Former Investment Manager Employee Pleads Guilty In Manhattan Federal Court To Obstruction Of Justice And Perjury Charges

Press Release Former Investment Manager Employee Pleads Guilty In Manhattan Federal Court To Obstruction Of Justice And Perjury Charges Friday, March 13, 2015 Share FacebookLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. XLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. LinkedInLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. Email For Immediate Release U.S. Attorney's Office, Southern District of New York Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEVEN HART pled guilty today to obstruction of justice and perjury relating to an investigation that the U.S. Securities and Exchange Commission (the “SEC”) had conducted into potential violations of the federal securities laws. HART, who was employed at an investment management firm headquartered in Englewood Cliffs, New Jersey (the “Investment Firm”), lied in sworn testimony to the SEC that he had obtained consent from the president of the Investment Firm (the “Investment Firm President”) to conduct match trades between a fund managed by the Investment Firm and a fund controlled and owned in part by HART. Moreover, when representatives of the SEC called the Investment Firm in an attempt to speak with the Investment Firm President, HART, on three occasions, answered the phone and pretended to be either the Investment Firm President or another employee. HART entered his guilty plea today before the Honorable Katherine P. Failla. Manhattan U.S. Attorney Preet Bharara said: “Steven Hart went to great lengths to try to derail and avoid an investigation into his trading conduct. But, as his plea today shows, no one is above the law, including the law that governs investigations, and obvious attempts to change the course of a legal investigation will not be tolerated.” According to the Information filed in Manhattan federal court and statements made during today’s proceeding: HART worked at the Investment Firm, which managed several funds. HART, who reported directly to the Investment Firm President, served as a portfolio manager at the firm and, in that capacity, exercised trading authority over the brokerage accounts for one of the funds managed by the Investment Firm (the “Fund”). At the same time, HART also controlled and directed Octagon Capital Partners, LP (“Octagon”), a private investment fund with its principal place of business in New York, New York. Through Octagon, HART invested his own money and the money of several of his associates. In or about 2009, the SEC was investigating HART’s trading activities at the Investment Firm (the “SEC Investigation”). First, the SEC was investigating whether HART, in his capacity as a portfolio manager at the Investment Firm, had conducted improper “match trades” or “cross trades” between his personal fund, Octagon, and the Fund. The SEC was also investigating whether HART had traded in securities based on material nonpublic information (“MNPI”) relating to confidentially marketed securities offerings – information that HART had obtained while being solicited to invest in these offerings. As part of this investigation, SEC officials, among other things, issued a subpoena to the Investment Firm, care of the Investment Firm President, seeking the production of several different categories of documents. HART received the subpoena at the Investment Firm before it was seen by any other employee and produced documents to the SEC in New York, New York, without (1) informing anyone else at the Investment Firm about the subpoena, or (2) informing the SEC that it was HART alone who responded to the subpoena. Moreover, in the course of providing sworn testimony to the SEC, HART made several materially false statements. He falsely testified that the Investment Firm President had agreed that HART should conduct match trades involving the Fund as part of an investment strategy for the Fund. HART also falsely testified that he and the Investment Firm President had discussed the SEC Investigation, and that the Investment Firm President was aware that HART had been subpoenaed to testify before the SEC. On multiple occasions, HART impersonated other employees of the Investment Firm during telephone conversations with the SEC. Specifically, on December 8, 2009, an SEC attorney called the Investment Firm to speak with the firm’s President about the SEC Investigation. HART received the phone call and pretended to be another employee of the Investment Firm. The SEC attorney asked HART, who was pretending to be another employee, to ask the Investment Firm President to return the call, which HART failed to do. The following day, the same SEC attorney again called the Investment Firm to speak with the firm’s President. HART again received the phone call and, on this occasion, pretended to be the Investment Firm President. During that call, HART, pretending to be the Investment Firm President, falsely stated that: (1) the Investment Firm President was aware that HART had engaged in improper trading activity, but nevertheless wanted HART to remain an employee of the Investment Firm; and (2) the Investment Firm President was aware of, and had approved, Hart’s match trading activity as a means for the Fund to dispose of restricted shares of stock. Finally, on December 11, 2009, the same SEC attorney, along with a second SEC attorney, called the Investment Firm to speak with the firm’s President. HART again received the phone call and again pretended to be the Investment Firm President. During that call, HART, speaking as the Investment Firm President, falsely stated to the SEC attorneys that: (1) HART’s match trading activity was an intentional strategy of the Investment Firm to take a loss on the trading in exchange for the ability to sell otherwise restricted shares of stock; (2) HART was still a valued employee of the Investment Firm who had earned the Investment Firm far more than whatever amount HART had gained through match trading; and (3) HART had fully disclosed to the Investment Firm President that HART had traded based on MNPI and that this was a one-time mistake that would not happen again. Each of these statements was false. HART, 42, of New York, New York, faces a maximum sentence of ten years in prison. He is scheduled to be sentenced by Judge Failla on July 2, 2015. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the Judge. This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Jason H. Cowley is in charge of the prosecution. Updated May 14, 2015 Component USAO - New York, Southern Press Release Number: 15-070

