David Schottenstein, a member of the prominent Schottenstein retail family, is expected to plead guilty to charges of insider trading early next month.
Schottenstein, the grandson of retail tycoon Jay Schottenstein, is facing allegations of using his family connections to procure illegal stock trading tips.
The Schottenstein family is made up of a number of successful CEOs and entrepreneurs. The family is based out of Columbus, Ohio, with the head of the family and David’s grandfather, Jay Schottenstein, being one of the four founding brothers of big retail names including American Eagle Outfitters, Value City Furniture, and Designer Brands Inc.
David Schottenstein, 38, is accused of using his connections to his family to gather information not available to the public in order to make stock trades that would benefit himself and at least two close friends.
Schottenstein’s second cousin, Joseph Schottenstein, sat on Designer Brands Inc.'s board of directors, and the two regularly vacationed together and spoke numerous times on the phone according to the SEC. Reports indicate that Schottenstein was able to obtain non-public information from his second cousin, the son of Jay Schottenstein, regarding Designer Brands Inc. and Albertsons Cos.
Days before Designer Brands Inc. publicly revealed that their quarterly results beat their expectations, Schottenstein bought up 66,000 shares of the company. After news of the company’s earnings, the stock jumped up 17%.
Reports also detail that David Schottenstein was able to obtain information about grocery retailer Albertsons’ plan to merge with Rite Aid Corp in 2018. Joseph Schottenstein’s father sat on the board of Albertsons and shared news of the merger with Joseph who then shared the news with David Schottenstein. Prosecutors allege that along with using this information to make stock trades, David Schottenstein shared the information with close friends as well.
Prosecutors claim that because of his access to non-public information, the 38-year-old was able to generate at least $4 million in illicit trading profits.
Through his attorney Eric Rosen, Schottenstein shared his remorse explaining, “I take full and sole responsibility for my conduct and deeply regret my actions. I apologize to my family, friends, and colleagues."
Schottenstein is scheduled to plead guilty to these charges on February 1. His charges carry with them a maximum of 20 years behind bars and a fine of at least $250,000 along with forfeiture of $634,000 in illicit trading profits.
