UNITED STATES DISTRICT COURT
Plaintiff, the United States Securities and Exchange Commission (the "Commission") alleges:
NATURE OF THE ACTION
1. This insider trading case involves unlawful purchases by defendants John Wesley Straub ("Wes Straub") and Anthony J. Campisi ("Campisi"), of securities of BetzDearborn Inc. ("BetzDearborn") before a July 30, 1998 announcement that BetzDearborn and Hercules Inc. ("Hercules") agreed to merge.
2. Defendant Jane M. Straub ("Jane Straub"), an administrative assistant at BetzDearborn, and wife of Wes Straub, learned material nonpublic information about the impending merger around July 27, 1998, and unlawfully tipped Wes Straub, who purchased 500 BetzDearborn shares on July 28.
3. Wes Straub tipped his friend and long-time accountant, Campisi, about the impending merger, and on July 29, 1998, Campisi purchased 500 BetzDearborn shares.
4. Wes Straub exchanged his shares at the close of the merger, October 15, 1998, for a profit of $18,838. On July 31, Campisi sold his BetzDearborn shares for a profit of $15,063.
5. By virtue of the conduct alleged above, defendants violated antifraud provisions of the federal securities laws. The Commission requests that the Court enjoin each defendant against further violations of these laws, impose a civil penalty on each defendant, require the defendants Wes Straub and Jane Straub to jointly and severally disgorge all profits realized from their unlawful tipping and trading, and require Campisi to disgorge all profits realized from his unlawful trading, plus prejudgment interest on those amounts.
JURISDICTION AND VENUE
6. Defendants engaged in acts, practices, and courses of business that violate Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act")[15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. §240.10b-5], through the means or instrumentalities of interstate commerce, the mails, or the facilities of a national securities exchange.
7. This Court has jurisdiction under Sections 21(e), 21A(d)(4), and 27 of the Exchange Act [15 U.S.C. §§ 78u(e), 78u-1(d)(4), and 78aa]. Certain of the defendants' transactions, acts, practices, and courses of business occurred within this District, and venue is proper pursuant to Section 27 of the Exchange Act.
8. John Wesley Straub, age 59, resides in Churchville, Pennsylvania, with his wife Jane. Wes Straub has been retired on disability for several years. Wes Straub asserted his Fifth Amendment privilege against self-incrimination when subpoenaed to testify in the Commission's investigation.
9. Jane M. Straub, age 57, resides in Churchville, Pennsylvania, and is the wife of Wes Straub. Jane Straub was a sixteen-year employee of BTL at the time of the merger. During 1998, she was an administrative assistant in the Corporate Marketing Department. Jane Straub asserted her Fifth Amendment privilege against self-incrimination when subpoenaed to testify in the Commission's investigation.
10. Anthony J. Campisi, age 51, resides in West Collingswood, New Jersey, and is a self-employed public accountant. Campisi has been Wes Straub's personal accountant since 1982, and from 1981 to 1992 was the accountant for Wes Straub's business. Campisi asserted his Fifth Amendment privilege against self-incrimination when subpoenaed to testify in the Commission's investigation.
11. BetzDearborn was a Pennsylvania corporation based in Trevose, Pennsylvania, that produced and marketed chemical treatment programs for water, wastewater, and industrial process systems. Prior to its merger with Hercules on October 15, 1998, BetzDearborn's common stock was registered with the Commission pursuant to Section 12(b) of the Exchange Act and was traded on the New York Stock Exchange.
12. Hercules Inc. is a Delaware corporation based in Wilmington, Delaware, that manufactures specialty chemical products for a variety of markets worldwide.
13. From April 1998 through the July 30, 1998 merger announcement, BetzDearborn and Hercules conducted merger negotiations in secret. Defendant Jane Straub was an administrative assistant for BetzDearborn and worked in the suite of offices occupied by BetzDearborn's corporate communications department.
