ALLEGED INSIDER TRADING KICKBACKS INCLUDED CASH AND MARIJUANA
Shane Fleming, a former executive at major Minnesota-based fitness firm Life Time Fitness and a network friends (eight other people) are accused in a new federal indictment of using insider information to make $866,629 by quickly accumulating stocks before word of the company’s sale from a publicly-traded company to a private firm pushed share prices higher in 2015. The information was obtained from unsealed documents from the Securities and Exchange Commission (SEC) Friday September 29, 2017 in Chicago.
The share price for LifeTime Fitness on the New York Stock Exchange (NYSE) rose from around $58 on March 5, 2015, to about $70 one day following the tips among friends, and after the Wall Street Journal first reported the pending sale. LifeTime Fitness, which owns fitness centers across the U.S. and Canada, officially announced on March 16,2015 that two private equity firms were buying all company shares for $72.10 per share.
The Securities and Exchange Commission (SEC) alleges that the defendants Shane P. Fleming, Bret J. Beshey, Christopher M. Bonvissuto, Peter A. Kourtis, Alexander T. Carlucci, Dimitri A. Kandalepas, Austin C. Mansur, Eric L. Weller, and “Individual A” (?) sold the options and shares they had acquired after news of Life Time’s acquisition became public, realizing total illegal profits of approximately $866,629.
Shane Fleming, 54, then-vice president for corporate sales at Life Time Fitness Inc., allegedly passed an insider tip about the company’s pending sale earlier in 2015 to a friend. That friend then allegedly told his girlfriend and other friends. All nine defendants were charged with conspiracy and each faces at least one count of securities fraud.
The nine people charged purchased hundreds of call options in Life Time Fitness stock from February 25, 2015, through March 3, 2015, according to the indictment. The options were traded on the Chicago Board Options Exchange, while the company’s common stock was traded on the New York Stock Exchange. The company remains a privately-held firm.
The SEC alleges Defendant Shane Fleming, a vice president of sales at Life Time, learned of the company’s negotiations to sell itself on or before February 23, 2015, and tipped his long-time friend and business partner, defendant Bret Beshey.
Rather than trading in his own name, Beshey tipped his friends, defendants Christopher Bonvissuto and Peter Kourtis, who agreed to share some of their trading profits with him. Beshey also tipped his friend Individual A, who
traded profitably on the tip and gave some of his proceeds to Beshey in the form of a purported loan.
Kourtis, in turn, tipped the inside information he received from Beshey to four of
his friends — defendants Alexander Carlucci, Dimitri Kandalepas, Austin Mansur, and Eric Weller. Carlucci, Mansur, and Weller agreed to pay, and ultimately did pay, Kourtis a kickback in exchange for the tip, according to an SEC document.
On March 5, 2015, after the close of trading, the Wall Street Journal published an
article reporting that Life Time was in negotiations with two private equity firms to be acquired and taken private. The next day, Bonvissuto, Kourtis, Carlucci, Kandalepas, Mansur, and Weller sold most of their call options. The defendants sold their remaining positions on or before March 16, 2015 — the day that Life Time officially announced the merger in a press release. Bonvissuto and Kourtis subsequently sent approximately $19,300 of their trading proceeds to Beshey, who
in turn paid approximately $10,000 to Fleming. After selling their options, Carlucci and Mansur gave Kourtis cash, and Weller (a resident of Hermosa Beach, California) gave Kourtis at least 10 pounds of marijuana as a kickback for providing the tip about Life Time.
Alleged Local Connections in Niles and Schaumburg
In late February 2015, shortly after learning about Life Time’s impending
acquisition from Bret J. Beshey, Peter A. Kourtis met with his friend Dimitri A. Kandalepas in Schaumburg, Illinois.
Peter A. Kourtis, age 50, is a resident of Niles, Illinois, and is employed as a realtor. At the time of the alleged insider trading communications, Kourtis was friends with Beshey, Carlucci, Kandalepas, Mansur, and Weller.
Dimitri A. Kandalepas, age 28, is a resident of Schaumburg, Illinois, and is
currently employed by a healthcare business located in Illinois. At the time of the alleged insider trading communications, Kandalepas was friends with Kourtis.
Kourtis and Kandalepas had known each other for many years, and Kourtis had invested in several businesses run by Kandalepas’s father. During their meeting, Kourtis told Kandalepas the inside information about Life Time’s impending acquisition that he received from Beshey, including:
(a) that he had a friend who was long-time friends with someone who worked in a high-level position at Life Time;
(b) that the Life Time insider said Life Time was going to be bought by a private company within the next month; and
(c) that Life Time’s stock price would go up as a result of the acquisition.
At the same meeting, Kourtis also told Kandalepas that Kourtis was going to buy
out-of-the-money Life Time options with a strike price of $65 per share and an expiration date of March 20, 2015. He encouraged Kandalepas to do the same.
On March 3, 2015 — after being tipped by Kourtis about the Life Time acquisition -— Kandalepas purchased 140 LTM March 20, 2015 $65 call options. Kandalepas had
never before purchased Life Time securities or the options of any security.
Statement Friday on ensuring the integrity of markets …
“… a core principle upon which the American financial system is built.”
— Joel R. Levin, Acting U.S. attorney in Chicago
A conviction on a single fraud count of securities fraud carries a maximum 20-year prison term.
Court records on Friday didn’t name attorneys for Fleming or the other defendants. Shane Fleming lives in Chanhassen, Minnesota, the hometown of Life Time Fitness its headquarters. Among the network of friends, four live defendents in the Chicago area, one in California one in New York, and two in Mexico.
