SEC v. LNB Bancorp, Inc.; Gary C. Smith; Thomas P. Ryan; Gerald S. Falcon; and Thomas H. Eschke, No. LR-18718, Northern District of Ohio (May 19, 2004) — Press Release
raw: LNB Bancorp, Inc., Gary C. Smith, Thomas P. Ryan, Gerald S. Falcon and Thomas H. Eschke
LNB Bancorp, Inc., Gary C. Smith, Thomas P. Ryan, Gerald S. Falcon and Thomas H. Eschke, No. LR-18718 (May 19, 2004)
LNB Bancorp and four executives—Gary C. Smith, Thomas P. Ryan, Gerald S. Falcon, and Thomas H. Eschke—manipulated LNB’s stock price by placing 285 late-day purchases to 'mark the close,' artificially inflating its closing price on Nasdaq, and consented to injunctions and $285,000 in penalties, with Ryan banned from serving as a public company officer or director.
From February 2000 to July 2001, LNB Bancorp, Inc. and its executives Gary C. Smith, Thomas P. Ryan, Gerald S. Falcon, and Thomas H. Eschke engaged in a market manipulation scheme by placing 285 near-day-end purchases of LNB common stock through employee benefit plans, successfully making the last trade of the day on 232 occasions to artificially stabilize and inflate the stock’s closing price on Nasdaq. Smith, as supervisor, was charged with recklessly failing to stop the scheme, while Ryan, Falcon, and Eschke directly executed the trades. Without admitting or denying the allegations, all parties consented to a permanent injunction under Section 10(b) and Rule 10b-5, paying civil penalties totaling $285,000—$100,000 each for LNB Bancorp and Ryan, $50,000 for Smith, $25,000 for Falcon, and $10,000 for Eschke—with Ryan also permanently barred from serving as an officer or director of a public company.
From February 11, 2000, to July 16, 2001, LNB Bancorp, Inc. and four of its executives—Gary C. Smith, Thomas P. Ryan, Gerald S. Falcon, and Thomas H. Eschke—orchestrated a 'marking the close' market manipulation scheme to artificially inflate and stabilize the closing price of LNB Bancorp common stock on the Nasdaq National Market. On 285 separate trading days, Ryan, Falcon, and Eschke placed purchase orders for 100 or 200 shares during the final half-hour of trading using funds from Lorain National Bank employee benefit plans, successfully executing the last trade of the day on 232 occasions. Smith, who held supervisory authority over the three traders, was accused of being reckless in failing to detect or halt the scheme despite his oversight responsibilities. The U.S. Securities and Exchange Commission filed a civil injunctive action against them for violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Without admitting or denying the allegations, all defendants consented to a permanent injunction prohibiting future securities law violations. Civil penalties were imposed totaling $285,000: $100,000 each for LNB Bancorp and Ryan, $50,000 for Smith, $25,000 for Falcon, and $10,000 for Eschke. Additionally, Ryan agreed to a permanent bar from serving as an officer or director of any publicly held company.
Exhibits & Attached Documents (1)
Extracted insights
- $100K $100,000 $100K–$1M
- $50K $50,000 $10K–$100K
- $25K $25,000 $10K–$100K
- $10K $10,000 $10K–$100K
- company civil injunctive action against lnb bancorp, inc.
- company filing of civil injunctive action against lnb bancorp, inc.
- company lnb bancorp, inc.
- agency Securities and Exchange Commission
- SEC filed civil injunctive action against LNB Bancorp, Inc.
- SEC announced filing of civil injunctive action against LNB Bancorp, Inc.
