Gregory C. Glynn, Esq. Cal. Bar No. 039999
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
Plaintiff Securities and Exchange Commission ("Commission") for its Complaint against Defendant John J. Cassese ("Cassese") alleges as follows:
JURISDICTION AND VENUE
1. This Court has jurisdiction and venue over this action pursuant to Sections 21(e), 21A(a)(1) and 27 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §§ 78u(e), 78u-1(a)(1) and 78aa.
2. Defendant Cassese has made use of the mails, means, or instrumentalities of transportation or communication in interstate commerce, and/or the facilities of a national securities exchange, in connection with the transactions, acts, practices and courses of business alleged in this Complaint.
3. This case arises out of insider trading in the securities of Data Processing Resources Corporation ("DPRC") by Cassese. Cassese, in his capacity as Chairman and President of Computer Horizons Corporation ("Computer Horizons"), acquired material, nonpublic information concerning a tender offer by Compuware Corporation ("Compuware") for DPRC, after Compuware had taken a substantial step or steps to commence a tender offer for DPRC.
4. After learning of Compuware's intention to acquire DPRC, Cassese, on June 22, 1999, purchased 15,000 shares of DPRC stock. On June 24, 1999, Compuware and DPRC publicly announced the tender offer in a press release. Later that day, Cassese sold the 15,000 shares realizing a profit of $150,937.50. In purchasing and selling the DPRC shares, Cassese knew, or acted in reckless disregard of the fact, that the material information regarding the Compuware tender offer for DPRC was nonpublic
5. John J. Cassese, age 56, resides in Mendham, New Jersey. Since 1992, Cassese has been the Chairman and President of Computer Horizons Corporation ("Computer Horizons"), a publicly traded company.
6. Data Processing Resources Corporation was a California corporation with its headquarters in Orange County, California. DPRC was a publicly-traded company engaged in the business of providing temporary staffing of computer and information technology personnel. The stock of DPRC was registered with theCommission pursuant to Section 12(g) of the Exchange Act, 15 U.S.C. § 78l(g). Compuware acquired DPRC on August 30, 1999.
7. Computer Horizons Corporation, a New York corporation headquartered in New Jersey, is a publicly-traded company engaged in the business of providing temporary staffing of computer and information technology personnel.
8. Compuware Corporation, a Michigan corporation, maintains its headquarters in Detroit, Michigan. Compuware's business includes an information services division, which provides temporary staffing of computer and information technology personnel. The stock of Compuware was registered with the Commission pursuant to Section 12(g) of the Exchange Act, 15 U.S.C. § 78l(g).
COMPUWARE'S TENDER OFFER FOR DPRC STOCK
9. On April 21, 1999, a senior Compuware manager met with DPRC senior managers at DPRC's corporate offices to discuss a potential acquisition of DPRC by Compuware. During this meeting, the companies informally discussed the potential advantages of such an acquisition. Over the following two weeks, informal communications between representatives of both companies continued regarding a potential acquisition.
10. On May 13, 1999, DPRC senior managers met with Compuware senior managers at Compuware's corporate office to continue the discussions regarding a potential acquisition. As the meeting progressed, the tone of the acquisition talks became more serious. In addition, at the meeting or shortly thereafter, Compuware provided DPRC with a confidentiality agreement that, among other things, prohibited either party from using any information learned through the discussions for any purpose other than the acquisition.
11. Subsequent to the May 13 meeting, the discussions between the two companies progressed until, in a letter dated May 26, Compuware offered to purchase each DPRC share for $25. On June 2, 1999, DPRC accepted Compuware's offer.
12. On June 2, 1999, following DPRC's acceptance of Compuware's tender offer, Compuware sent DPRC a comprehensive 26-page letter requesting the production of a large number of documents necessary for the formal due diligence review, which was scheduled to begin on June 8. Compuware conducted its due diligence review and, on June 23, 1999, both DPRC's and Compuware's boards approved the acquisition at a slightly lower price of $24 per share.
