Bloomberg News

SEC Fines Broker for Profiting From Bankruptcy Data

November 07, 2005

A New York broker was fined $150,000 for profiting from confidential information he received after securing seats on the bankruptcy committees of WorldCom Inc., Adelphia Communications Corp. and Globalstar LP.

Van D. Greenfield, 60, manager of Blue River Capital LLC, was accused of directing trades based on nonpublic information about the distressed companies in 2001 and 2002, the Securities and Exchange Commission said today in a statement. Blue River earned $167,309 from trades in Globalstar, $664,241 from Adelphia securities and $424,290 from WorldCom transactions during the time Greenfield was on the issuers' committees.

``Greenfield was bound to maintain the confidentiality of information he obtained as a committee member,'' the SEC said. ``As a member of the respective committees, Greenfield also owed a fiduciary duty of loyalty to Globalstar's and WorldCom's unsecured creditors and to Adelphia's equity holders.''

Greenfield, who didn't admit or deny wrongdoing, was suspended for six months from associating with any broker or dealer. Blue River, which voluntarily filed to withdraw its registration with the commission, hasn't conducted broker-dealer business since Nov. 30, 2004.

Greenfield also was accused of lying to the U.S. Trustee for the Second Circuit, a federal appointee that oversees bankruptcy proceedings in New York, Connecticut and Vermont, about Blue River's position in WorldCom so he could get a seat on the unsecured creditors' committee.

Backdated Sale

He backdated a $400 million short sale and purchase of notes to give the impression he was one of the 20 largest unsecured creditors when he actually had a $6.5 million position. After he was named co-chair of the committee, he had the short sale canceled.

Blue River was accused of failing to take steps to guard against the misuse of confidential material in light of the conflicts of interest arising from Greenfield's position as Blue River's representative on the committees at the same time he was the firm's principal owner.

The SEC said Greenfield would walk through the trading room and ask his employees for market quotes for Adelphia and WorldCom securities. He also received daily Blue River profit and loss reports reflecting Blue River's trading in WorldCom, Adelphia and Globalstar securities.

Greenfield didn't return a call seeking comment.

To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net.

To contact the editor responsible for this story: Erik Schatzker at eschatzker@bloomberg.net.


Hollywood Goes YouTube
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus