When Ciriaco “Eric” Rivor of Millbrae learned in mid-2007 that his company, the Corte Medera-based home furnishing retailer Restoration Hardware, was about to be acquired by a private equity firm at a “substantial premium”, the former finance vice president passed the confidential, non-public information to friends Emmanuel Axiaq of San Carlos, Calif., and Steven Lusardi of San Jose, according to allegations leveled by the Securities and Exchange Commission Tuesday. Rivor also told Emmanuel Axiaq to pass the information to his father, Francis Axiaq of Millbrae, according to the SEC complaint.
That last bit of advice was probably especially unwise, in retrospect.
Rivor allegedly urged the men to “limit the size of their Restoration Hardware stock purchases to prevent detection”, said the SEC in its press release publicizing the action today. The two friends, Emmanuel Axiaq and Lusardi, followed his advice, but Emmanuel’s dad either didn’t get the message or couldn’t resist, as he spent the following weeks “amassing nearly 250,000″ shares, according to the SEC complaint.
Restorations’s stock price soared more than 140 percent from $2.68 to $6.44 per share after the deal was announced publicly on Nov. 8. Axiaq, the younger, and Lusardi made an illegal profit of $29,539 and $4,398 respectively, on their stock purchases, according to the SEC, while Papa Axiaq scored nearly $900,000.
Rivor, Lusardi, and Emmanuel Axiaq agreed to settle the charges, without admitting or denying the allegations, n’est pas. “Rivor, who did not personally trade on the information, has agreed to pay a $68,000 penalty. Lusardi has agreed to pay a total of $8,901, including disgorgement of his trading profits, prejudgment interest and a penalty equal to his trading profits. Emmanuel Axiaq has agreed to pay a total of $90,249, including $30,249 in disgorgement of his trading profits and prejudgment interest and a penalty of $60,000.”
Papa Axiaq, however, is evidently not letting go of his profits willingly. The SEC says that in “its non-settled enforcement action” against him, it is seeking “disgorgement, financial penalties, and other relief.”
U.S. Securities and Exchange Commission Press Release
“This case makes clear that attempts to ‘stay under the radar’ by trading in small quantities by no means ensures that traders will avoid detection and prosecution,” said Marc Fagel, the regional Director of the SEC’s San Francisco office, in a statement.