THREE SENIOR EXECUTIVES SETTLE INSIDER TRADING CHARGES
The Commission filed settled insider trading charges against three senior executives of CONSOL Energy, Inc. that center on the company’s acquisition of the Appalachian Exploration and Production business of Dominion Resources, Inc. The deal was announced on March 15, 2010. Each executive traded in the shares of his company. Each bet correctly that the share price would drop. Each profited. Each was terminated. SEC v. Mazur, Case No. 2:12-cv-00731 (W.D. Pa. Filed June 1, 2012).
CONSOL Energy is a producer of coal and natural gas based in Canonsburg, Pennsylvania. Dominion Resources is a power and energy company whose headquarters is in Richmond, Virginia. The three defendants are Charles Mazur, Jr., James Poland and Joseph Ceranzia. Each defendant learned about the transaction separately through the course of their employment.
Mr. Mazur became the Director of CONSOL’s Investor Relations Group in 2005 and later became the Director of Corporate Strategy. In mid-November 2009 he assisted others with the preparation of materials relating to the valuation of Dominion’s assets, potential deal structures and financial comparisons. By mid-February 2010 he was coordinating with the investment bankers.
On March 9, Mr. Mazur received an e-mail with the announcement date for the deal. The next day he purchased 140 in-the-money CONSOL put options. When the deal was announced six days later the share price fell 10%. He sold the options at a profit of $47,355. In November 2010 he was terminated for violating the firm’s insider trading policy.
James Poland was a CONSOL mining engineer for over 30 years. In December 2009 he conducted an environmental survey of 16 Dominion wells. He transmitted the report onto a confidential company website being utilized by those working on the deal. The next month he was cautioned in an e-mail from the chief legal officer of the company that the deal was confidential.
On March 9, 2010 Mr. Poland was told the date the deal would close. Two days later when he returned to a branch office of the company from travel, he accessed his 401(k) account. Mr. Poland sold 2,000 shares of company stock at about $53.85. After the public announcement of the deal the share price closed at $48.85. Mr. Poland thus avoided a loss of $9,552. In November he was terminated for violating the insider trading policy of the company.
Mr. Cerenzia, who began with the firm in 1980, was the Director of Public Relations. He reported directly to CONSOL’s EVP of Corporate Affairs and Chief Legal Officer. As the deal moved forward he coordinated the preparation of investor slide shows and news releases and edited press releases.
On March 9, 2010 Mr. Cerenzia received the same e-mail that was sent to Mr. Mazur with the date of the deal announcement. Two days later he logged into this employee incentive account and exercised two sets of stock options. He immediately sold the shares. By selling before the announcement of the deal and the resulting price drop Mr. Cerenzia avoided a loss of $5,690. He was terminated in November 2010 for violating the insider trading policy of the company.
Each defendant settled with the Commission, consenting to the entry of permanent injunctions prohibiting future violations of Exchange Act Section 10(b) and Securities Act Section 17(a). In addition, Mr. Mazur agreed to pay approximately $97,171, Mr. Poland about $19, 600 and Mr. Cerenzia about $15,453 in disgorgement, prejudgment interest and civil penalties.
ABA Program: The New Era of FCPA Enforcement and the Collapse of the Africa Sting Cases: Time to Reevaluate? Tuesday June 5, 2012, 12:00 PM to 1:30 PM EST, Live in Washington, DC and webcast.
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