NEW YORK – The husband of former Playboy Enterprises CEO Christie Hefner was accused Wednesday of using inside information in trading Playboy stock, and has agreed to pay almost $170,000 to settle the case.
The Securities and Exchange Commission said William A. Marovitz made trades in the magazine publisher's shares between 2004 and 2009 based on non-public information and despite instructions from his wife and the company's attorney not to do so. The agency said the five trades helped him either make profits or avoid losses of $100,952.
The civil case, filed Wednesday in federal court in Illinois, said Marovitz bought and sold Playboy shares based on information from his wife about the company's earnings, stock offerings and a potential acquisition.
Hefner, the daughter of company founder Hugh Hefner, was CEO until January 2009. Christie Hefner and Marovitz were married in 1995.
The complaint said the trades involved the purchase or sale of shares, in some cases Marovitz' entire stake in the company, on days surrounding events that impacted the stock price.
For instance, the government said Marovitz bought 9,000 shares of Playboy stock on Nov. 10, 2009, two days before news broke that the company was in talks about a sale of the company to Iconix Brand Group Inc. News of the talks sent Playboy shares up 42 percent and netted Marovitz unrealized gains of $44,745.
The government also said Marovitz told his broker at Chicago's Mesirow Financial to sell all 35,200 shares of Playboy that he owned on Dec. 15, 2009 at about 2:40 p.m. Central time, a few hours after Hefner received emails from Iconix saying it was ending acquisition efforts. The broker was able to sell 23,752 shares before the market closed, according to the complaint.
The next day, when the news was made public, the share price dropped 10 percent, and Marovitz had avoided a loss of $9,911, the SEC said.
The agency said Hefner talked with her husband about her concerns with his trading Playboy stock. She also asked Playboy's general counsel, Howard Shapiro, to discuss the implications of his trading. Shapiro sent a memo to Marovitz in September 1998 warning him of the "serious implications" of trading the shares, and asked him to consult with him before executing any trades in Playboy stock. Marovitz never did so, according to the complaint.
Marovitz' attorney James Streicher said his client has agreed to pay $168,352 to settle the case, without admitting or denying wrongdoing. Streicher said Marovitz lost money on his investments in Playboy during the years in question.
The SEC said the settlement amount represents his ill-gotten gains, prejudgment interest and civil penalties. The settlement is subject to approval by the court.
Marovitz, an attorney and real estate developer in Chicago who served in both the Illinois House of Representatives and the Illinois Senate.
The government said the case came to light during an examination of a broker-dealer.
Playboy Enterprises went private in March in a deal orchestrated by Hugh Hefner.
The case is Securities and Exchange Commission v. Willliam and Marovitz, in U.S. District Court for the Northern District of Illinois, Eastern Division.