According to Life Time Fitness Shane Fleming has not worked at Life Time Fitness since 2016.
Life Time Fitness currently has nine locations high quality facilities in Chicagoland — three Onyx Clubs and six Gold Clubs. Currently Life Time Fitness has 124 Life Time Fitness facilities in 27 states, and three Life Fitness facilities in Canada.
A Life Time Fitness facility will be opening soon at 1100 Skokie Blvd in Northbrook, Illinois, and the company is in the early stages of planning a Life Time Fitness at the former Hackney’s location, 880 North Old Rand Road in Lake Zurich, Illinois.
The closest Life Time Fitness facilities to Arlington Heights are located in Algonquin, Bloomingdale, Old Orchard/Skokie, Schaumburg and Vernon Hills.
According to the Better Business Bureau (BBB reviewed on Monday October 2, 2017), Life Time Fitness is not BBB accredited, and had 329 complaints closed with the BBB in last 3 years, and 127 closed in the last 12 months. Most of the complaints were related to Advertising/Sales Issues or Billing/Collection Issues, according to the BBB.
As of Monday, October 2, 2017 on their official website, Life Fitness has an obscure membership sales method with different levels of facilities offering different amenities. In order of increasing amenities and pricing rates, clubs are named Bronze, Gold, Platinum, Onyx, and Diamond. The facilities are not classified clearly for comparison. On October 2, 2017, the location levels were only identified with a label on location maps. Also pricing, including initiation fees and monthly dues are not published or easily obtained, or published for comparison.
Beginning January 1, 2015, the City of Minneapolis announced that Life Time Fitness was offering special half price rates for Onyx-level memberships and Diamond-level memberships for civilian/nonsworn* City employees.
Monthly rate $59.95
Discount 39.5 percent off
Monthly rate $99.95
Discount 40.8 percent off
(includes a partner and children ages 12-18
and full-time students up to age x)
Monthly rate $129.95
Discount 45.6 percent off
Junior Membership Add-on (add children younger than age 12)
Monthly rate $5 each
Discount 50 percent off
2015 Diamond-level Membership
Monthly rate $99
Discount 26.1 percent off
Monthly rate $139
Discount 35 percent off
Family Membership (includes a partner and children ages 12-18
and full-time students up to age x)
Monthly rate $169
Discount 40.7 percent off
Junior (add children younger than age 12)
Monthly rate $5
Discount 83.3 percent off
The company was founded by Chairman and Chief Executive Officer, Bahram Akradi, and was incorporated in 1990 as FCA, Ltd., a Minnesota corporation. The Life Time Fitness name was registered in 1992. The first Life Fitness Center opened in Brooklyn Park, Minnesota.
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DEFENDANTS and Profits Gained According to SEC
Shane P. Fleming, age 54, is a resident of Minneapolis, Minnesota. Fleming
previously resided in Arizona. At the time of the relevant conduct, Fleming was a vice president of sales at Life Time. He currently is working as a consultant in the fitness industry.
Bret J. Beshey, age 44, currently resides in Mexico. Beshey formerly resided in
Arizona. At the time of the conduct alleged herein, Beshey was friends with Fleming, Bonvissuto, Kourtis, Carlucci, and Individual A. He works in the fitness industry and owns and operates a company that purports to provide services to fitness centers.
Christopher M. Bonvissuto, age 41, is a resident of Buffalo, New York. He is
self-employed in the garbage removal industry. At the time of the conduct alleged herein, Bonvissuto was friends with Beshey and Individual B, who is Beshey’s girlfriend. Bonvissuto realized approximate profits of $33,677.
Peter A. Kourtis, age 50, is a resident of Niles, Illinois. Kourtis is employed as a realtor. At the time of the conduct alleged herein, Kourtis was friends with Beshey, Carlucci, Kandalepas, Mansur, and Weller. Kourtis gained approximate profits of $92,744.
Alexander T. Carlucci, age 51, is a resident of Clarendon Hills, Illinois. He is
employed as a mortgage broker. At the time of the conduct alleged herein, Carlucci was friends with Beshey, Kourtis, and Mansur. Carlucci gained approximate profits of $14,492.
Dimitri A. Kandalepas, age 28, is a resident of Schaumburg, Illinois. He is
currently employed by a healthcare business located in Illinois. At the time of the conduct herein, Kandalepas was friends with Kourtis. Kandalepas gained approximate profits of $37,613.
Austin C. Mansur, age 45, is a resident of Chicago, Illinois. He is employed by a
real estate investment and development company located in Chicago, Illinois. At the time of the conduct alleged herein, Mansur was friends with Kourtis. Mansur gained approximate profits of $130,659.
Eric L. Weller, age 52, is a resident of Hermosa Beach, California. His
employment status is unknown. At the time of the conduct alleged herein, Weller was friends with Kourtis. Weller gained approximate profits of $130,659.
Individual A, Individual A is a retiree who resides in Scottsdale, Arizona. At the time of the conduct alleged herein, Individual A was friends with Beshey. Individual A gained trading profits of approximately $48,492.
Individual B currently resides in Mexico and is, and at all relevant times has been, in a romantic relationship with Beshey. Her employment status is unknown. At the time of the conduct alleged herein, Individual B was friends with Bonvissuto. Individual B allowed Beshey to use at least one bank account in her name to receive portions of the illicit trading profits obtained by reason of the unlawful conduct alleged in this Complaint.
Life Time Fitness is a Minnesota corporation headquartered in Chanhassan, Minnesota.