MARCY GORDON / The Associated Press | Posted: Saturday, September 30, 2006 7:00 pm
WASHINGTON — Did the butler do it?
Federal regulators say the former butler of businessman Robert F.X. Sillerman illegally profited in stock trading by using confidential information regarding his boss’s acquisition plans.
Through his lawyer, Graham J. Lefford disputed the allegations by the Securities and Exchange Commission.
The SEC announced a civil lawsuit charging Lefford with illegal insider trading in shares of Sports Entertainment Enterprises Inc., which Sillerman acquired in December 2004 in a $100 million deal.
Sillerman, a prominent media and entertainment entrepreneur, bought the then-dormant public shell company as a vehicle to acquire the commercial rights to Elvis Presley’s name and image from the Presley estate. The estate brought in nearly $45 million in 2003, and Sillerman said at the time that more aggressive marketing could make Elvis an even bigger earner.
The SEC, in the suit filed in federal court in Manhattan, says Lefford made $48,525 in profit on a $600 investment by selling shares of the company when they skyrocketed after the announcement of the deal. The agency is seeking restitution of the profits plus interest as well as an unspecified civil fine.
Lefford’s attorney, Dan Waller, said his client cooperated fully with the SEC’s investigation of his stock trading.
Lefford, 44, who is originally from Britain and a U.S. citizen who now lives in Waxahachie, Texas, was hired by Sillerman in early 1999.
Sillerman amassed a fortune estimated at nearly $1 billion from buying and selling media properties. In addition to the Elvis rights, his company, CKX Inc., also owns the “American Idol” TV show and other entertainment ventures.
The SEC alleged that, in the summer of 2004, as Sillerman was negotiating with the Presley estate, Lefford found out about the deal from documents faxed between Sillerman’s Manhattan office and his summer residence in tony South Hampton, where Lefford was the house manager.
On Aug. 12, according to the SEC, Lefford bought 5,000 shares of Sports Entertainment at 12 cents a share. After the deal was announced in December, the stock price jumped by 9,000 percent, to $9.10, the SEC said.
By using the nonpublic information, Lefford “breached an express duty of trust and confidence” under the terms of a written confidentiality agreement he had signed covering Sillerman’s business and financial affairs, the SEC said.
Lefford disagrees with the SEC staff’s “interpretation of the facts and their assumptions concerning the basis for his trading” in Sports Entertainment, the statement said. “He is profoundly disappointed that the (SEC) authorized the action against him. Mr. Lefford is considering all of the legal options available to him at this time.”
CKX acknowledged in a statement that “a former domestic employee of its chairman and chief executive officer has been named as a defendant in a civil complaint filed today by the Securities and Exchange Commission in federal court in Manhattan.”
“The complaint does not allege misconduct by any present or former employee of the company,” the statement said. “The company was aware of and cooperated fully with the SEC’s investigation that led to today’s filing.”