from their trading on the information. The SEC has not established how much Verinac earned from his trading on the information.
The SEC filed this action August 2005. Verinac and Dilber were first named in the Fourth Amended Complaint ("Complaint"), filed on August 30, 2006. The Complaint alleges that Verinac and Dilber knowingly obtained confidential, non-public information through the Business Week and Merrill Lynch Schemes, and personally traded (and, in Verinac's case, assisted others in trading) on that information, in violation of Section 17(a) of the Securities Act of 1933 (the "Securities Act"), and Section 10(b) of the Securities Exchange Act of 1932 (the "Exchange Act") and Rule 10b-5 thereunder.
Dilber was properly served with the Summons and Complaint on September 1, 2006. Verinac was served by publication as of April 23, 2009, pursuant to the terms of an order issued by the Court on February 13, 2009. Neither Verinac nor Dilber has responded to the Complaint; the Clerk of ...