13. Throughout the discussions and the due diligence period, Compuware and DPRC took extensive steps to ensure that the acquisition remained confidential. Among other things, both companies used code names on internal documents to prevent detection of the negotiations, limited the number of employees who knew about the tender offer and executed a confidentiality agreement that prohibited their employees from trading securities based upon inside information.
14. On June 23, DPRC's stock closed at $12.25 per share, on volume of 229,800 shares. On June 24, before the market opened, Compuware and DPRC publicly announced that Compuware would acquire DPRC at $24 per share. On June 24, DPRC's stock closed at $23.375 per share, on volume of 5,721,000 shares. The closing price represented a gain of $11.125 per share, or a 91% increase from the previous day, and a volume increase of 2,390%.
CASSESE'S KNOWLEDGE AND TRADING OF DPRC SHARES
15. On April 12, Defendant Cassese met with a senior Compuware manager to discuss the potential acquisition of Computer Horizons by Compuware. After the meeting, the companies continued to have discussions regarding the possibility of an acquisition.
16. On May 4, Compuware sent Defendant Cassese a letter of intent that set forth the proposed terms of the acquisition. Subsequently, Computer Horizon's board of directors rejected Compuware's offer as too low.
17. On June 21, 1999, Compuware's Chairman and CEO contacted Defendant Cassese after the stock market closed. During the conversation, Compuware's Chairman and CEO told Cassese that Compuware would not be acquiring Computer Horizons at that time because it was acquiring DPRC. Compuware's Chairman and CEO also told Defendant Cassese that Compuware had not yet publicly announced the acquisition.
18. On June 22, 1999, the next morning after learning of Compuware's planned acquisition, and shortly after the market opened, Defendant Cassese purchased a total of 15,000 DPRC shares at $13.25 per share through two brokerage accounts. On June 24, Compuware and DPRC made the announcement, which included the terms of Compuware's tender offer to acquire DPRC at $24 per share. After the announcement, on June 24, Defendant Cassese sold his 15,000 DPRC shares at $23.3125 per share for a two-day profit of $150,937.50.
FIRST CLAIM FOR RELIEF
Violations of Section 14(e) of the Securities
Exchange Act of 1934, 15 U.S.C. § 78n(e),
and Rule 14e-3, 17 C.F.R. 240.14e-3, thereunder
19. Paragraphs 1 through 18 are realleged and incorporated herein by reference.
20. By June 22, 1999, Compuware had taken substantial steps towards commencing its tender offer for the securities of DPRC, including, among other things, holding several confidential meetings and discussions with representatives of DPRC, exchanging financial information for the purpose of facilitating such meetings and discussions, and ascertaining an approximate price at which it was prepared to acquire DPRC.
21. Cassese purchased DPRC stock, as described above, while he possessed material non-public information relating to a tender offer for DPRC stock by Compuware. At the time that he purchased the DPRC stock, Casseseknew, or was reckless in not knowing, that the information he possessed concerning the tender offer stock was non-public and had been acquired directly or indirectly from Compuware's Chairman and CEO.
22. Prior to Cassese's purchases, the material, nonpublic information related to the tender offer for DPRC shares was not publicly disclosed.
23. By reason of the foregoing, Cassese violated Section 14(e) of the Exchange Act, 15 U.S.C. § 78(e), and Rule 14e-3, 17 C.F.R. §240.14e-3, promulgated thereunder.
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court:
Issue findings of fact and conclusions of law that Defendant Cassese committed the violations charged and alleged herein.
Permanently enjoin Cassese from violating Section 14(e) of the Exchange Act and Rule 14e-3 thereunder.
Order Cassese to disgorge all improper gains from his unlawful conduct, gained directly or indirectly from the transactions complained of herein, together with prejudgment interest thereon.
Order Cassese to pay a civil money penalty pursuant to Section 21A of the Exchange Act, 15 U.S.C. § 78u-1.
Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.
Grant such other and further relief as this Court may determine to be just and necessary.