The Commission filed a settled insider trading case against a corporate executive who traded in advance of a tender offer while in possession of material, non-public information. SEC v. Lackey, Civil Action No. 2:13-CV-2153 (W.D. Tenn. Filed March 11, 2013). The defendant in the case is Michael Lackey, formerly Vice-President and General Manager of International Paper Company. The deal he traded in advance of was the tender offer by his employer for Temple-Inland, Inc., announced on June 6, 2011.
Two years before the tender offer announcement International Paper’s Board of Directors asked senior managers to consider what type of strategic transactions might make sense for the company. Within a year a management group focused on five possible companies. By the fall of 2010 the group began to prepare a proposal for Temple-Island. The group included Executive A.
By the Spring of 2011 the group was considering pricing and terms for an offer to Temple-Island. On April 30, 2011 Mr. Lackey attended a charity event with Executive A. During the event the two men discussed the possible acquisition of Temple-Island. Mr. Lackey learned, according to the complaint, that there was “a good chance” the deal would proceed.
Between May 2 and June 1, 2011 Mr. Lackey purchased 9,000 shares of Temple-Island in two accounts. At the time of the purchases International Paper had policies and procedures which required its employees to maintain the confidentiality of its information.
After the close of trading on June 6, 2011 the deal was announced. The hostile tender offer was priced at $30.60 per share, a 46% premium to market. The following day Temple-Island’s stock opened at $29.97 and closed at $29.49. During the trading day Mr. Lackey sold his holdings, yielding a profit of $56,533.89. The Commission’s complaint alleges violations of Exchange Act Sections 10(b) and 14(e).
Mr. Lackey settled with the Commission, consenting to the entry of a permanent injunction prohibiting future violations of the Sections cited in the complaint. He also agreed to pay disgorgement in the amount of his trading profits, a penalty in that amount and prejudgment interest. See also Lit. Rel. No. 22640 (March 11, 2013).