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Sirianni, Youtz, Meier & Spoonemore Represents Shareholder in Largest Section 16b Securities Act Judgment in Statute's 70-Year History.

Business Editors/Legal Writers


Federal Court enters $247 million judgment against InfoSpace

founder Naveen Jain for illegal insider "short-swing" trades

A United States Federal District Court Judge ruled today that InfoSpace founder and former CEO Naveen Jain must pay $247,122,712 for prohibited short-swing trading in violation of Section 16(b) of the Securities Exchange Act of 1934.

The judgment is the largest award under Section 16(b) in the statute's 70-year history.

Prior to this the highest recovery under the statute was a $20 million settlement in Levy v. Southbrook International Investments in New York in 2001.

The Seattle law firm of Sirianni, Youtz, Meier & Spoonemore, and David M. Simmonds, represented InfoSpace shareholder Thomas R. Dreiling in the suit.

Under the judgment damages paid by Jain will go to Bellevue, Washington-based InfoSpace. This judgment follows an order entered on May 14 that held that Jain had engaged in prohibited short swing trading in the Internet company's stock while he was an insider. The illegal stock activity took place between December 1998 and May 1999

At the height of the dot-com business boom, InfoSpace had a market capitalization of over $30 billion -- a market cap higher than The Boeing Company. He was forced out of the company in December 2002.

Dreiling sued Jain after InfoSpace, which was informed of the illegal conduct, refused to take action to remedy the violations. Under the 1934 Securities and Exchange Act, Section 16(b), shareholders are permitted to sue on behalf of the company to remedy prohibited insider trading.

On May 14, 2003, U.S. District Court Judge Marsha Pechman issued a summary judgment in favor of Dreiling, ruling that Jain had illegally bought and sold millions of shares of InfoSpace stock. Today's entry of judgment sets the amount of how much in profits Jain will be required to pay InfoSpace.

The court decided that Jain violated federal law by moving stock from three irrevocable trusts into an escrow account and into the Jains' personal brokerage accounts. Nearly 2.5 million shares were deposited directly into Jain's personal brokerage account, while one million shares were used by Jain to fulfill a personal escrow obligation to InfoSpace. Jain and his wife sold over two million shares of InfoSpace stock on the open market within the prescribed six-month period, netting over $207 million in profits.

Jain defended by arguing that he did not mean to break the law. He asserted that he never read the relevant documents, including his own brokerage statements, stock transfer orders and legal documents (such as InfoSpace's SEC filings) that he signed. The Court rejected this defense, finding that the Jains' conduct was voluntary and that "...the Jains participated in the transfers and retained more than a degree of control over the transactions."

Under Section 16(b), an insider cannot engage in "short-swing" transactions, defined as buying and then selling, or selling and then buying, by a corporate insider within any six-month period. If the corporate insider violates the law, he or she must pay all short-swing trading profits to the company. By prohibiting all short-swing trading by insiders, the federal act is intended to prohibit profiteering by corporate insiders who have, or may have, knowledge about the company and its stock that is not available to the investing public.

Interview and background opportunities are available with attorneys representing shareholder/plaintiff:

Attorneys Rick Spoonemore and Stephen Sirianni are available for additional background on this landmark suit. Seattle-based Sirianni Youtz Meier & Spoonemore handle commercial and business litigation, including securities, health care, intellectual property and class action areas. They can be reached at 206-223-0303. For more information, visit

Satellite Interviews:

Sirianni and Spoonemore are available upon request for interviews via satellite through your resources in Seattle, including FisherPathways (206-404-4264;

Both are articulate and comfortable/experienced in television interviews.

Media Contacts:

Rick Spoonemore or Steve Sirianni, 206-223-0303

Barry Bartlett, The Bartlett Group Public Relations, 206-529-3612

After-hours Media Contacts:

Rick Spoonemore, 206-937-1319; Steve Sirianni, 206-349-6666

Barry Bartlett, 206-529-1202

About Sirianni, Youtz, Meier & Spoonemore

The lawyers at Sirianni Youtz Meier & Spoonemore handle commercial and business litigation, including securities, health care, intellectual property, and class action areas. They have their office in Seattle, Washington, and can be reached at 206-223-0303. Visit the web at
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Publication:Business Wire
Geographic Code:1USA
Date:Aug 22, 2003
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