Hefner husband takes insider trading into Playboy bedroom
Christie Hefner, former chief executive officer of Playboy Enterprises Inc., said she was shocked as her husband of 15 years, William Marovitz, confessed to her that he was being investigated for suspicious trading in Playboy shares. They were in their apartment atop a 42-story Lincoln Park tower overlooking the glittering Chicago skyline and Lake Michigan on a March evening in 2010.
"He told me he had been contacted by the SEC," Hefner said later in testimony before the U.S. Securities and Exchange Commission, which didn't accuse her of any wrongdoing.
"And when did you learn your husband owned shares of Playboy?" she was asked.
"In that conversation," she replied.
Hefner's husband is just one of more than 400 persons the SEC and the U.S. Department of Justice have accused of insider trading in a crackdown in the last five years, according to data compiled by Bloomberg. All involved betrayal of clients, employers, relatives or friends. The Hefner episode and a handful of cases like it include an especially cruel breach of trust: betrayal of a wife by a husband.
The husband's perfidy produces not only financial loss for the couple as fines have to be paid and illegal profits returned but also a loss of reputation for the wife and sometimes her job. In the worst outcome, the couple breaks up..
"The popular notion is betrayal in terms of sexual infidelity," said Thomas Ajamie, a securities lawyer who runs his own firm in Houston, Ajamie LLP. "Another type is the betrayal of trust that destroys the marriage partner's reputation, or career."
The intimate details of Hefner's case are recorded in SEC interviews with her and her husband, revealed here for the first time, based on transcripts obtained by Bloomberg News through a Freedom of Information Act request.
The move of insider trading from the boardroom into the bedroom in cases like Hefner's is one indication that the crime has become so pervasive that even people with significant assets figure it's like bending down to pick up a quarter on the street. A spike in criminal convictions and SEC enforcement actions in the last five years shows the U.S. government does not share that blasé attitude toward a crime that cheats other investors.
"The SEC is determined to send a message to big investors as well as Everyman that insider trading is against the law and is not going to be tolerated," said Marc Powers, a former SEC attorney in the Washington office of Baker & Hostetler LLP.