U.S. Securities and Exchange Commission

Litigation Release No. 19499 / December 19, 2005

Securities and Exchange Commission v. Gary D. Herwitz and Tracey A. Stanyer, 05-CV 10622 (LAP) (S.D.N.Y.)

The Securities and Exchange Commission today announced that it filed a settled insider trading action against Gary D. Herwitz, a certified public accountant and former president of the accounting firm Mahoney Cohen & Company, and Tracey A. Stanyer, former executive vice president of Sirius Satellite Radio Inc. The complaint, filed today in the Southern District of New York, alleges that the defendants engaged in illegal insider trading when they purchased Sirius stock in advance of the October 6, 2004 announcement that radio broadcaster Howard Stern had signed a $500 million agreement with Sirius. In the complaint, the Commission alleges that Herwitz purchased Sirius stock on September 30, 2004, after learning in confidence from his Mahoney Cohen colleague, who is Stern’s longtime accountant, that Stern had received an offer from Sirius and that the parties were negotiating. The Commission alleges that Stanyer purchased Sirius stock on October 5, 2004, after learning in confidence from a senior Sirius executive that Sirius had signed an agreement with Stern. Finally, the Commission alleges that, based on this conduct, Herwitz and Stanyer violated Section 10(b) of the Securities Exchange Act and Rule 10b-5. Both Herwitz and Stanyer have consented to full disgorgement plus prejudgment interest, penalties, and antifraud injunctions. Stanyer has also consented to a bar from serving as an officer or director of a public company.

Specifically, the Commission’s complaint alleges:

• On or about September 21, 2004, Herwitz learned about the Sirius negotiations and contract offer in the course of his employment with Mahoney Cohen. Mahoney Cohen’s chief executive officer, who was also Stern’s long time personal accountant, told Herwitz that Stern was in negotiations with Sirius, that Sirius had made Stern an offer, and that he was working on the transaction. Herwitz’s colleague admonished him to keep the information confidential. On or about September 23, 2004, the Mahoney Cohen CEO again informed Herwitz that he was working on the transaction between Sirius and Stern.
   
• On September 30, 2004, Herwitz purchased 25,000 Sirius shares at $3.19 a share. When Herwitz purchased Sirius shares on September 30, 2004, he was aware of material nonpublic information about Sirius’s negotiations with, and offer to, Stern. Between November 19, 2004 and January 10, 2005, Herwitz sold 22,500 of those Sirius shares for a profit.
   
• In early September 2004, Stanyer learned from a senior Sirius executive that company executives were in negotiations with Stern. Stanyer learned this information in connection with his corporate duties at Sirius and was specifically cautioned that the negotiations were confidential. On or about October 5, 2004, Stanyer learned from the Sirius executive that Sirius had signed an agreement with Stern.
   
• On October 5, 2004, Stanyer purchased 29,120 Sirius shares at prices ranging between $3.28 and $3.32 a share. At the time of his purchase, he was aware of material nonpublic information about Sirius’s offer to Stern. On October 7 and 8, 2004, Stanyer sold his 29,120 Sirius shares for a profit.

Herwitz and Stanyer have agreed to settle the Commission’s claims by consenting to the entry of separate judgments that permanently enjoin each of them from violating the antifraud provisions of the federal securities laws. The judgment against Herwitz also orders him to pay $18,163 to disgorge fully his profits plus prejudgment interest and to pay civil penalties in the amount of $34,000. Similarly, the judgment against Stanyer orders him to pay $17,897 to disgorge fully his profits plus prejudgment interest and to pay civil penalties in the amount of $17,357. The judgment against Stanyer also bars him from acting as an officer or director of a public company.

The Commission acknowledges the assistance and cooperation of the United States Attorney’s Office for the Eastern District of New York and the Federal Bureau of Investigation in this matter.

SEC Complaint in this matter

http://www.sec.gov/litigation/litreleases/lr19499.htm