by T. GormanPosted on Posted in SECActions

Earlier this week the Commission went to Montana to name a daughter and her father in an insider trading action. Yesterday the agency went to Hollywood to bring another insider trading case. This time the action named as defendants: Mohammed Mark Amin, the producer or executive producer of 75 Hollywood films and owner of a production company; his brother Robert Reza Amin; Michael Mahmood Amin, Mark’s cousin; Sam Saeed Pimazar, Mark’s friend and long time business manager; Mary Teresa Coley, a long time friend of Mark and his brother; and Ali Tashakori, a contractor who did construction work for Mark and his brother. SEC v. Amin, CV12 – 3960 (C. D. Cal. Filed May 7, 2012).

The action centers on transactions in the shares of DuPont Fabros Technologies, Inc. or DFT, a developer and manager of data centers. The inside information concerns DFT’s pending loans and leases, announced in an earnings release on February 11, 2009. Mark had been a DFT board member since the company went public in October 2007. He is related by marriage to the CEO.

At a special board meeting on December 22, 2009 Mark, along with the other outside directors, were advised that the company was negotiating certain leases and bank loans that were important to the company. Prior to that meeting Mark and the other directors had been advised that the trading window was closed under the company insider trading policy and would not reopen until after the release of earnings.

Subsequently, on January 7, 2009 Mark spoke with the CEO about the transactions for several minutes. Shortly after the telephone call Mark told his cousin and his business manager Mr. Pirnazar about the pending transactions at DFT. The cousin purchased 145,000 DFT shares. Mr. Pirnazar bought 10,500 shares.

At the February 4, 2009 board meeting Mark received additional information about the pending transactions. The next morning he told his brother about the deal. Almost immediately his brother began buying stock. Overall he purchased 214,600 shares. The brother also told his close friend, Mary Teresa Coley, and Ali Tashakori, the contractor. Ms. Coley purchased 20,050 shares while Mr. Tashakori bought 15,000 shares.

Following the close of the market on February 11, 2009 the company issued an earnings release. It highlighted the new leases and lending arrangements. The share price rose 36% to $5.40 per share. The traders collectively had profits of $618,497. The Commission’s complaint alleges violations of Exchange Act Section 10(b).

Each of the defendants settled with the Commission, consenting to the entry of a permanent injunction prohibiting future violations of Exchange Act Section 10(b). Mark also agreed to the entry of an officer director bar for ten years. In addition, the defendants collectively agreed to pay disgorgement of $618,497 along with prejudgment interest and a penalties of over $540,000.

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by T. GormanPosted on Posted in SECActions

Many insider trading cases turn out to be “all in the family,” involving various family members who have access to, and trade on, inside information. Sometimes spouses trade together. Other times one spouse betrays the trust of another by using information revealed in confidence to illegally trade. Some of the cases involve brothers, sisters and friends.

The Commission’s latest family insider trading ring is built on the close relationship between a daughter and her father. Daughter Angela Milliard was a paralegal in the three person law department of Kalispell, Montana based Semitool, Inc., a semiconductor corporation. Father Kenneth Milliard is a retired business executive in Columbia Falls, Montana. Daughter and father spoke on the telephone frequently. Those phone calls, and stock trading done at times during the calls and in other instances shortly after the call concluded are the predicate for the SEC’s insider trading action against them. SEC v. Milliard, Case No. CV 12-73 (D. Mon. Filed May 7, 2012).

The case centers on the announcement of a tender offer for the shares of Semitool by Applied Materials, Inc. prior to the opening of the market on November 17, 2009. In October 2009 Ms. Milliard became a key member of the deal team. She managed the due diligence process and reviewed draft merger documents, SEC filings and board minutes. The documents contained the terms of the deal including the announcement date and the fact that the tender offer would be at $11 per share, a premium to the then market price of $7.83.

From the end of October through Mid-November as Ms. Milliard worked on key aspects of the pending deal she repeatedly telephoned her father. The two purchased company shares as did other family members at the behest of Mr. Milliard. For example:

  • October 27: Ms. Milliard was placed in charge of the due diligence. Over the course of 50 phone calls over a three day period beginning on October 27 between daughter and father, Mr. Milliard purchased 500 Semitool shares while his daughter purchased 400.
  • November 9: Outside counsel e-mailed Ms. Milliard a draft merger agreement to review. She called her father two hours later and again the next morning. Father purchased 5,000 shares as the conversation continued.
  • November 12: Outside counsel gave Ms. Milliard draft board minutes dated for November 16 which approved the deal with handwritten edits. At the same time the board was meeting to give preliminary approval. A phone call was placed by daughter to father. She also wired $38,000 to her boyfriend’s brokerage account. The same day an additional 5,000 shares was purchased in that account from a Semitool computer.
  • November 12/13: Prior to the November 16 date for the approval of the merger, Ms. Milliard and her father spoke three more times. Within minutes of the calls Mr. Milliard purchased 5,000 shares while Ms. Milliard bought another 300 in her account.

When the market opened on November 17 following the announcement of the tender offer, the share price rose. By the end of the day Semitol’s shares closed up 30% at $11.05. The family sold its shares. Ms. Milliard had profits of $20,355. Her father had profits of $33,667.11. Other family members had profits of $14,138. Collectively, the family had illegal trading profits of $47,805.11. The complaint alleges violations of Exchange Act Sections 10(b) and 14(e).

Daughter and father settled with the SEC. Each consented to the entry of a permanent injunction prohibiting future violations of the Sections cited in the complaint. Ms. Milliard also agreed to pay disgorgement of $20,355 along with prejudgment interest and a civil penalty of $54,022.11. Mr. Milliard agreed to disgorge his trading profits and those of his sons, totaling $47,805 along with prejudgment interest and a penalty equal to the amount of the disgorgement.

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