U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19918 / November 20, 2006
Securities and Exchange Commission v. David M. Willey and Joy S. Willey, (D.D.C., filed July 16, 2004)
SEC Settles Insider Trading Case Against Former Capital One CFO, David M. Willey, For $1.8 Million and 5 Year O&D Bar
The Securities and Exchange Commission today announced that it settled insider trading charges against David M. Willey of Great Falls, Virginia, former Chief Financial Officer of Capital One Financial Corporation. Under the settlement, Willey agreed to pay over $1.8 million in disgorgement, prejudgment interest and penalties. Willey also agreed to a five years bar from serving as an officer and director of a public company.
The Commission's complaint, which was filed with the United States District Court for the District of Columbia in July 2004, charged Willey with insider trading in the securities of Capital One. According to the complaint, the examiner in charge of the Federal Reserve Board of Governors' examination of Capital One advised Willey in April 2002 that the Fed was likely to downgrade Capital One's supervisory assessment, and that such a downgrade would result in some form of supervisory action including a possible Memorandum of Understanding (MOU). The complaint alleges that, without informing other members of senior management or the Capital One Board of Directors of this material information, Willey engaged in a series of transactions in Capital One stock and options in May 2002 and obtained substantial profits. Shortly thereafter, the Fed informed other senior officials at the bank of its intentions and a trading ban was put in place. The Fed finalized its supervisory assessment of Capital One in July 2002, determining that it would require an MOU as its supervisory action. On July 16, 2002, after the market closed, Capital One issued a press release announcing the MOU. Capital One's stock price plummeted 40% after the disclosure.
Without admitting or denying the allegations, Willey has agreed to settle the Commission's enforcement action by consenting to a final judgment that imposes a permanent injunction prohibiting him from violating Sections 10(b) and 16(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 16a-3 thereunder, ordering that he pay $801,434 disgorgement plus $218,180 in prejudgment interest and an insider trading penalty of $801,434, and imposing a five year officer and director bar. In connection with this settlement, the Commission is voluntarily dismissing with prejudice its relief defendant claim again Willey's wife. The Commission thanks the Federal Reserve Board of Governors for its assistance in this matter. For more information, see LR-18794 (July 26, 2004).