CBOE founder admits to obstructing SEC
Elliot Smith, a founding member of the Chicago Board of Options Exchange, pleaded guilty to criminally obstructing justice in a U.S. Securities and Exchange Commission investigation, prosecutors said.
Smith manufactured two memoranda in 2003 that suggested that he'd done independent research into an unidentified North Carolina pharmaceutical company before trading in its shares, according to criminal charges filed against him today in Manhattan federal court. He submitted the documents to the SEC after learning the agency had opened a probe into whether his trades were based on secret information, the court papers say.
"In truth and in fact, as Smith well knew when he provided these documents to the SEC, the two memoranda purportedly written by him were fake and had not been created at the time of his pharmaceutical company trades," according to the charging documents.
Smith's guilty plea comes 14 months after he and his son, former Banc of America Securities investment banker Gregg Smith, agreed to pay $890,415 to settle the SEC's insider-trading lawsuit. Neither admitted nor denied liability in the SEC case.
In the SEC case, the agency accused the son of tipping his father about secret news involving three companies in 2001 and 2002. Twice during the SEC's probe, Elliot Smith created phony documents to mislead investigators, the agency alleged.
Lying to SEC
Acting U.S. Attorney Lev Dassin in Manhattan announced the guilty plea today in a statement. A telephone call to Elliot Smith's lawyer, Alan Vinegrad, wasn't immediately returned.
Elliot Smith, now 76, was employed at the time as a managing director of Broadband Capital Management and had served as a director of the CBOE and the American Stock Exchange, the SEC said.
Gregg Smith left his job at the unit of Bank of America, the nation's second-largest bank, in April 2005. Gregg Smith isn't charged criminally.
Today's criminal case also accuses Elliot Smith of lying in testimony to the SEC in 2004.
The case is U.S. v. Elliot Smith, U.S. District Court, Southern District of New York (Manhattan).