THE SEC RESOLVES A REG FD CASE
The Commission resolved a Reg FD case with the former CEO of Presstek, Inc., Edward Marino. The case has been in litigation since March 2010. SEC v. Presstek, Inc., Civil Action No. 10-1058 (E.D.N.Y. Filed March 9, 2010).
Presstek is a company engaged in designing, manufacturing, selling and servicing high tech digital imaging equipment in the graphics arts industry. Mr. Marino formerly served as a member of the board of directors, the chairman of the audit committee and as CEO.
The allegations against Mr. Marino center on his conversations about company performance on September 28, 2006 with a registered investment adviser whose funds held a large block. Shortly before that conversation Mr. Marino received an e-mail from the company controller. It stated that company performance in North America and Europe for August was weak and had a negative impact on margin and operating income relative to plan. Several days later Mr. Marino told certain senior personnel about the difficult results in an e-mail. No announcement of financial performance was planned before early October.
On September 28, 2006, Mr. Marino received a telephone call from Michael Barone, a managing partner of Sidus, a registered investment adviser. The funds managed by the adviser owned almost half a million shares of Presstek. During the telephone call, Mr. Marino told the adviser that the summer had not been as vibrant as expected in North America and Europe, according to notes of the conversation prepared by Mr. Barone. The notes go on to record Mr. Marino as saying, in substance, that overall a mixed picture for the company emerged for the quarter.
Mr. Barone began selling Presstek shares immediately, sending an e-mail during the call. By the end of the day he liquidated most of the fundsâ€™ holdings. The share price closed down about 19%.
The next day Presstek issued a preliminary announcement. It reported that quarterly financial performance was below prior estimates.
The Commissionâ€™s complaint named Mr. Marino and the company as defendants. It alleges violations of Exchange Act Section 13(a) and Regulation FD. The prayer for relief requested an injunction against both defendants and a penalty.
The company settled at the time the complaint was filed, consenting to the entry of a permanent injunction prohibiting future violations of the sections cited in the complaint. As part of the settlement the company agreed to pay a $400,000 civil penalty. In an unusual step the Commission, in its complaint, acknowledged the cooperation of the company citing its remedial measures. Those included revising its corporate communications policies and governance principles, replacing its management team, appointing new independent board members and creating a whistleblowerâ€™s hotline.
This week Mr. Marino settled with the Commission. In the civil injunctive action he agreed to the entry of a final judgment which imposed a $50,000 civil penalty. The settlement did not include an injunction. Rather, a separate administrative proceeding was instituted based on the same allegations as the civil injunctive action. To resolve that action Mr. Marino consented to the entry of a cease and desist order based on Exchange Act Section 13(a). In the Matter of Edward J. Marino, Adm. Proc. File No. 3-14879 (May 15, 2012).