Two California husbands who allegedly heard their executive wives discussing nonpublic information about their technology company employers on the phone were sued for insider-trading by securities regulators.
The lawsuits are the latest in a string of recent U.S. Securities and Exchange Commission cases involving men, including the husband of former Playboy Enterprises Inc. Chief Executive Officer Christie Hefner, who allegedly traded on inside information they learned from spouses over the objections or without the knowledge of their wives.
“Family members have a duty to protect and safeguard that information, not to trade on it,” said Jina Choi, director of the SEC’s regional office in San Francisco.
Ching Hwa Chen, 61, of San Jose, California, overheard his wife, Informatica Corp.’s senior tax director, discussing the company’s quarterly results in June 2012 and gleaned that they might miss its forecasts, the SEC said in a complaint filed today in federal court in San Jose, California. Chen bought options and sold the company’s shares short, making $138,000 when they dropped after the company didn’t make the forecast, the SEC said.
His wife had told him not to trade in Informatic shares under any circumstances and Chen hid the trades from her, the SEC said. Debbie O’Brien, an Informatica spokeswoman, declined to comment on the lawsuit.
Chen, who didn’t admit or deny wrongdoing, agreed to pay $280,523 to settle the case, according to the SEC.
In a separate complaint filed in San Jose, the agency said Tyrone Hawk, 46, of Los Gatos, California, made $151,480 by selling shares of Acme Packet Inc. that he bought after overhearing his wife, an Oracle Corp. finance manager, in discussions regarding the software company’s planned acquisition of Acme in February 2013. Hawk didn’t heed his wife’s warning that there was a blackout in trading Oracle securities because it was in the process of an acquisition.
Hawk, who also didn’t admit to or deny the allegations, agreed to pay about $305,614 to resolve the SEC lawsuit, according to court documents. Deborah Hellinger, an Oracle spokeswoman, declined to comment.
The mens’ wives weren’t accused in the lawsuit of any improper actions. Parties not accused of wrongdoing typically aren’t identified in SEC complaints. The settlements must be approved by a federal judge.
David Cohen, an attorney for Chen, declined to comment on the lawsuit. Ed Swanson, an attorney for Hawk, didn’t immediately return a voice-mail message seeking comment.
Spouses have a duty of confidence when learning nonpublic information, under SEC rules over insider trading. Last year the agency sued a Houston man for trading shares of National Semiconductor Corp. after learning about a company acquisition from his wife, whose law firm was providing advice on the deal. He settled the claims for $60,000 without admitting or denying wrongdoing, according to the agency.
The agency in 2011 sued William Marovitz, Hefner’s husband, claiming he traded on nonpublic information about the company’s possible sale from his wife, who had instructed him not to trade in Playboy shares. Marovitz settled with the agency for $168,352, without admitting or denying wrongdoing.
A former managing director at an executive search firm in Illinois was sued by the SEC in 2011 for trading Hewitt Associates Inc. shares after learning about the company’s merger with Aon Corp. Inc. from his wife, then an Aon executive. She asked him in e-mails after telling him the news not to share the information. The husband settled the case for almost $21,000, also without admitting or denying wrongdoing.
In a San Francisco case, the wife of an ex-Deloitte Tax LP partner, agreed in 2011 to pay $1 million to settle SEC claims that she tipped family members to merger deals. While Annabel McClellan didn’t admit wrongdoing in the SEC case, she pleaded guilty to a charge that she obstructed the agency’s investigation and told a judge she overheard her husband talking about the deals and passed the information to her brother-in-law. She was sentenced to 11 months in prison.
McClellan and her husband, Arnold, were initially accused by the SEC in 2010 of telling family members of at least seven confidential buyouts from 2006 to 2008 planned by Deloitte’s clients, including Kronos Inc., aQuantive Inc. and Getty Images Inc. The relatives made about $3 million in profits, according to the lawsuit. The SEC dropped its claims against Arnold McClellan after his wife’s settlement was approved by a judge.
The cases are SEC v. Hawk, 14-cv-01466, and SEC v. Chen, 14-cv-01467, U.S. District Court, Northern District of California (San Jose).
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