The Securities and Exchange Commission said Thursday two Pleasanton men were profiteers of a multi-million-dollar insider trading scheme.
In a civil complaint filed Thursday in federal district court in San Francisco, the SEC said Emile Jilwan, 54, and Joseph Azar, 49, both of Pleasanton, made $2.4 million combined.
The $5.3-million scheme was initiated by Maher Kara, a 37-year-old former director in Citigroup Global Market's investment banking division in New York, the SEC alleges. According to the complaint, Kara "repeatedly told his brother Michael Kara of Walnut Creek, Calif., about upcoming deals involving Citigroup's health care industry clients." The SEC further alleges that Michael Kara, 48, who now lives in San Carlos, in addition to buying stock and options in target companies that were the subject of Citigroup deals, leaked the information to a network of friends and family who also traded in advance of the deals. That's where Jilwan and Azar come in to the allegations.
Jilwan, a civil engineer for an unspecified regional transit agency, is alleged to have made $2.3 million on trades of shares from Biosite, a San Diego-based medical testing company, less than three days before a March 25, 2007 announcement that the company would be acquired. Jilwan invoked his fifth amendment right in sworn testimony during the SEC investigation against self-incrimination and refused to answer questions regarding the allegations.
Azar allegedly made a total of $118,000 from two different illegal stock deals. In the SEC complaint, Michael Kara is alleged to have tipped Azar off in March 2006 about a plan to acquire drugmaker Andrx Corporation. Azar, also a civil engineer, according to the SEC, spent $120,000 on stock shares and following a March 13, 2006 announcement that Andrx would be acquired, he made more than $18,000 in profit. A second alleged deal was made a year later, in March 2007, when Kara tipped Azar again about the acquisition of Biosite. Two days before the acquisition, Azar allegedly spent $200,000 in stock shares and profited more than $108,000 when the acquisition announcement was made.
Azar has agreed to repay the illegal profits without admitting guilt and pay a penalty.
Four other men are named as profiteers, including two men from Stockton, who made a combined $373,000. The SEC is seeking the return of the ill-gotten gains as well as civil penalties.
In conjunction with the civil action, the U.S. Attorney's Office and the Federal Bureau of Investigation announced Thursday that they have indicted Maher Kara, Michael Kara and Jilwan on criminal charges. The 38-count indictment, unsealed Thursday, charges the men with securities fraud and conspiracy.
Mounir Fayez Kara -- also known as Michael F. Kara -- and Jilwan are charged with using that information to make illegal trades, between 2004 and 2007, in the securities of about 15 publicly traded companies, most in the biotechnology sector, according to the Justice Department.
Mounir Fayez Kara and Jilwan are also charged with conspiracy and obstruction for alleged "false and misleading statements" they made to the U.S. Securities and Exchange Commission during its parallel investigation of the alleged scheme.
All three men surrendered to the FBI Thursday morning and made their first appearance in federal court in San Francisco Thursday. They were released from custody on $100,000 bond each, and are scheduled to return to court May 18.
To view the indictment, click here
To view the complaint for Azar, click here
To view the complaint for Jilwan, click here