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By Lloyd McGraw on Feb 18, 2010 with no responses

SEC Places Fire Under Top World Fuel Execs

The SEC filed suit against principles of World Fuel for insider trading.

The Securities and Exchange Commission charged five men, including current and former World Fuel Services Corp. (WFSC) executives with insider trading.

According to the complaint, Steven Scoppetuolo, Robert S. Tocci, Sarang Ahuja, Richard White and Eric M. Gordon illegally netted over one million dollars in profits traded in securities for stock in the Doral-based company. The action was brought Tuesday in U.S. District Court for the Southern District of Florida.

The SEC alleges that former WFSC CFO Tocci, twice received non-public information about the company’s earnings from his close friend, Scoppetuolo, who was serving as both vice president of commercial operations supply and trading for World Fuel. Tocci then purportedly used the information to purchase put options in the company’s stock and to sell short.

Ahuja, the securities broker for both Scoppetuolo and Tocci, allegedly used insider information to benefit his personal accounts and other customer accounts before both earnings announcements.

The SEC claims to have phone records revealing that in May, 2007 Scoppetuolo called Tocci soon after World Fuel executives decided to put old debts back on their books. Tocci immediately called Ahuja, who quickly began purchasing short positions and puts so that they could benefit from the anticipated drop in the stock’s price.

Scoppetuolo’s attorney, James Sallah, adamantly denied the charges. “[T]he suggestion that he would breach his duty to the company is simply ludicrous,” he said. “Steven talked to Tocci every day for a year. They were best friends. But, as Steven will say, if there was one subject he avoided with Tocci, it was the company.”  Sallah added that the lawsuit is groundless and their clients will defend themselves vigorously.

Attorney Richard Brodsky claims that the SEC lacks sufficient evidence to find WFSC exec Richard White guilty.

White, the company’s vice president of tax, purportedly sold short stock before the earnings statements went public.  White is also accused of tipping Gordon about World Fuel’s potentially imminent stock dip. He, in turn, allegedly used the information to buy put options prior to both earnings announcements, and allegedly tipped two of his friends, who followed suit on taking advantage of the information.

Richard Brodsky, White’s attorney, claims that the SEC is lacking any smoking gun to tie his client to the alleged crimes. “There’s no evidence that my guy tipped Eric Gordon. They were both members at the same golf club, but there’s no e-mail, phone record, paper, nothing,” Brodsky, said.

World Fuel’s general counsel, Alexander Lake, claimed that no charges have been asserted against World Fuel and that the company is cooperating with the SEC.  Scoppetuolo and White have not faced criminal charges, however, they both have been placed on administrative leave.