Columbus native David Schottenstein entered a guilty plea Jan. 6 to a charge of conspiracy to commit securities fraud stemming from insider tips he received ahead of three corporate announcements.
Schottenstein received tips from a cousin before an August 2017 earnings announcement of Columbus-based DSW Inc. He also received tips before the February 2018 announcement of a merger between Rite Aid Corp. and Albertsons Cos. and a December 2018 announcement of the acquisition of Aphria Inc. and Green Growth Brands, Inc., according to Department of Justice and Securities and Exchange Commission court filings. His cousin, who is not named in the filings, had, according to those documents, obtained this information in his role as a member of DSW’s board of directors since 2012 and as a member of Green Growth Brands’ board from February to November 2018. Schottenstein’s cousin also obtained information about Albertsons due, in part, to a family-owned company that was a party to the deal, the court filings said.
Schottenstein then used the information to purchase shares of stock in DSW, Rite Aid and Aphria, which netted him $634,893. According to court filings, Schottenstein, who is now a Florida resident, shared the insider information with two friends, Kris Bortnovsky and Ryan Shapiro, who also used the tips to buy stock. Bortnovsky and Shapiro also reside in Florida.
Schottenstein, facing a maximum of 20 years in prison and other penalties, pleaded guilty to one count of conspiracy to commit securities fraud.
“I take full and sole responsibility for my conduct and deeply regret my actions,” Schottenstein said in a statement provided to the Columbus Jewish News Jan. 10 through his lawyer, Eric Rosen of Roche Freedman.
“I apologize to my family, friends and colleagues.”
According to the filing with the U.S. District Court for the District of Massachusetts, the acting U.S. Attorney for the District of Massachusetts recommended a more lenient sentence due to the guilty plea, both in terms of potential prison time and fines. The recommendations to the court included one year of supervised release, forfeiture of the $634,893 he gained from the stock trades, plus additional restitution in an amount to be determined by the court at sentencing and a special assessment of $100 to be paid on the date of sentencing, which is scheduled for 11:30 a.m. Feb. 1.
The plea will not, however, affect any civil liability, including any tax liability, Schottenstein might face at a later date stemming from his conduct. To this end, the Securities and Exchange Commission filed its own claim Jan.6 against Schottenstein, Bortnovsky and Shapiro in the U.S. District Court for the District of Massachusetts seeking civil penalties for their actions. The SEC has requested a jury trial to assess its claims of insider trading.