U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20758 / September 30, 2008
SEC v. Randolph Leone and Randall Clark Wall, Civil Action No. 3-08CV1686-L, United States District Court for the Northern District of Texas (Dallas Division)
SEC Files Settled Insider Trading Action Against Randolph Leone and Randall Clark Wall
On September 29, 2008, the Securities and Exchange Commission filed an insider trading action in the United States District Court for the Northern District of Texas against Randolph Leone and Randall Clark Wall. The Commission alleges that Leone and Wall engaged in unlawful insider trading in the securities of ACR Group, Inc. in advance of a public announcement on July 5, 2007 that ACR Group had executed a definitive agreement with Watsco, Inc., a New York Stock Exchange issuer, pursuant to which Watsco would acquire ACR Group's outstanding common stock in a tender offer.
In its complaint, the Commission alleges that, in June and July 2007, Leone and Wall purchased ACR Group securities based on material, non-public information regarding the tender offer of ACR Group by Watsco. The Commission alleges that Leone learned of the pending ACR Group/Watsco transaction when he overheard a telephone conversation between his wife and the wife of ACR Group's in-house general counsel telephoned (they are sisters). Leone understood that the information was confidential and knew that the source, either directly or indirectly, was an employee of ACR Group. Nevertheless, he purchased 4,000 ACR Group shares on July 2, while in possession of that material, nonpublic information. He tendered the shares on August 10, 2007, profiting $7,866.00.
Wall, a former employee of a supplier to both ACR Group and Watsco, learned of the pending ACR Group/Watsco transaction from his supervisor, who was informed of the deal, in confidence, by Watsco's senior vice president. Shortly thereafter, Wall's supervisor informed Wall, noting that the information was confidential. While in possession of this material nonpublic information, Wall, on June 25, 2007, purchased 3,000 ACR shares. He ultimately sold those shares, realizing a profit of approximately $6,243.00.
Without admitting or denying the allegations in the complaint, Leone and Wall have agreed to settle the Commission's charges by consenting to the entry of final judgments that would: (i) permanently enjoin them from further violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14e-3 thereunder; (ii) order them to pay disgorgement of $7,866 and $6,243, respectively; (iii) order them to pay prejudgment interest of $406.58 and $322.68, respectively; and (iv) order them to pay civil penalties of $3,933 and $6,243, respectively. In accepting Leone's settlement, the Commission took into account his significant cooperation in the staff's investigation, including the fact that he came forward prior to being contacted by staff, reported his trades, and worked promptly with the staff to resolve the matter.