U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22705 / May 22, 2013
Securities and Exchange Commission v. John Anthony Stilwell, Dr. Michael Curtis Moore, and Jillian Margaret Murphy, Civil Action No. 13-civ-3437 (S.D.N.Y. May 21, 2013)
SEC Charges Director's Brother, and His Friend and His Relative, with Insider Trading in Shares of a Medical Professional Liability Insurer
The Securities and Exchange Commission yesterday charged the brother of a director, his friend, and his sister-in-law with insider trading in the securities of an East Lansing, Mich.-based holding company for a medical professional liability insurer.
The SEC alleges that John A. Stilwell misappropriated confidential information from his brother, an American Physicians Capital, Inc., (ACAP) director, about the anticipated acquisition of ACAP by another insurance company. Stilwell in turn shared this nonpublic information with his friend, Dr. Michael C. Moore, and his sister-in-law, Jillian M. Murphy. Moore and Murphy each tipped another person who purchased ACAP shares. The four tippees purchased ACAP stock based on confidential information about the impending sale in the months leading up to a public announcement. Collectively, they made nearly $62,000 in illegal profits on their ACAP stock following the announcement.
Stilwell and his tippees agreed to pay a combined total of about $167,000 to settle the SEC's charges.
According to the SEC's complaint filed in the U.S. District Court for the Southern District of New York, Stilwell, a resident of New York, worked as an employee of his brother's investment firm while his brother was serving as a member of ACAP's board of directors. At a meeting on March 12, 2010, ACAP's board confidentially discussed whether it should consider a potential sale of ACAP, instructed company management to evaluate whether or not to continue as an independent, stand-alone company, and authorized ACAP's CEO and Stilwell's brother to determine potential strategic partners and contact them on a preliminary basis in order to determine their interest in acquiring ACAP.
The SEC alleges that, as Stilwell's brother and ACAP's CEO continued taking definite steps toward a sale, Stilwell misappropriated material nonpublic information from his brother and disclosed it to his friend, Moore, and sister-in-law, Murphy. Between April 16 and 30, 2010, Moore, Murphy, and two individuals that they tipped illegally purchased 8,200 shares of ACAP stock based on the confidential information Stilwell tipped. On July 8, the acquisition of ACAP by Napa, Calif.-based insurer The Doctors Company was publicly announced, and ACAP shares closed approximately 28 percent higher than the previous day's closing price.
Without admitting or denying the allegations in the SEC's complaint, Stilwell, Moore, and Murphy consented to the entry of final judgments ordering them to pay disgorgement, prejudgment interest, and financial penalties, and permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
Specifically, Stilwell agreed to pay approximately $41,500; Moore, a resident of Colorado, agreed to pay approximately $113,000; and Murphy, also a resident of Colorado, agreed to pay approximately $12,000. The proposed settlement is subject to court approval.
The SEC appreciates the assistance of the Financial Industry Regulatory Authority (FINRA) in this matter.