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Department of Justice Logo 

U.S. Department of Justice

United States Attorney
Northern District of California

 

11th Floor, Federal Building
450 Golden Gate Avenue, Box 36055
San Francisco, California  94102

FOR IMMEDIATE RELEASE
 

 

Tel: (415) 436-7200
Fax: (415) 436-7234

 

June 15, 2004

The United States Attorney's Office for the Northern District of California announced that Robert Rutner, of Los Altos Hills, California, pled guilty on June 13, 2004, to securities fraud, in violation of 15 U.S.C. §§ 78(j) and 78(ff), and 17 C.F.R. 240.10b-5.  In pleading guilty, Mr. Rutner admitted that he received material, non-public information concerning Adaptec, Inc., from Michael Ofstedahl, a former Vice-President of OEM sales at Adaptec, and that he used that inside information to purchase Adaptec securities.

Robert Rutner, 46, was originally charged on July 31, 2002, by a single-count criminal information filed by the U.S. Attorney's Office charging him with securities fraud.  In his plea agreement, Mr. Rutner admitted that in November or December of 1998, he and Mr. Ofstedahl had discussed an arrangement by which Mr. Ofstedahl would provide Mr. Rutner with inside information from Adaptec in return for a share of any profits Mr. Rutner made by trading on that information.  Mr. Rutner also admitted that on January 6, 1999, Mr. Ofstedahl alerted him that Adaptec would be making "an announcement" later that day and that, immediately following this conversation, Mr. Rutner began buying Adaptec securities.  By the end of the day, Mr. Rutner had purchased 1100 "January 20" and 300 "January 17 ˝" call options for a total of $126,236.82.  (Those options gave Mr. Rutner the right to buy, at any time before the options expired on January 16, 1999, 110,000 Adaptec shares at $20 per share and 30,000 shares at $17.50 per share.) 

On January 6, 1999, after the stock market had closed for the day, Adaptec issued a press release stating that its earnings would exceed 20 cents per share and, on January 7, 1999, Adaptec's stock closed at $14 7/8 per share, an increase of $5 5/16, or 27 percent from its closing price the day before.  In pleading guilty, Mr. Rutner admitted that he sold his options for $775,173.35, resulting in a net profit of $648,936.53.

Mr. Rutner is scheduled to be sentenced on September 20, 2004, at 1:30 p.m., before District Judge James Ware in San Jose federal court.  The maximum penalty for the offense is ten years imprisonment and $1,000,000 fine, or twice the gross gain or gross loss, whichever is higher.  However, any sentence will be dictated by the federal sentencing guidelines, which take into account a number of factors, and will be imposed at the discretion of the Court.

The prosecution is the result of a criminal referral from the San Francisco District Office of the Securities and Exchange Commission.  The criminal case was investigated by Special Agents of the Federal Bureau of Investigation.  David Callaway is the Assistant United States Attorney who prosecuted the case with the assistance of legal technician Tracey Anderson.

A copy of this press release may also be found on the U.S. Attorney's Office website at www.usdoj.gov/usao/can.  Related court documents and information may be found on the District Court website at www.cand.uscourts.gov or on http://pacer.cand.uscourts/gov.

All press inquiries to the U.S. Attorney's Office should be directed to Assistant U.S. Attorney Matthew J. Jacobs at (415) 436-7181, or Assistant U.S. Attorney Matthew Parrella in San Jose at (408) 535-5042.

mattmed