Press Release Former Investment Manager Employee Pleads Guilty In Manhattan Federal Court To Obstruction Of Justice And Perjury Charges Friday, March 13, 2015 Share FacebookLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. XLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. LinkedInLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. Email For Immediate Release U.S. Attorney's Office, Southern District of New York Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEVEN HART pled guilty today to obstruction of justice and perjury relating to an investigation that the U.S. Securities and Exchange Commission (the “SEC”) had conducted into potential violations of the federal securities laws. HART, who was employed at an investment management firm headquartered in Englewood Cliffs, New Jersey (the “Investment Firm”), lied in sworn testimony to the SEC that he had obtained consent from the president of the Investment Firm (the “Investment Firm President”) to conduct match trades between a fund managed by the Investment Firm and a fund controlled and owned in part by HART. Moreover, when representatives of the SEC called the Investment Firm in an attempt to speak with the Investment Firm President, HART, on three occasions, answered the phone and pretended to be either the Investment Firm President or another employee. HART entered his guilty plea today before the Honorable Katherine P. Failla. Manhattan U.S. Attorney Preet Bharara said: “Steven Hart went to great lengths to try to derail and avoid an investigation into his trading conduct. But, as his plea today shows, no one is above the law, including the law that governs investigations, and obvious attempts to change the course of a legal investigation will not be tolerated.” According to the Information filed in Manhattan federal court and statements made during today’s proceeding: HART worked at the Investment Firm, which managed several funds. HART, who reported directly to the Investment Firm President, served as a portfolio manager at the firm and, in that capacity, exercised trading authority over the brokerage accounts for one of the funds managed by the Investment Firm (the “Fund”). At the same time, HART also controlled and directed Octagon Capital Partners, LP (“Octagon”), a private investment fund with its principal place of business in New York, New York. Through Octagon, HART invested his own money and the money of several of his associates. In or about 2009, the SEC was investigating HART’s trading activities at the Investment Firm (the “SEC Investigation”). First, the SEC was investigating whether HART, in his capacity as a portfolio manager at the Investment Firm, had conducted improper “match trades” or “cross trades” between his personal fund, Octagon, and the Fund. The SEC was also investigating whether HART had traded in securities based on material nonpublic information (“MNPI”) relating to confidentially marketed securities offerings – information that HART had obtained while being solicited to invest in these offerings. As part of this investigation, SEC officials, among other things, issued a subpoena to the Investment Firm, care of the Investment Firm President, seeking the production of several different categories of documents. HART received the subpoena at the Investment Firm before it was seen by any other employee and produced documents to the SEC in New York, New York, without (1) informing anyone else at the Investment Firm about the subpoena, or (2) informing the SEC that it was HART alone who responded to the subpoena. Moreover, in the course of providing sworn testimony to the SEC, HART made several materially false statements. He falsely testified that the Investment Firm President had agreed that HART should conduct match trades involving the Fund as part of an investment strategy for the Fund. HART also falsely testified that he and the Investment Firm President had discussed the SEC Investigation, and that the Investment Firm President was aware that HART had been subpoenaed to testify before the SEC. On multiple occasions, HART impersonated other employees of the Investment Firm during telephone conversations with the SEC. Specifically, on December 8, 2009, an SEC attorney called the Investment Firm to speak with the firm’s President about the SEC Investigation. HART received the phone call and pretended to be another employee of the Investment Firm. The SEC attorney asked HART, who was pretending to be another employee, to ask the Investment Firm President to return the call, which HART failed to do. The following day, the same SEC attorney again called the Investment Firm to speak with the firm’s President. HART again received the phone call and, on this occasion, pretended to be the Investment Firm President. During that call, HART, pretending to be the Investment Firm President, falsely stated that: (1) the Investment Firm President was aware that HART had engaged in improper trading activity, but nevertheless wanted HART to remain an employee of the Investment Firm; and (2) the Investment Firm President was aware of, and had approved, Hart’s match trading activity as a means for the Fund to dispose of restricted shares of stock. Finally, on December 11, 2009, the same SEC attorney, along with a second SEC attorney, called the Investment Firm to speak with the firm’s President. HART again received the phone call and again pretended to be the Investment Firm President. During that call, HART, speaking as the Investment Firm President, falsely stated to the SEC attorneys that: (1) HART’s match trading activity was an intentional strategy of the Investment Firm to take a loss on the trading in exchange for the ability to sell otherwise restricted shares of stock; (2) HART was still a valued employee of the Investment Firm who had earned the Investment Firm far more than whatever amount HART had gained through match trading; and (3) HART had fully disclosed to the Investment Firm President that HART had traded based on MNPI and that this was a one-time mistake that would not happen again. Each of these statements was false. HART, 42, of New York, New York, faces a maximum sentence of ten years in prison. He is scheduled to be sentenced by Judge Failla on July 2, 2015. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the Judge. This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Jason H. Cowley is in charge of the prosecution. Updated May 14, 2015 Component USAO - New York, Southern Press Release Number: 15-070