SEC CHARGES FORMER COO WITH INSIDER TRADING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23142 / November 25, 2014

Securities and Exchange Commission v. D. Michael Donnelly, Civil Action No. 4:14-cv-01970 (E.D. Mo., November 25, 2014)

SEC Charges Former Solutia Executive with Insider Trading

The Securities and Exchange Commission today charged D. Michael Donnelly, the former Chief Operating Officer of Solutia, Inc., with insider trading in the stock of Solutia based on material non-public information regarding Eastman Chemical Company’s offer to acquire Solutia.  On the morning of January 27, 2012, Solutia and Eastman announced that Eastman would acquire Solutia at an implied value of $27.65 per share for Solutia investors.  At the end of trading on January 27, 2012, Solutia’s stock price closed at $27.51 per share, approximately 41 percent higher than the previous day’s close.

According to the SEC’s complaint filed in the U.S. District Court for the Eastern District of Missouri, Donnelly knew of Eastman’s interest in acquiring Solutia and learned on November 18, 2011, that Eastman would be submitting an improved offer.  The complaint alleges that between November 18, 2011, and November 22, 2011, Donnelly made multiple purchases of Solutia stock totaling 8,130 shares in brokerage accounts in the names of his children.  The complaint also alleges that between February 2, 2012, and February 8, 2012, Donnelly sold all 8,130 shares of Solutia stock for a profit of $104,391.  The complaint alleges that Donnelly misappropriated this information for his own personal benefit and breached the duty of trust and confidence that he owed to Solutia and its shareholders.

Without admitting or denying the SEC’s allegations, Donnelly agreed to settle the case against him.  The settlement is pending final approval by the court.  Specifically, Donnelly consented to the entry of a final judgment permanently enjoining him from violations of Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; requiring him to pay disgorgement of $104,391, the amount of his ill-gotten gains, plus prejudgment interest of $8,371.71, and a civil penalty of $104,391; and prohibiting him from serving as an officer and director of a public company.

FORMER EXECUTIVE AT CKE RESTAURANTS CHARGED WITH INSIDER TRADING

The following excerpt is from the SEC website:
March 16, 2012
SEC CHARGES FORMER EXECUTIVE AT CKE RESTAURANTS WITH INSIDER TRADING
On March 15, 2012, the Securities and Exchange Commission charged a former executive at the parent company of Carl’s Jr. and Hardee’s fast food restaurants with insider trading in the company’s securities based on confidential information he learned on the job.

The SEC alleges that Noah J. Griggs, Jr., who was executive vice president of training and leadership development at CKE Restaurants Inc., made two purchases totaling 50,000 shares of CKE stock after attending an executive meeting during which he learned that the company was in discussions with private equity investors about a possible acquisition. Griggs made a potential profit of $145,430 after the stock price soared when the merger was announced publicly. Griggs has agreed to pay $268,000 to settle the SEC’s charges without admitting or denying the allegations.

According to the SEC’s complaint filed in U.S. District Court for the Central District of California, Griggs attended a monthly strategic planning meeting on Friday, Nov. 20, 2009. CKE’s CEO cautioned the executives that information about the potential merger was confidential and nonpublic, and that no one should act on it. Nonetheless, on Monday morning November 23, Griggs bought 30,000 shares of CKE. He bought an additional 20,000 shares on Jan. 8, 2010. CKE and Thomas H. Lee Partners (THL) publicly announced a definitive merger on February 26 in which THL would acquire CKE. On news of the announcement, the value of Griggs’s shares increased significantly as CKE stock closed at $11.37 per share, up more than 27 percent from the previous day’s closing price of $8.91.

CKE Restaurants, Inc. is based in Carpinteria, California, and is the parent company of Carl Karcher Enterprises, which owns the fast-food restaurant brands of Carl’s Jr. and Hardee’s. Its common stock was listed on the NYSE under the ticker symbol CKR until July 13, 2010, when the NYSE suspended trading of the stock following the company’s acquisition by Columbia Lake Acquisition Holdings, Inc.

The SEC’s complaint charges Griggs with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c). Griggs agreed to pay disgorgement of $145,430, prejudgment interest of $11,035.74, and a penalty of $111,730. He also agreed to the entry of a final judgment permanently enjoining him from violating Section 10(b) of the Exchange Act and Rule 10b-5 and barring him from serving as an officer or director of a public company for 10 years. The settlement is subject to court approval.

The SEC’s investigation was conducted by Los Angeles Regional Office enforcement staff Lorraine Echavarria and Carol Lally. The SEC acknowledges the assistance of NYSE Regulation, Inc. in this matter.

FORMER COKE BOTTLING EXEC. CHARGED WITH INSIDER TRADING

The following excerpt was from the SEC website:

“SEC Charges Former Executive at Coca-Cola Bottling Company with Insider Trading
Washington, D.C., March 8, 2012 — The Securities and Exchange Commission today charged a former executive at a Coca-Cola bottling company with insider trading based on confidential information he learned on the job about potential upcoming business with The Coca-Cola Company.

The SEC alleges that Steven Harrold, who was a Vice President at Coca-Cola Enterprises Inc., purchased company stock in his wife’s brokerage account after learning that his company had agreed to acquire The Coca-Cola Company’s bottling operations in Norway and Sweden. The stock price jumped 30 percent when the deal was announced publicly the following day, enabling Harrold to make an illicit $86,850 profit.
“Harrold deliberately flouted the federal securities laws and specific company restrictions in his purchases and trades of Coca-Cola Enterprises stock,” said Rosalind R. Tyson, Director of the SEC’s Los Angeles Regional Office. “His employer entrusted him with critical nonpublic information, and Harrold shattered that trust to bottle up extra cash.”

Coca-Cola Enterprises is one of the world’s largest marketers, producers and distributors of Coca-Cola products, and its stock trades on the New York Stock Exchange under the stock symbol CCE. The Coca-Cola Company (ticker symbol: KO) develops and sells its products and syrup concentrate to Coca-Cola Enterprises and other bottlers.

According to the SEC’s complaint filed in the U.S. District Court for the Central District of California, Harrold was regularly in possession of sensitive, confidential information as an executive at CCE. On numerous occasions, Harrold signed non-disclosure agreements requiring him to keep confidential any information he learned about acquisitions being considered. Harrold also periodically received blackout notices prohibiting him from trading in company stock for a defined period in which he was likely to be in possession of confidential information.

The SEC alleges that Harrold, who lives in Los Angeles and London, was informed in early January 2010 that CCE was considering the acquisition of The Coca-Cola Company’s Norwegian and Swedish bottling operations. He signed a non-disclosure agreement requiring him to maintain the confidentiality of any nonpublic information he learned about the potential transaction. Harrold also received an e-mail from CCE’s legal counsel informing him that he was subject to a blackout period and was prohibited from trading in CCE stock “until further notice.”

Nevertheless, the SEC alleges that Harrold purchased 15,000 CCE shares in his wife’s brokerage account on Feb. 24, 2010, the day before the announcement of the transaction with The Coca-Cola Company. The insider trading was based on certain confidential information that Harrold learned in the days leading up to the announcement, including that the transaction was internally valued at more than $800 million and was viewed as creating significant positive growth opportunities for CCE.

The SEC’s complaint charges Harrold with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c) thereunder. The complaint seeks a final judgment ordering Harrold to pay a financial penalty and disgorge his ill-gotten gains plus prejudgment interest, preventing him from serving as an officer or director of a public company, and permanently enjoining him from future violations of those provisions of the federal securities laws.
The SEC acknowledges the assistance of FINRA in this matter.