Sept. 17 (Bloomberg) -- Alfred Teo Sr., a New Jersey plastics manufacturer who went to prison for insider trading, will appeal a judge’s order that he give up $21 million he made while concealing his shares of Musicland Stores Corp.
U.S. District Judge Susan Wigenton imposed the order Sept. 12 on Teo in federal court in Newark, New Jersey. Teo had lost a jury trial May 25 after contesting a civil complaint by the U.S. Securities and Exchange Commission. Teo also is liable for interest and penalties to be calculated by the SEC, she ruled.
Teo personally began buying Musicland shares in July 1998, using a trust to hide a stake that grew to 36 percent of its stock. In January 2001, Best Buy, the world’s largest consumer- electronics retailer, bought his shares, the SEC claimed. Teo failed to disclose that his Musicland holding exceeded 17.5 percent, which should have triggered a dilution of his shares.
“Alfred Teo intends to pursue all of his rights and appeal the decision to the Third Circuit Court of Appeals,” his attorney, Mary Mulligan, of Friedman Kaplan Seiler & Adelman in New York said in an e-mail, referring to the U.S. Court of Appeals in Philadelphia.
Teo is currently the chairman of the Sigma Plastics Group in Lyndhurst, New Jersey. He was previously chairman of Lyndhurst, New Jersey-based Alpha Industries Group of companies, a maker of plastic bags and film.
“The trades at issue have nothing to do with the business of Sigma Plastics or Alpha Industries and involve personal trades that Mr. Teo made over 10 years ago,” Mulligan said.
Wigenton ruled that “disgorgement is appropriate as to both Teo and the trust for all profits gained from the sale of Musicland shares beginning July 30, 1998, that is $21,087,345.”
In March 2010, Teo agreed to pay $996,783 to cover the profits and interest that the SEC said he made through insider trading.
Teo pleaded guilty in June 2006 during his insider-trading trial in Newark, admitting he bought Musicland shares based on secret information about the sale of the company to Best Buy. He also pleaded guilty to insider trading when he was a director at Cirrus Logic Ind.
Teo, who had lived in Kinnelon, New Jersey, and Fisher Island, Florida, at first contested the charges. A jury trial was in its seventh week when he pleaded guilty.
In February 2007, Teo was sentenced to 30 months in prison by U.S. District Judge Katharine Hayden, who imposed a $1 million fine.
Teo built his business from scratch after coming to the U.S. from China in 1968 with $70. His fortune reached $700 million at one point.
The SEC case is Securities and Exchange Commission v. Alfred S. Teo Sr., 04-cv-1815, U.S. District Court, District of New Jersey (Newark). The criminal case is U.S. v. Teo, 04-cr- 00583, U.S. District Court, District of New Jersey (Newark).
--Editors: Fred Strasser, Peter Blumberg
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