U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21890 / March 18, 2011
SEC v. Kim Ann Deskovick and Brian S. Haig, Civ. 11-1522 (JLL) (DNJ)
SEC Charges Former Director of First Morris Bankand New Jersey Accountant With Illegal Insider Trading
On March 17, 2011, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the District of New Jersey charging a former director of First Morris Bank and Trust (“First Morris”), at the time a publicly traded regional New Jersey bank, with illegally tipping a friend about First Morris’s confidential efforts to be acquired by another bank, and a New Jersey accountant with illegally trading on the basis of that inside information. The accountant is also charged with tipping a business associate about the potential sale of First Morris. Both defendants have agreed to settle the Commission’s charges and to pay a total of $188,699 in disgorgement and civil penalties.
The Commission’s complaint alleges as follows: Defendant Kim Ann Deskovick, age 55, was a director of First Morris during the relevant period. From June through September of 2006, Deskovick received confidential information concerning First Morris’s efforts to be acquired by another bank and the status of those merger negotiations. In breach of her fiduciary duty as a director, Deskovick tipped a close friend that First Morris was for sale and periodically updated her friend on the status of First Morris’s merger negotiations. Deskovick’s friend then tipped defendant Brian S. Haig, age 45, a friend and business associate. Deskovick’s friend told Haig that the friend had learned from Deskovick that First Morris was for sale and recommended that Haig buy First Morris securities. Based on the tip from Deskovick’s friend, Haig purchased 4,000 shares of First Morris stock in September 2006. Haig also tipped a friend and business associate, now deceased, about the pending sale of First Morris and the source of the information. Based on Haig’s tip, Haig’s friend purchased 800 shares of First Morris stock in September 2006. On October 16, 2006, First Morris and Provident Financial Services, Inc. announced the execution of a merger agreement, and the price of First Morris stock increased by approximately 14% that day. Haig sold his entire First Morris position on the day of the announcement for a profit of $56,797, and his friend sold his entire First Morris position on the following day for a profit of $11,480.
The complaint charges Deskovick and Haig with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Simultaneous with the filing of the complaint, Deskovick and Haig each consented, without admitting or denying the allegations in the complaint, to the entry of final judgments: (1) permanently enjoining them from violating Section 10(b) of the Exchange Act and Rule 10b-5; (2) ordering Haig to disgorge $68,277, the full amount of the First Morris trading profits made by Haig and the person he tipped, and to pay prejudgment interest of $18,007 on that amount; (3) ordering Deskovick to pay a civil penalty of $68,277; (4) ordering Haig to pay a civil penalty of $34,138; and (5) barring Deskovick from serving as an officer or director of a public company for five years. In determining the amount of the penalty sought from Haig, the Commission considered the significant cooperation he provided in connection with this matter, including providing information about others that assisted the Commission in bringing additional charges. The final judgments are subject to the Court’s approval.