Hedge fund manager Nelson Obus’ lawyer reprised one of the best lines from his opening statement for his closing yesterday, saying that, if his client is guilty of the allegations leveled against him by the Securities and Exchange Commission, he’s “the lamest insider-trader in history.”
Joel Cohen noted that it made no sense for the Wynnefield Capital to make an illegal trade based on advanced knowledge of Allied Capital Corp.’s acquisition of SunSource, and then to admit as much to SunSource’s CEO, as the latter has testified.
“Why would you do that if you were insider trading?” he asked. “You wouldn’t.”
The SEC’s Kyle DeYoung countered that there was “nothing lame about making $1.3 million in less than three weeks.”
Tell them that even though they may have more money than most people, they may be more sophisticated than most people… they still have to follow the same rules as everybody else,” DeYong insisted yesterday.
“Obus could only have gotten this information from Black. And Black could only have gotten this information from his call with Mr. Strickland,” he added. “He knew he couldn’t buy that stock before the information became public, period. But he bought it anyway. That’s insider trading.”
Wynnefield bought up nearly 300,000 SunSource shares in advance of the announcement of Allied Capital’s 2001 acquisition. According to the SEC, Obus made the trades after his analyst, Peter Black, learned of the impending deal from Thomas Strickland, a friend at GE Capital, which was working on the deal. SunSource’s CEO testified that Obus told him that a “little birdie” had tipped him to the deal.
Defense lawyers for Obus, Wynnefield, Black and Strickland insisted that Maurice Andrien’s memory was faulty, and that Obus actually called him to discuss a loan agreement SunSource was considering. As for the call between Black and Strickland during which the tip was allegedly passed, the defense insisted that Strickland was merely doing due diligence for GE Capital.
Following closing arguments, the jury began its deliberations.