Playboy CEO’s Spouse Took Insider Trading to Bedroom

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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 people 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.”

First Revealed

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.


Nina Devlin’s husband brought some friends into the conspiracy of his insider-trading duplicity. She was a partner in the New York office of Brunswick Group LLC, a London-based communications firm specializing in mergers and acquisitions. Her husband, Matthew, was a broker for Lehman Brothers. At least 12 times starting in 2004, he shared with a circle of friends information he had overheard from her about corporate takeovers, according to an SEC complaint. Among this group of insider traders, Devlin’s wife became known as “the golden goose.”

In an April 2005 e-mail, one conspirator told Matthew Devlin, “We need the goose to pop its head out and show us the biz.” All told, the ring netted $4.8 million in illicit gains, according to the SEC. As for Devlin, his profit was negligible: $23,000 in gifts and kickbacks from his buddies.

FBI agents confronted Matthew Devlin in August 2008. He confessed to his wife, who was pregnant. Matthew Devlin agreed to cooperate with the government. Four months later, Nina Devlin, 38, gave birth to a son, born prematurely, according to court documents. At Devlin’s sentencing earlier this year, Nina pleaded on his behalf.

Shocked, Devastated

“I was shocked and devastated when I learned of my husband’s actions in the summer of 2008,” Nina Devlin wrote in a letter to U.S. District Judge William H. Pauley III. “I suffered severe repercussions from them nonetheless, including the loss of a job I loved and severe damage to the reputation and career I had worked for more than a decade to build.”

Judge Pauley granted Matthew probation, but not before summing up what he had done: “He betrayed the trust of Lehman Brothers, his responsibility to his profession and he betrayed the trust of his spouse, all of it completely tragic and senseless for a sum of money, to his benefit, that was a rounding error in his compensation.”

Matthew Devlin’s lawyer, Mary Mulligan, declined to comment.

Dodged Questions

Lorene Hipp was an executive secretary at Seattle insurer Safeco Corp. She followed orders when management told her the company was about to be sold and made her sign a confidentiality agreement. In April 2008, her husband, Math J. Hipp Jr., asked Lorene why she was suddenly working overtime and weekends.

“His wife dodged his questions, stating she could not talk about it or was particularly busy at work,” according to the SEC. “She also told him she was concerned Safeco employees would lose their jobs, but she would not tell him why.”

Hipp, an engineer, bought 127 call options on Safeco stock that month, betting the shares would jump. They did when a sale to Boston-based Liberty Mutual Group Inc. was announced, and he made $118,245 in illicit profit, the SEC said. Safeco fired Lorene Hipp, said her lawyer, Lawrence Cock, even though the SEC ultimately determined she’d never breached her agreement to remain quiet. Math Hipp settled SEC insider trading charges in May 2009 without admitting wrongdoing. He agreed to pay twice the sum he made on the transaction, plus interest, for a total of $239,771. His attorney, Christopher B. Wells, said Hipp has no comment.

Pillow Talk

Couples sometimes share pillow talk about work, of course, but the wives victimized in these insider cases made it clear they didn’t expect their spouses to trade on it in the morning.

Jason Hanold’s wife, Neela Seenandan, was an executive in the Chicago office of London-based Aon PLC. in July 2010 when she learned that the company was about to acquire Hewitt Associates, a provider of payroll and consulting services. On July 6, she told her husband that an announcement was imminent. She followed up with two e-mails warning him not to share the information.

He responded with an e-mail, saying, “I won’t, no need. I only wish we bought their stock!!!”

Scottrade Account

The next day, Hanold deposited $28,500 into his Scottrade account, which had a cash balance of $0. He bought 831 shares of Hewitt at $34.25 each, or $28,476. After the deal was announced, he sold them for a $10,241 profit, according to the SEC. Hanold settled without admitting wrongdoing, agreeing to pay twice the amount of his profit and $284 in interest, for a total of $20,766. Hanold didn’t respond to phone messages and e-mails seeking comment. Seenandan didn’t respond to a phone message.

The Hefner-Marovitz case stands out among these betrayals of wives by husbands, mixing love and treachery with wealth and power. More than most, it raises the question: What in the world was he thinking?

From 1988 through early 2009, Hefner, 60, ran Chicago-based Playboy Enterprises, the company founded in 1953 by her father, Hugh Hefner, who took it private in 2011. She expanded the magazine publishing company into cable programming and digital media and attempted to reenter the gambling industry. “Billy” Marovitz, 68, whom she began dating in the early 1990s and married in 1995, seemed the ideal soul mate.

Prominent Family

A former state senator from a prominent family of Chicago Democrats, he and Hefner shared interests in progressive causes. After leaving public service in 1993, Marovitz became a real estate developer in Chicago and a limited partner in investment groups behind local restaurants.

Even before they were married, Hefner relied on Marovitz for business advice. In 1993, he brought Hefner a plan to develop a casino in Greece; she and the board approved the idea and encouraged him to pursue it. Over the next six years, Marovitz helped broker the opening of the Playboy casino in Rhodes, for which he was paid a total of $310,000, as well as travel expenses, according to Playboy proxy statements.

On several occasions after they were married, her husband made casual remarks about buying Playboy stock. In her SEC testimony, Hefner said she warned Marovitz against doing that. In 1998, she went a step further, according to the SEC complaint in the matter, assigning Playboy’s general counsel, Howard Shapiro, to spell out the consequences Marovitz and his wife would face if he began trading Playboy shares.

‘Legal Minefield’

Shapiro prepared a memo for Marovitz, himself a lawyer, outlining the “serious implications” of his trading in Playboy stock, according to the SEC. He warned him that “all SEC rules regarding Christie’s sale or purchase of stock are equally applicable to you, particularly the rules governing insider trading” and “your purchase is imputed to Christie.”

