U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20779 / October 14, 2008
Securities and Exchange Commission v. James D. Zeglis, Gautam Gupta, Jim W. Dixon and Lance D. McKee, Civil Action File No. 08-CV-5259 (N.D. Ill. October 9, 2008)
Federal Judge Permanently Enjoins Jim W. Dixon and Lance D. McKee From Future Insider Trading Violations
The Securities and Exchange Commission announced that the Honorable James B. Moran, United States District Judge for the Northern District of Illinois, entered Final Judgments as to defendants Jim W. Dixon ("Dixon") and Lance D. McKee ("McKee") on October 9, 2008. Dixon and McKee were enjoined from future violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder.
The Court ordered disgorgement and prejudgment interest against Dixon in the respective amounts of $116,324.84 and $22,074.03. The Court also imposed a civil penalty against Dixon in the amount of $50,000. The Court ordered Dixon to satisfy payment of these amounts within ten business days after entry of the Final Judgment. Further, the Court ordered disgorgement, prejudgment interest and post judgment interest against McKee in the respective amounts of $7,157.60, $1,383.17, and $73.41. The Court also imposed a civil penalty and post judgment interest against McKee in the respective amounts of $7,157 and $73.41 and ordered McKee to satisfy payment of these amounts in accordance with a payment schedule. Dixon and McKee each consented to the entry his respective judgment without admitting or denying the allegations of the Commission's Complaint.
The Commission's Complaint, filed on September 16, 2008, alleged fraud by Dixon, McKee and others in connection with insider trading in the securities of Georgia-Pacific Corporation. The Complaint alleged that James D. Zeglis ("Zeglis") misappropriated material nonpublic information from his brother, a member of Georgia-Pacific's board of directors, and further alleged that on November 10, 2005, three days before a public announcement that Georgia-Pacific had agreed to be acquired by Koch Industries, Inc., Zeglis tipped Dixon and Gautam Gupta ("Gupta"), both of whom purchased Georgia-Pacific securities. Gupta, in turn, tipped McKee, who also purchased Georgia-Pacific securities. Further, the Complaint alleged that on Sunday, November 13, 2005, Koch Industries, Inc. ("Koch") publicly announced a definitive agreement for a Koch subsidiary to make a cash tender offer for all shares of Georgia-Pacific. The following day, Georgia-Pacific's stock price increased 36% in response to the announcement. McKee then sold his Georgia-Pacific securities, realizing a profit of $7,157.60. Dixon also realized a profit of $116,000 from the sale of Georgia-Pacific options. Thereafter, over the course of several months, Dixon paid Zeglis kickbacks from his ill-gotten gains of approximately $25,000.
See also: LR 20720A (September 16, 2008).