14. As an employee of BetzDearborn, Jane Straub had a duty to maintain the confidentiality of information she learned during the course of her employment and not to use the information for her benefit or for the benefit of her friends. BetzDearborn's 1994 employee handbook included sections titled "Insider Information" and "Proprietary Information" that instructed employees not to trade in BetzDearborn securities if they are knowledgeable about any "inside" information and not to disclose confidential information to anyone. In April 1994, Jane Straub signed an acknowledgement that she had received and reviewed the handbook.
15. On or about July 27, 1998, Jane Straub learned about the merger discussions between BetzDearborn and Hercules during the course of her employment at BetzDearborn, and was told to keep the information confidential. The information about the merger was both nonpublic and material. Thereafter, Jane Straub took advantage of her knowledge of the impending merger and told Wes Straub about the merger negotiations. This disclosure was in breach of her duty to BetzDearborn to maintain the information in confidence and was made under circumstances in which it was reasonably foreseeable that Wes Straub would use the information to trade in BetzDearborn securities and tip others to do so.
16. Wes Straub knew or was reckless in not knowing that the merger information was delivered to him in breach of Jane Straub's duty of trust and confidence owed to BetzDearborn. Wes Straub inherited Jane Straub's duty not to trade in BetzDearborn securities or to tip others to trade while in possession of material nonpublic information about the merger.
17. On July 28, 1998, Wes Straub bought BetzDearborn securities, buying 400 shares for $34.3125 and 100 shares for $34.375, for a total cost of $17,163.
18. On July 29, 1998, BetzDearborn's closing stock price was $35.88. After the merger announcement the next day, BetzDearborn's stock price increased to $69.25 and closed for the day at $67.69.
19. On October 15, 1998, the date the merger closed, Wes Straub exchanged his 500 BetzDearborn shares for $72 per share for gross proceeds of $36,000 and an unlawful profit of $18,838.
Wes Straub Tips his Friend and Long-Time Accountant Campisi About BetzDearborn's Secret Merger Plans and Campisi
20. On or before July 29, 1998, Wes Straub tipped Campisi material nonpublic information about BetzDearborn's merger plans. It was foreseeable under the circumstances that Campisi would use the information to trade in BetzDearborn securities. Campisi knew, or was reckless in not knowing, that the information had been provided to Wes Straub by Jane Straub, in breach of her duty of trust and confidence owed to BetzDearborn. Campisi inherited this duty not to trade in BetzDearborn securities from Wes Straub.
21. On July 29, 1998, following the tip from Wes Straub, Campisi bought 500 shares of BetzDearborn for $35.75 per share, for a total cost of $17,875.
22. On July 31, 1998, after the merger announcement, and after receiving a telephone call from Wes Straub, Campisi sold all his BetzDearborn shares for $67.875 per share for gross proceeds of $33,938, and an unlawful profit of $16,063.
23. By virtue of the conduct alleged in paragraphs 1-22 herein, each defendant, directly or indirectly, in connection with trading in BetzDearborn common stock, by use of the means and instrumentalities of interstate commerce, of the mails, or of the facilities of a national securities exchange: (1) employed devices, schemes, or artifices to defraud; (2) made untrue statements of material facts, or omitted to state material facts necessary in order to make the statements made, in light of the circumstances in which they were made, not misleading; or (3) engaged in acts, practices, or transactions which operated as a fraud or deceit upon purchasers or sellers of securities or upon other persons, in connection with the purchase or sale of securities.
24. By reason of the foregoing acts, practices, and transactions, each defendant violated Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court:
Grant a Final Judgment of Permanent Injunction restraining and enjoining each defendant and their agents, servants, employees, attorneys-in-fact, and assigns and those persons in active concert or participation with them, and each of them, from violating Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
Order the defendants Wes Straub and Jane Straub to jointly and severally disgorge all profits realized from their unlawful tipping and trading, and order defendant Campisi to disgorge all profits realized from his unlawful trading, plus prejudgment interest thereon.
Order each defendant to pay civil penalties under the Insider Trading and Securities Fraud Enforcement Act of 1988, Section 21A of the Exchange Act [15 U.S.C. § 78u-1].
Grant such other relief as this Court may deem just and appropriate.
Dated: June ___, 2002
Attorneys for Plaintiff