U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20611 / June 4, 2008
SEC v. Joseph A. Fontanetta, et al., Civil Action No. 08-CV-5110 (S.D.N.Y.)
SEC Charges Burr B. McKeehan and Joseph A. Fontanetta With Insider Trading in Connection With Animas Corporation's Announcement of Merger With Johnson & Johnson
McKeehan Agrees to Pay Disgorgement and Civil Penalties Totaling $384,095
The Securities and Exchange Commission ("Commission") today announced the filing of a civil action in the United States District Court for the Southern District of New York against Burr B. McKeehan, of Monarch Beach, California, and Joseph A. Fontanetta, of Paramus, New Jersey, for engaging in unlawful insider trading in the securities of Animas Corporation ("Animas") before a December 16, 2005 merger announcement with Johnson & Johnson. Animas, which was headquartered in West Chester, Pennsylvania, designed, manufactured and sold products and services for patients with insulin-requiring diabetes. Its common stock was traded on the NASDAQ National Market System until February 2006, when the merger with Johnson & Johnson became effective.
The complaint alleges that Fontanetta, the Chief Executive Officer and board member of a privately-held medical instrumentation company, tipped material nonpublic information about Animas' merger to McKeehan, a retired podiatrist, two days prior to the merger announcement. The complaint also alleges that Fontanetta either misappropriated or unlawfully received the material nonpublic information from a fellow board member at his company who was the husband of an Animas executive and privy to the merger negotiations.
The complaint further alleges that, during a December 14, 2005 telephone call, Fontanetta unlawfully tipped McKeehan about the Animas merger. Specifically, he told McKeehan that Animas was going to be sold soon and that McKeehan would be making some money soon as a result. Six minutes after this telephone call, McKeehan began purchasing Animas stock. In total, on December 14 and 15, 2005, McKeehan purchased 30,000 shares of Animas stock. On December 16, 2005, the day of the merger announcement, Animas common stock closed at $24.03 per share, an increase of 32 percent over the previous day. As a result of his unlawful trading, McKeehan realized potential profits of $183,018.
The Commission's complaint alleges that by their conduct, the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctions, disgorgement by McKeehan of his unlawful trading profits, together with prejudgment interest, and civil monetary penalties from McKeehan and Fontanetta.
Without admitting or denying the allegations of the complaint, McKeehan has consented to the entry of a final judgment, subject to the Court's approval, permanently enjoining him from violating the charged provisions, and ordering him to pay disgorgement of $183,018, plus prejudgment interest of $18,059, and a civil penalty of $183,018.