Two former Bay Area employees with PricewaterhouseCoopers (PwC) were charged Tuesday with insider trading by the Securities and Exchange Commission, the SEC said in a release.
Gregory Raben, 30, a former auditor in PwC’s San Jose office, purchased stock in six
companies–including Fremont-based Lexar Media and Embarcadero Technologies of San Francisco–during 2006 after learning about potential acquisition plans of PwC clients from William Borchard, 28, a co-worker in the firm’s San Francisco office responsible for for due diligence for clients interested in mergers or acquisitions, according to the SEC complaint, filed in federal district court in San Francisco.
Raben, a former Campbell resident who now lives in Louisville, Ky., is also accused by the SEC of alerting two other acquaintances about two of the acquisitions. He resigned from PwC in February of last year.
Raben and Borchard first met in PwC’s San Jose office in 2001, according to the complaint, and became close both professionally and personally. In April 2004, Borchard was promoted to a senior associate position with PwC’s transactions services department in San Francisco and eventually relocated there, but he remained in contact with Raben.
In his new position, Borchard gained access to “highly sensitive, confidential information
about PwC client’s planned acquisitions of publicly-traded target companies,” according to the complaint.
Beginning in February 2006, Borchard began passing inside information regarding deals he worked on to Raben, who would then buy shares of stock in the target company. “While Raben kept each individual trade small, the overall scheme was profitable,” according to the complaint. In all, Raben bought $97,181 worth of stock in six companies, and made trading profits of $20,836, netting a 21.4 percent return.
Among the deals Borchard tipped-off Raben to were the acquisition of Lexar Media by Micron Technology, according to the SEC. Raben learned of that deal from Borchard in February 2006 and then bought Lexar shares twice before the deal was publicly announced March 8. He sold the shares the next day.
The same pattern followed in July 2006 when Borchard told Raben of Sandisk’s pending
acquisition of M-Systems Flash, and in August 2006 when he told Raben of the pending
acquisition of Embarcadero Technologies by PwC client Thoma Cressey Equity Partners.
It was that last deal that led to the pair’s undoing, when one of PwC’s audit partners noticed Raben’s name on a list of traders in Embarcadero Technologies. The matter was referred to PwC’s legal office, which referred the matter to the SEC and cooperated with its investigation.
Raben, who refused to answer questions in sworn testimony before the SEC, agreed to a
“permanent injunction” from further violations of the anti-fraud provisions of federal
securities law and will pay $23,879, representing the profits he and his acquaintances made on the trades, and the same amount as a civil penalty, without admitting guilt or denying the allegations.
Borchard, a former San Francisco resident who now lives in Chicago, similarly refused to
answer questions in sworn testimony before the SEC. He also agreed to a permanent injunction and a penalty of $20,836 without admitting or denying the allegations.