- Civil Action No. 04 CV 0933 filed on May 19, 2004
- LNB Bancorp, Inc. located at 457 Broadway, Lorain, Ohio
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 18718 / May 19, 2004 Securities and Exchange Commission v. LNB Bancorp, Inc., Gary C. Smith, Thomas P. Ryan, Gerald S. Falcon and Thomas H. Eschke, Civil Action No. 04 CV 0933 (N.D. Ohio)(filed May 19, 2004) The SEC announced today that it filed in the United States District Court for the Northern District of Ohio a civil injunctive action against LNB Bancorp, Inc. (LNB Bancorp) 457 Broadway, Lorain, Ohio, Gary C. Smith (Smith) of Avon Lake, Ohio, Thomas P. Ryan (Ryan) of Vermilion, Ohio, Gerald S. Falcon (Falcon) of Solon, Ohio and Thomas H. Eschke (Eschke) of Elyria, Ohio. The SEC's Complaint alleges violations of the anti-fraud provisions of the federal securities laws and seeks an order of permanent injunction and civil penalties. The Complaint alleges that from February 11, 2000 through July 16, 2001, LNB Bancorp, Smith, Ryan, Falcon and Eschke perpetrated a market manipulation scheme to artificially increase and stabilize the price of LNB Bancorp common stock on the Nasdaq National Market (Nasdaq). Specifically, on 285 separate days, at or near the close of the trading day, Defendants Ryan, Falcon and Eschke placed purchase orders for 100 or 200 shares of LNB Bancorp common stock during the last half-hour of the trading day for the Lorain National Bank employee benefit plans in an attempt to mark the close of trading in the stock with a purchase order. Of these 285 purchases, Lorain National succeeded in placing the last trade of the day for LNB Bancorp stock on 232 days. This manipulative trading practice is known as "marking the close." Defendant Smith maintained supervisory roles over Ryan, Falcon and Eschke and knew, or was reckless in not knowing of the marking the close scheme and failed to take timely action to stop the scheme. By marking the close, the Defendants artificially supported the price of LNB Bancorp common stock on Nasdaq. As a result, the Defendants fraudulently manipulated the closing price of LNB Bancorp common stock. LNB Bancorp, Smith, Ryan, Falcon and Eschke consented, without admitting or denying the allegations of the Complaint, to the entry of a permanent injunction enjoining them from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and imposing civil penalties in the amounts of $100,000 for LNB Bancorp, $100,000 for Ryan, $50,000 for Smith, $25,000 for Falcon and $10,000 for Eschke. Ryan also agreed to be permanently barred from acting as an officer and a director of a publicly held company. SEC Complaint in this matter
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 18718 / May 19, 2004 Securities and Exchange Commission v. LNB Bancorp, Inc., Gary C. Smith, Thomas P. Ryan, Gerald S. Falcon and Thomas H. Eschke, Civil Action No. 04 CV 0933 (N.D. Ohio)(filed May 19, 2004) The SEC announced today that it filed in the United States District Court for the Northern District of Ohio a civil injunctive action against LNB Bancorp, Inc. (LNB Bancorp) 457 Broadway, Lorain, Ohio, Gary C. Smith (Smith) of Avon Lake, Ohio, Thomas P. Ryan (Ryan) of Vermilion, Ohio, Gerald S. Falcon (Falcon) of Solon, Ohio and Thomas H. Eschke (Eschke) of Elyria, Ohio. The SEC's Complaint alleges violations of the anti-fraud provisions of the federal securities laws and seeks an order of permanent injunction and civil penalties. The Complaint alleges that from February 11, 2000 through July 16, 2001, LNB Bancorp, Smith, Ryan, Falcon and Eschke perpetrated a market manipulation scheme to artificially increase and stabilize the price of LNB Bancorp common stock on the Nasdaq National Market (Nasdaq). Specifically, on 285 separate days, at or near the close of the trading day, Defendants Ryan, Falcon and Eschke placed purchase orders for 100 or 200 shares of LNB Bancorp common stock during the last half-hour of the trading day for the Lorain National Bank employee benefit plans in an attempt to mark the close of trading in the stock with a purchase order. Of these 285 purchases, Lorain National succeeded in placing the last trade of the day for LNB Bancorp stock on 232 days. This manipulative trading practice is known as "marking the close." Defendant Smith maintained supervisory roles over Ryan, Falcon and Eschke and knew, or was reckless in not knowing of the marking the close scheme and failed to take timely action to stop the scheme. By marking the close, the Defendants artificially supported the price of LNB Bancorp common stock on Nasdaq. As a result, the Defendants fraudulently manipulated the closing price of LNB Bancorp common stock. LNB Bancorp, Smith, Ryan, Falcon and Eschke consented, without admitting or denying the allegations of the Complaint, to the entry of a permanent injunction enjoining them from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and imposing civil penalties in the amounts of $100,000 for LNB Bancorp, $100,000 for Ryan, $50,000 for Smith, $25,000 for Falcon and $10,000 for Eschke. Ryan also agreed to be permanently barred from acting as an officer and a director of a publicly held company. SEC Complaint in this matter