SEC Implicates Paul Hastings Associate in Alleged Insider-Trading

[WSJ_law_blog]

Today the SEC filed a complaint alleging a massive insider-trading scheme that implicates, among others, a former Lehman Brothers employee; his wife, who’s a partner in Brunswick, a firm that does public relations for M&A deals; and Eric Holzer, who the complaint describes as “a tax associate in the New York City office of an international law firm.”

Holzer is an an associate with Paul Hastings in New York. In a statement, the firm said, “We learned today of allegations brought against an associate of the firm, which have no connection to any firm or client matters. We will fully cooperate with the authorities in any investigation.” According to this early WSJ report, Holzer, 34, was arrested by the FBI at his residence this morning.

Here’s the complaint, which begins:

Over a four year period, from at least March 2004 through July 2008, Matthew C. Devlin, then a registered representative at Lehman Brothers, Inc. (”Lehman”) in New York City, traded on and tipped at least four of his clients and friends with inside information about 13 impending corporate transactions. Some of Devlin’s clients and friends, three of whom worked in the securities or legal professions, tipped others who traded in the securities. In all, the illicit trading yielded over $4.8 million in profits.

Attempts to reach Matthew Devlin were unsuccessful.

According to this New York Times wedding announcement, Matthew Devlin married Nina Devlin in 2003. The announcement says: “Mrs. Devlin, 29, works at the Brunswick Group, a financial communications and public relations agency in New York, where she advises clients on corporate communications. She graduated from Georgetown University. . . Mr. Devlin, 30, is an associate at Lehman Brothers, the New York investment bank, where he specializes in selling stocks to mutual funds, hedge funds and money managers. He graduated from Bucknell University. . .”

In a statement, a Brunswick spokeswoman said: “The husband of a Brunswick employee has been arrested by U.S. authorities for using information obtained illegally from her, and without her knowledge, which he has then passed to third parties. It is our understanding that the information, which relates to a limited number of her clients, was obtained by being in close proximity to his wife and from the implications of her travel schedule.” A call to Nina’s lawyer, Akin Gump’s Jim Benjamin, was not immediately returned.

The complaint alleges that the defendants — nine individuals and three investment companies — traded with inside information about impending transactions, including Alcoa’s 2007 tender offer for Alcan, Electronic Arts’ 2008 tender for Take-Two and InBev’s 2008 tender offer for Anheuser-Busch.

The complaint alleges that Matthew Devlin misappropriated the confidential non-public information about the transactions from his wife. “As a reflection of the value of the inside information that Devlin provided,” says the complaint, some of the defendants “referred to Devlin and his wife as the ‘golden goose.’”