In the memo, Shapiro urged Marovitz to “give me a call and I’ll walk you through the legal minefield.” Marovitz never called, according to the SEC, which cited the memo in its insider-trading complaint against him.

“I always felt that he should never buy or sell Playboy stock as long as I was CEO,” Hefner testified. “Just the fact of it struck me as wrong.” She also said: “I didn’t like the optics of it regardless.”

The couple kept separate brokerage accounts throughout their marriage, Hefner told the SEC.

“To the extent you discussed non-public matters regarding Playboy with your husband, did you expect your husband to keep those non-public matters confidential?” the SEC asked Hefner in her deposition.

“Yes,” she replied.

She was mistaken, it turned out, according to the SEC.

First Betrayal

Marovitz’s first betrayal, as alleged by regulators, was a small one. It came on April 15, 2004, around the time the company was planning to issue new stock to pay down debt, a transaction that might boost the company’s share price. Marovitz purchased 5,000 shares. When the offering was announced on April 21, Playboy stock jumped 8 percent, resulting in a gain of $2,806 for Marovitz, the SEC claimed when it sued him.

A few months later, on Aug. 5, Marovitz sold 25,000 shares of Playboy stock, all of his holdings, which he had accumulated without his wife’s knowledge and without consulting Playboy’s general counsel. The day after the sale, Playboy reported a second-quarter loss, and the company’s shares dropped 18 percent. Marovitz thus avoided $64,983 in losses, the SEC said.

Four years later, Marovitz was at it again, according to the SEC, selling 14,700 shares of Playboy stock the day before the announcement of a quarterly loss resulted in a 9 percent drop in the company’s shares. That transaction helped him avoid a loss of $11,507.

In Talks

On November 10, 2009, he bought 9,000 shares of Playboy stock, two days before Bloomberg News reported that New York- based Iconix Brand Group Inc. (ICON), which manages brands, was in talks to acquire the company. The report caused Playboy stock to rise 42 percent that day.

A month later, according to the SEC, he ordered his broker to sell all of his 35,200 shares of Playboy stock just hours after his wife learned that Iconix had ended talks with Playboy. The SEC calculated that he gained, or avoided losses, of nearly $22,000 through his Iconix-related trading.

‘Getting Documents’

A few months after the Iconix trade, an SEC attorney visited Marovitz at his Chicago office to inform him that his Playboy stock trading, conducted through Mesirow Financial Inc., was being investigated. According to Marovitz’s testimony before the SEC, he visited his broker shortly after that meeting to talk about “getting documents,” among other things.

Asked by the SEC what was discussed, Marovitz responded: “Basically, I, I, I think I asked him if I had a right to, to trade in Playboy stock, was there anything that, was there any illegality between actually trading with Playboy stock. And he said no.” Pressed about whether he had seen the memo about trading in Playboy stock faxed by Shapiro in 1998, Marovitz invoked his Fifth Amendment right against self-incrimination.

The revelation that Marovitz, contrary to her repeated warnings, had been trading in Playboy stock stunned Hefner. The SEC asked if she suspected her husband of acting on inside information surrounding his trades.

“To the best of my recollection, I didn’t even think that,” she testified.

Hefner’s first instinct was to stand by her man. According to her testimony, she called a top Chicago lawyer to see “if he had a very good attorney to recommend to my husband.”

SEC Hearing

Hefner and Marovitz retained James Streicker of Cotsirilos, Tighe & Streicker, to represent their mutual interests. It was only later in 2010, when Hefner received a subpoena from the SEC asking for her testimony in the matter, that she retained her own lawyer, Sheldon Zenner of Katten Muchin Rosenman LLP.

On Nov. 8, 2010, Marovitz and Streicker appeared at the SEC’s Chicago office to provide investigative testimony. Over the course of 90 minutes, Marovitz declined to answer any questions about his trading activity, invoking his Fifth Amendment right 179 times, even to basic questions about whether he knew anyone associated with Playboy Enterprises.

Regarding his conversations with his wife, Marovitz invoked a “marital communication privilege,” which can bar testimony by one spouse against another.

Three weeks later, Hefner and her attorney visited the SEC office for her testimony. In contrast to her husband’s appearance, Hefner spent the better part of four hours describing her actions around the five dates on which the SEC suspected her husband had been trading on insider information. She said she would generally abide by the same marital communication privilege that Marovitz had invoked.

Broad Questions

In response, the SEC attorneys posed broad questions about the types of discussions she’d have with her husband, while never asking her to divulge the contents of specific conversations. Hefner testified that she occasionally shared sensitive insider information with her husband, sure that he would respect the confidentiality of their conversations.

When Hefner was asked why she was surprised when Marovitz told her about his trading, she replied simply: “Because I had every reason to believe that he would not have done that.”

Over five years of alleged financial infidelity, the SEC calculated that Marovitz gained, or avoided losses, of $100,952, He agreed to pay $168,352, including penalties and interest, to settle the matter, without admitting wrongdoing.

‘Terrible Things’

How do couples survive that?

“Forgiveness isn’t all or nothing,” said Janis Spring, clinical psychologist and author of “How Can I Forgive You? The Courage to Forgive, the Freedom Not To.” “It doesn’t happen in an instant. Good people can do terrible things. You weigh the good against the bad, and you make a thoughtful decision. You weigh all the things that this person has brought to your life and how they enhanced your life and weigh that against what they’ve done to you. And if they’re remorseful, it may make sense to stay together.”

Not in this case, though.

Earlier this year, a few months after the settlement, Hefner, now executive chairman of Tucson-based Canyon Ranch Enterprises Inc., moved out of the couple’s condominium on Lake Shore Drive into another Chicago apartment of her own, according to property records. Hefner and Marovitz are now separated.


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