LINDA CHATMAN THOMSEN (DC Bar No. 334219)
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
Plaintiff Securities and Exchange Commission (the "Commission") alleges:
NATURE OF THE ACTION
1. This is an insider trading case involving the purchase of securities of Acuson Corporation ("Acuson") by Douglas M. Gloff, a resident of San Diego, California. On September 20, 2000, Gloff learned from a member of the Acuson board of directors that Acuson was likely to be acquired in the near future. The next day, Gloff purchased 200 Acuson call options while in possession of this material, nonpublic information. On September 27, 2000, Acuson and Siemens Medical Engineering Group ("Siemens Medical") jointly announced that they had reached an agreement providing for the acquisition of Acuson by Siemens Medical. On September 27, 2000, after the public announcement of the Acuson/Siemens Medical agreement, Gloff sold all 200 of the Acuson call options he purchased on September 21, generating $137,485.91 in profits from his illegal trading.
2. This Court has jurisdiction over this action pursuant to Sections 21(e), 21A and 27 of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78u(e), 78u-1 and 78aa].
3. Defendant, directly or indirectly, has made use of the means or instrumentalities of interstate commerce, or of the mails, or the facilities of a national securities exchange in connection with the transactions, acts, practices, and courses of business alleged herein.
4. Defendant may, unless restrained and enjoined, continue to engage in the acts, practices, and courses of business alleged herein, or in transactions, acts, practices, and courses of business of similar purport and object. The Commission seeks a judgment permanently enjoining Defendant from future violations and directing disgorgement of illegal profits, together with prejudgment interest thereon, pursuant to Sections 21(d)(1) and (e) of the Exchange Act [15 U.S.C. §§ 78u(d)(1) and (e)]. The Commission also brings this action for an award of civil penalties, pursuant to Section 21A of the Exchange Act [15 U.S.C. § 78u-1].
5. Assignment to the San Francisco Division is appropriate pursuant to Civil Local Rule 3-2(d) because certain of the transactions, acts, practices and courses of business alleged below occurred in San Francisco County, California.
THE DEFENDANT AND RELEVANT ENTITIES
6. Gloff is a resident of San Diego, California. On March 31, 2000, he resigned as the president and chief operating officer of Eco Soil Systems, Inc. ("Eco Soil"), a public company headquartered in California.
7. Acuson is a Delaware corporation headquartered in Mountain View, California. Acuson is in the health care industry, specializing in ultrasound diagnostic systems. Acuson's common stock and options were, at all relevant times, registered pursuant to Section 12(b) of the Exchange Act and its options were, at all relevant times, traded on the San Francisco stock option market of the Pacific Stock Exchange.
8. Siemens Medical is a subsidiary of Siemens AG, a German corporation headquartered in Munich, Germany. Siemens Medical is a large supplier of healthcare products and services throughout the world.
9. On September 20, 2000, Gloff played a round of golf with an outside director of Acuson. Early in the round, Gloff asked the Acuson director whether he would be available to join Eco Soil as either an officer or a director. Gloff had made several previous unsuccessful attempts to recruit the director to join Eco Soil during the preceding year. On this occasion, the Acuson director responded that he might have some free time because Acuson was "going to go away." Shortly thereafter, he specifically warned Gloff not to engage in any securities transactions based on his comment, stating, "It's not a good time to be buying stock unless you want to go to jail." He repeated this warning a second time during their golf round.
10. After they finished their round of golf, the Acuson director and Gloff had lunch in the clubhouse dining room. During lunch, Gloff asked the director for Acuson's "call letters" and questioned him about the timing of a potential deal, whether "a deal could be done or not," and "the probability that something could happen." The Acuson director gave Gloff the ticker symbol, but did not respond to his other questions.
11. On September 21, 2000, while in possession of the material, nonpublic information he had learned about the previous day, Gloff purchased 200 Acuson call options, i.e., the right to buy 20,000 shares of Acuson common stock at $15.00 per share before October 21, 2000 (the "Acuson October 15 Calls"). Gloff paid $0.75 per option, for a total expenditure of $15,004.50.
12. Six days later, on Wednesday, September 27, 2000, before the market opened, Acuson and Siemens Medical announced that Siemens Medical would make a tender offer for all of Acuson's outstanding common stock at a price of $23.00 per share.
13. On September 27, 2000, following the public announcement, Acuson shares closed at $22.55, up forty-three percent (43%) from the previous trading day. The price of the Acuson October 15 Calls closed at $7.625, up five hundred and ten percent (510%) from the previous day.
14. On September 27, 2000, Gloff sold the Acuson October 15 Calls he had purchased on September 21, for $7.625 per option, thereby realizing profits of $137,485.91.
15. As a result of the suspicious trading activity, on October 3, 2000, the Commission staff called Gloff to conduct a voluntary telephone interview, which he declined. Shortly thereafter, Gloff called the Acuson director and asked to meet with him right away. When he agreed, Gloff arrived at his office in less than an hour.
16. Gloff told the Acuson director that he had purchased Acuson securities and that the Commission had called him regarding his trading. Gloff then apologized for his conduct, but asked the director to help him. Specifically, he told the director that if Acuson sent the director a questionnaire regarding the transaction with Siemens Medical, "all you have to do is tell them that you don't know me."
CAUSE OF ACTION
Violation of Exchange Act Section 14(e) and
17. Paragraphs 1 through 16 above are realleged and incorporated herein by reference.
18. By September 21, 2000, Siemens Medical had taken a substantial step or steps to commence its tender offer for the outstanding shares of Acuson common stock. All such steps were taken in confidence.
19. By reason of the foregoing alleged conduct, Gloff, directly or indirectly, engaged in fraudulent, deceptive or manipulative acts or practices in connection with a tender offer by Siemens Medical for the common stock of Acuson. Specifically, he purchased or caused to be purchased the Acuson October 15 Calls, while in possession of material information relating to the tender offer, which information he knew or had reason to know was nonpublic and which information he knew or had reason to know was obtained, directly or indirectly, from an Acuson director.
20. By reason of the foregoing, Gloff violated Section 14(e) of the Exchange Act [15 U.S.C. § 78n(e)] and Rule 14e-3 thereunder [17 C.F.R. § 240.14e-3] and is likely to commit such violations in the future unless enjoined from doing so.
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court:
(i) permanently enjoin the defendant Douglas M. Gloff and his agents, servants, employees, and attorney-in-fact, and all persons in active concert or participation with him who receive actual notice of the injunction by personal service or otherwise, and each of them, from violating Section 14(e) of the Exchange Act [15 U.S.C. §78n(e)] and Rule 14e-3 thereunder [17 C.F.R. § 240.14e-3];
(ii) order the defendant Douglas M. Gloff to disgorge all profits from the trading alleged herein, with prejudgment interest;
(iii) order the defendant Douglas M. Gloff to pay a civil penalty under Section 21A of the Exchange Act [15 U.S.C. § 78u-1]; and
(iv) grant such other relief as this Court may deem just and appropriate.