Brother-in-Law From Hell: Wall Street Edition

What's the worst thing your brother in law could possibly do at a big family gathering? Get drunk and hit on your spouse? Insult your mother? Break a family heirloom?

How about hack into your home computer, discover confidential information about a private equity deal you're running, and trade on it illegally?

According to an insider trading settlement announced today by the Securities and Exchange Commission, Michael A. Stummer took "bad houseguest" to a new level when he did just that the his wife's brother in the summer of 2006.

On the weekend of July 21. Caxton-Iseman Capital (known now as "CI Capital Partners") was on the verge of announcing a deal to acquire Ryan's Restaurant Group through one of its portfolio companies, Buffet.

It happened that firm president Steven A. Lefkowitz was hosting an annual family gathering on that weekend, which included (probably for the last time) his sister Randi's day-trader husband Michael (the S.E.C. complaint didn't identify Lefkowitz by name, but it was easily deduced based on other identifying facts provided).

During the get together, Stummer snuck into Lefkowitz's bedroom office, where he hacked into Lefkowitz's computer by correctly guessing his password, according to the S.E.C. Stummer then read several confidential emails relating to the Ryan transaction.

Based on the information, Stummer snapped up 5,500 shares of Ryan's by July 24. Shortly following the public announcement of the acquisition of Ryan's on July 25, Stummer sold his entire position for a total profit of $22,351.17.

Not surprisingly, the S.E.C. came a' knockin,' and now the brother in law from hell has agreed to forfeit $46,386.66 — representing the disgorgement of his illegal trading profits, plus prejudgment interest, plus a civil penalty in an amount equal to the profits.

And needless to say, he's probably persona non grata at Lefkowitz family barbeques from now on.

by Liz Gunnison