A former partner in a prestigious law firm specializing in corporate takeovers used inside information acquired in counseling firms about mergers to make nearly half a million dollars in illegal stock market profits, the Securities and Exchange Commission charged yesterday.
The SEC charged Carlo M. Florentino -- a rising young star in the New York firm of Wachtell, Lipton, Rosen & Katz until he resigned Sept. 8 at the firm's request -- with violating antifraud provisions of federal securities laws and laws relating to tender offers. The SEC asked the court to enjoin Florentino from abuses in the future and asked that he be ordered to pay back the $450,000 in illegal profits that the SEC claims he made.
Florentino has already been charged by New York state authorities with seven misdemeanor counts of stock fraud based on the allegations raised about his trading practices when a broker became suspicious.
According to the SEC charges, Florentino used insider information about mergers acquired in his work for two law firms over a five-year period to buy thousands of shares of stock before other investors knew what was happening and to sell the shares for huge profits when the events about which he had early information occurred.
Neither Florentino nor his lawyer could be reached for comment.
The SEC charged that the pattern of conduct -- which Florentino apparently took almost no steps to cover -- began when he worked as an associate specializing in corporate law for another New York law firm, Davis, Polk & Wardwell.
In several cases detailed in the SEC complaint, Florentino is said to have been aware of confidential corporate information about prospective mergers. With that knowledge, he is alleged to have bought stock in the merger target without clearing the transaction with the law firm, as the law firm required.
Florentino, now 37, continued the practice, according to the SEC complaint, when he went to Wachtell Lipton, one of the two leading firms specializing in corporate takeovers.
As recently as last summer, Florentino made a profit of approximately $286,000 by using confidential information obtained from Societe Nationale Elf Acquitaine and its investment banker, Salomon Brothers, about Elf Acquitaine's plans to make a tender offer for Texasgulf, the SEC said. Florentino bought stock at prices ranging from $36 3/4 to $37 a share before the information he had became public. He sold it for $56 a share.
"He was someone we knew and worked with and had a brilliant future and -- wow," partner Dick Katcher said.
Florentino lives with his father in Queens and was not a big spender, Katcher said. "He is a very likeable, nice guy who is hard working and an excellent lawyer."