SEC Suffers Loss in Insider Trading Case
The SEC lost an insider trading case last week against the CEO of Delta Petroleum, Roger Parker. SEC v. Parker, Civil Action No. 1:12-cv-02839 (D. Col.). The complaint centered on allegations of illegal tipping in two instances. The first concerned the acquisition of a significant block of Delta Petroleum stock by investment firm Tracinda Corporation. The second concerned the quarterly financial results for Delta for the firm’s third quarter of 2007.
First, the Commission alleged that Mr. Parker tipped two friends about the Tracinda transaction. One was Denver insurance executive Michael Van Gelder, a years long friend. In the period leading up to the deal announcement the two men communicated several times. Mr. Van Gilder purchased shares of Delta for his account as well as options. He also urged his relatives, his broker and a co-worker to purchase shares of Delta. Following the deal announcement the share price increased by about 20% giving Mr. Van Gelder, one of his relatives, his broker and his co-worker had trading profits of over $161,000.
Mr. Parker was also charged with having tipped Scott Reiman, the founder and president of Denver-based investment firm Hexagon Inc., about the Tracinda transaction. Mr. Parker provided information about the Tracinda investment to Mr. Reiman on at least three occasions, according to the charging papers. Mr. Reiman purchased shares of Delta Petroleum shortly after speaking with his friend. In one instance the purchase was made just minutes after the telephone call.
Second, the Commission claimed that Mr. Parker tipped Mr. Van Gelder about Delta’s third quarter 2007 financial results. Shortly before the earnings announcement Mr. Van Gelder received an email from a friend expressing a negative view of Delta’s future. After checking with his broker and indicating that he planned to sell his Delta shares, he contacted Mr. Parker three times in the same evening. Subsequently, Mr. Van Gilder purchased shares of Delta in advance of the earnings announcement. He also emailed a friend indicating that “Delta will hit their numbers at this Thursday’s announcement.” When the earnings announcement was made the results were favorable. The trading resulted in $4,000 in ill-gotten gains.
At trial Mr. Parker was charged with having illegally tipped Mr. Van Gilder prior the 2007 quarterly announcement and the announcement about Tracinda in 2008. He was also charged with having tipped Mr. Reiman about the Tracinda investment. Following a seven day trial the jury returned a verdict finding in favor of Mr. Parker on each claim.
Previously, Mr. Van Gilder settled with the SEC and pleaded guilty in a parallel criminal case. He was sentenced to serve five years of supervised release which was later terminated after about one and one half years. Mr. Reiman settled with the Commission, agreeing to the entry of a cease and desist order and to pay disgorgement of $398,000, prejudgment interest and a penalty of $398,000. In addition, he agreed to the entry of a bar from serving as an officer or director and from the securities business with a right to reapply after five years. In the Matter of Scott Reiman, Adm. Proc. File No. 3-15277 (April 15, 2013).