Legal News

SEC Charges Former Nixon Peabody Lawyer With Insider Trading

By Ashby Jones

Often, the story behind an insider-trading prosecution is, well, attenuated. Someone with inside information about an impending merger or bad earnings report inadvertently tells someone, who tells someone else, who tells someone else who may or may not know that the information is not yet public, who tells his or her broker, who places a sale. It’s those types of fact-patterns that end up law-school casebooks.

Other times, it seems, they’re not so complicated. Case in point: the recent allegation lodged by the SEC against a former Nixon Peabody lawyer. (Click here for the SEC’s complaint; here for the story, from the National Law Journal.)

The allegations are almost stupefyingly simple. The complaint alleges that On July 28, 2004, a Melissa Mahler, then a lawyer for Nixon Peabody in Rochester, N.Y., was asked by chief executive officer of Teleplus Consumer Services Inc., to draft a letter of intent involving a potential merger with Rooms.com, an online travel company.

That conversation occurred at 9:15 a.m. Fifteen minutes later, the complaint says, Mahler called her broker and instructed him to buy 10,000 shares of Teleplus for $1,200. Teleplus was trading at 12 cents a share. (LB editorial musing: We wonder what Mahler did during those 15 minutes? Did she spend it in a Hamlet-like bout of handwringing? Or did she jump up and down in glee for 15 minutes?)

In any event, when the deal between Teleplus and Rooms.com was announced on July 30, 2004, Mahler, who reportedly left Nixon Peabody in 2005 and now works as a solo practitioner, allegedly called her broker and instructed him to sell the 10,000 shares of Teleplus for a profit of $5,800.

“Mahler breached her duties of loyalty and confidentiality by using material, nonpublic information for personal gain,” the complaint says. The SEC is seeking a permanent injunction barring Mahler from further violating the insider trading rules, the repayment of her “ill-gotten gains” plus interest, and a civil penalty of an unspecified amount.

Mahler did not immediately return the NLJ’s request for comment.

Photo: iStockPhoto

Full post as published by Law Blog - WSJ.com on September 22, 2009 (boomark / email).