WASHINGTON (Dow Jones/AP) — Federal regulators yesterday accused a father and his sons of orchestrating a $3.7 million insider-trading scheme.The Securities and Exchange Commission says the scheme grew to include friends and relatives, and relied on information they stole from their employers, including Taro Pharmaceutical Industries Ltd. and accounting firm PricewaterhouseCoopers.

The SEC filed civil charges in New York district court, and said that Zvi Rosenthal, who was a vice-president at Israel-based Taro until January 2006, in 2001 began passing on Taro's most significant inside information — including earnings projections and regulatory approvals — to his sons, and they and their friends traded on it.

In 2003, Amir Rosenthal created a hedge fund, Aragon Partners, to pool money from the family to trade in Taro securities, the SEC said. In later stages of the scheme, Ayal Rosenthal, who worked at PwC, and a friend, David Heyman, who worked at Ernst & Young, passed on information that they picked up at work, and Amir traded on it, the SEC said.

"This was insider trading at its worst — this scheme involved serial and rampant insider trading by a family, its hedge fund, and friends and relatives, many of whom were professionals, lawyers and accountants, who had every reason to know better," said Bruce Karpati, assistant regional director at the SEC's Northeast regional office.

Attorneys for the men couldn't immediately be reached.

In one instance, Zvi, who had real-time access to Taro's sales data, knew that the company's 2005 third-quarter sales were low compared with previous quarters and understood the effect that would have on earnings, the SEC said. He passed along the information to his sons, Amir, Ayal, and Oren, the oldest, the SEC said. Amir passed the tip to his friend Heyman and his supervisor at a New York-based law firm, the SEC said. In total, the trades generated some $750,922, including the avoidance of losses on previously optimistic bets on Taro's stock price, the SEC said.

Young Kim, Amir's supervisor, has agreed to give up the $4,288 he earned and pay almost $42,000 in civil penalties, the SEC said. He settled without admitting or denying wrongdoing. His attorney wasn't in the office, and a person who answered the phone at a number for a Young Kim at a New York law firm said that he wasn't in.