A Philadelphia investment adviser is facing U.S. Securities and Exchange Commission claims that he led a group that used nonpublic information divulged by an Alcoholics Anonymous confidant to profit from a 2008 merger.
Timothy J. McGee and eight others made about $1.8 million trading ahead of Philadelphia Consolidated Holding Corp.’s announcement that it would be acquired by Tokio Marine Holding Inc. (8766), the SEC said today in a complaint filed at U.S. District Court (1100L) in Pennsylvania.
In early July 2008, immediately after an AA meeting, an executive with the Philadelphia firm, who wasn’t named in the SEC complaint, told McGee that he was under pressure related to merger negotiations, the SEC said. McGee, an Ameriprise Financial Inc. (AMP) broker, then bought shares in the insurer and tipped a co-worker, Michael Zirinsky, who purchased shares for himself and in accounts held by his wife, sister, mother and grandmother, according to the complaint.
“McGee stole information shared with him in the utmost confidence, and as securities industry professionals he and Zirinsky clearly knew better,” Elaine Greenberg, associate director of the SEC’s Philadelphia office, said in a statement.
The SEC’s lawsuit also names Zirinsky and his father, who made trades based on the tip, according to the complaint. Zirinsky also told a friend in Hong Kong who settled the SEC’s claims by agreeing to pay about $1.2 million without acknowledging or denying wrongdoing.
“We have strict rules related to the use of material, non- public information and have suspended Mr. McGee and Mr. Zirinsky,” Ameriprise spokesman Paul Johnson said in a statement. “We fully cooperated with the SEC on this matter and conducted an internal review.”
A phone call to John Grugan, McGee’s attorney, wasn’t immediately returned. Richard Levan, a lawyer for Zirinsky, declined to comment.
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