U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21425 / February 25, 2010
Securities and Exchange Commission v. John A. Foley et al., Civil Action No. 1:10-cv-00300 (JDB) (D.D.C., Feb. 25, 2010)
SEC FILES SETTLED INSIDER TRADING CHARGES AGAINST FORMER DELOITTE TAX PROFESSIONAL AND THREE OTHERS
Related Settled Administrative Proceeding Also Announced
The Securities and Exchange Commission today filed settled insider trading charges against four individuals—John A. Foley, Aaron M. Grassian, Timothy L. Vernier, and Bradley S. Hale—for their respective roles in an alleged pattern of insider trading and tipping in the securities of four public companies over a 22-month period that yielded illegal profits totaling $210,580.62. The four public companies involved are Crocs, Inc., YRC Worldwide, Inc., Spectralink Corporation and SigmaTel, Inc. All four defendants have agreed to settle the Commission's charges without admitting or denying the allegations in the Commission's Complaint, and their settlement papers have been submitted to the Court for its consideration. Separately, a fifth individual, Tara R. Eisler, was named in a related administrative proceeding instituted and simultaneously settled today.
According to the Complaint, which was filed in federal court in the District of Columbia, Foley served as an employee benefits specialist at Deloitte between July 2005 and May 2007, and learned, through his work on Deloitte client engagements, material, non-public information concerning (i) Crocs' first earnings release after going public; (ii) a potential acquisition of YRC by a third party (that ultimately was not consummated); and (iii) the acquisition of Spectralink, via tender offer, by another public company. According to the Complaint, Foley traded in all three issuers' securities based on this material, non-public information through nominee accounts; Foley also tipped his friend Vernier concerning all, and Grassian concerning part, of this information; and both men traded on Foley's communications.
The Complaint further alleges that Grassian later reciprocated by, in turn, tipping Foley concerning the acquisition of SigmaTel by Freescale Semiconductor, Inc., after learning of that pending acquisition from his friend and former colleague, Hale, who worked on the acquisition for Freescale. According to the Complaint, Grassian traded on Hale's tips for himself, and also passed them on to Foley, who, in turn, both traded in SigmaTel for himself, and also tipped Vernier and recommended SigmaTel to others, who likewise traded. The Complaint further alleges that Vernier substantially assisted Foley's insider trading violations as to Crocs by allowing Foley to trade in Crocs securities through Vernier's account, while knowing of or recklessly disregarding Foley's breaches of duty to Deloitte and to Crocs. Finally, the Complaint alleges that, since Crocs was a Deloitte audit client and Foley served on the Crocs audit team at the time of his Crocs trading and tipping, Foley also committed, and caused his firm to commit, an auditor-independence violation, and caused related issuer-reporting violations by the issuer.
According to the Complaint, by their conduct each defendant violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder; defendants Foley, Grassian and Vernier also violated Exchange Act Section 14(e) and Rule 14e-3 thereunder; defendant Vernier aided and abetted Foley's violation of Exchange Act Section 10(b) and Rule 10b-5 thereunder; defendant Foley violated, and aided and abetted and caused Deloitte's violation of, Rule 2-02(b) of Regulation S-X; and Foley also aided and abetted and caused Crocs' violation of Exchange Act Section 13(a) and Rule 13a-13 thereunder. No charges were filed against Deloitte or Crocs.
The four defendants' signed Consents—which are subject to approval by the Court—provide that, without admitting or denying the Commission's allegations, each defendant would be permanently enjoined against future violations of the statutes and rules each is alleged to have violated, with the monetary portions of each settlement being as follows: (i) Foley would pay disgorgement of $125,538.61, plus prejudgment interest thereon in the amount of $18,697.89, with no civil penalty being imposed against him based on his demonstrated inability to pay; (ii) Vernier would pay disgorgement of $50,285.08, plus prejudgment interest thereon in the amount of $6,320.29 and a civil penalty of $23,138.07, with no further civil penalty being imposed based on his demonstrated inability to pay; (iii) Grassian would pay disgorgement of $34,756.93, plus prejudgment interest thereon in the amount of $4,768.39 and a civil penalty of $34,756.93; and (iv) no civil penalty would be imposed upon Hale, based on his demonstrated inability to pay.
Separately today, the Commission also instituted, and simultaneously settled, a related administrative proceeding. See Matter of Tara R. Eisler, Admin. Proc. File No. 3-13792 (Feb. 25, 2010)
The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (“FINRA”) and the Options Regulatory Surveillance Authority (“ORSA”) in this matter.
See Also: SEC Complaint