The Securities and Exchange Commission charged two information technology specialists at a Bend, Oregon-based health insurance company with insider trading on confidential information about the acquisition of their employer.
The SEC alleges that Daniel Vance of Bend and Blake Wellington of Hillsboro, Oregon, learned that their employer Clear One Health Plans was involved in advanced merger negotiations with competitor PacificSource Health Plans. Rather than keep the information confidential, Wellington and Vance improperly used the information to personally profit by purchasing Clear One shares. Clear One's share price jumped by more than 150 percent after the companies announced the merger on Dec. 30, 2009.
According to the SEC's complaint filed in federal court in Oregon, Daniel Vance gained access to the confidential deal information on Dec. 16, 2009, when he was asked by Clear One's CEO to help resolve an e-mail issue. Vance saw confidential merger documents being sent to the CEO of PacificSource. Vance then informed Blake Wellington, who was his supervisor. The very next day, Wellington purchased 3,700 Clear One shares and Vance purchased 1,200 Clear One shares. Clear One's share price jumped by more than 150 percent after the companies announced the merger on Dec. 30, 2009. Wellington and Vance immediately began selling their stock, reaping more than $70,000 in profits.
The SEC alleges that Wellington and Vance took unusual steps to finance their purchases of Clear One shares. For instance, Wellington obtained a $25,000 loan from an online peer lending site. Vance borrowed $5,285 from his 401(k) retirement account, sold personal computer equipment, and sold his truck to finance his purchases of Clear One shares.
The complaint alleges that, by their conduct, Wellington and Vance violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the SEC's allegations, both Wellington and Vance consented to permanent injunctions against violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Wellington consented to pay full disgorgement of his trading profits totaling $55,891.50 plus prejudgment interest of $5,644.04 and a penalty of $55,891.50, and Vance consented to pay full disgorgement of his trading profits totaling 17,509.75 plus prejudgment interest of $1,768.18 and a penalty of $17,509.75.
The SEC thanks the Financial Industry Regulatory Authority (FINRA) for its assistance in this matter.
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