Preet Bharara, United States Attorney for the Southern District of New York, and Carl W. Hoecker, Inspector General of the United States Securities and Exchange Commission, Office of the Inspector General (“SEC-OIG"), announced charges against former SEC Compliance Examiner EUGENIA CANTIELLO for making false statements to the SEC regarding her and her husband’s ownership of various stocks they were prohibited from holding under SEC ethical rules. It is alleged that CANTIELLO, while a Compliance Examiner in the SEC’s New York Regional Office, made false statements to the SEC in order to conceal her ownership of stocks that she, as an SEC employee, was prohibited from holding. The Government and defendant have entered into a deferred prosecution agreement, which was approved in Manhattan Federal Court by U.S. Magistrate Judge James L. Cott today.
According to the allegations in the Criminal Complaint[1] unsealed today:
CANTIELLO was, until 2014, a Compliance Examiner in the SEC’s New York Regional Office. Among other duties, she was responsible for overseeing broker-dealers, investment advisers, investment companies, clearing agencies, and others in their compliance with the nation’s securities laws. As an SEC employee, CANTIELLO was subject to rules issued by the SEC (“SEC Ethics Rules") designed to prevent conflicts of interest that could arise when SEC employees hold stock in entities subject to routine SEC examinations.
The SEC Ethics Rules prohibit SEC employees from owning stock in entities directly regulated by the SEC, and require employees to submit any proposed personal transactions in such securities to the SEC prior to executing them. The prohibited securities include those of several banks and broker-dealers, including banks with broker-dealer subsidiaries. Individuals who owned stock at the time the changes were implemented were directed to divest their holdings, and provided with instructions on how to do so. The SEC Ethics Rules apply, with equal force, to securities holdings in the names of spouses and immediate family members of SEC employees.
CANTIELLO and her husband held approximately $50,000 in stock in one such prohibited company. Despite warnings and reminders provided by the SEC, CANTIELLO did not divest her and her husband’s holdings as required. Instead, she held on to much of the stock past deadlines imposed by the SEC and later, when the SEC-OIG investigated her holdings, she lied about her conduct in an investigation under oath, falsely claiming - among other things - that she had not been aware that her holdings were prohibited under the SEC Rules.
CANTIELLO, 46, of New Rochelle, New York, is charged with one count of making false statements, which carries a maximum sentence of five years in prison. The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
CANTIELLO has entered into a deferred prosecution agreement which provides that the charges against her will be dismissed in three months if CANTIELLO complies with certain conditions and commits no further offenses.
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Mr. Bharara praised the investigative work of the Securities and Exchange Commission, Office of the Inspector General, and the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Source: U.S. Department of Justice, Office of the United States Attorneys
