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THOMAS A. ZACCARO, Cal. Bar No. 183241 Attorneys for Plaintiff UNITED STATES DISTRICT COURT
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SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. DANIEL J. WOOTEN III, Defendant. |
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Civil Action No. COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS |
Plaintiff Securities and Exchange Commission ("Commission") alleges as follows:
1. This Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), 21A(a)(1) and 27 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §§ 78u(d), 78u(e), 78u-1(a)(1) & 78aa.
2. Venue is proper in this district pursuant to Section 27 of the Exchange Act and 15 U.S.C. § 78aa, because certain of the transactions, acts, practices and courses of conduct constituting violations of the laws alleged herein occurred within the Central District of California and because Defendant Daniel J. Wooten III ("Wooten") resides therein.
4. On or about March 6, 2000, Wooten acquired inside information regarding the acquisition of TMC through his employment as the Controller for Rustic Canyon Group ("RCG"), a venture capital firm hired by the Chandler Family Trust to assist in the acquisition. Wooten owed a fiduciary duty or similar duty of trust and confidence to RCG to maintain the confidentiality of information concerning the TMC-Tribune transaction. In breach of that duty, Wooten used this material, non-public information to purchase 2,285 shares of TMC stock before the public announcement of the acquisition. Wooten sold those shares after TMC's stock price rose following the public announcement of the TMC-Tribune transaction and realized illegal profits of approximately $76,652.
5. Wooten, age 38, is a resident of Torrance, California. Until June, 2001, Wooten worked as the Controller for Rustic Canyon Group. From June, 2001 to the present, Wooten has been unemployed.
6. TMC was a Delaware corporation based in Los Angeles, California. The company published several newspapers, including the Los Angeles Times, and magazines such as The Sporting News. The company's stock was registered with the Commission pursuant to Section 12(b) of the Exchange Act and traded on the New York Stock Exchange. In June 2000, TMC was acquired by the Tribune Company.
7. Tribune Company ("Tribune") is a corporation based in Chicago, Illinois. The company owns several newspapers and periodicals, including the Chicago Tribune. The company's stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act and trades on the New York Stock Exchange.
8. Rustic Canyon Group ("RCG") is a venture capital group based in Santa Monica, California. RCG was created as an investment affiliate of TMC, for the purpose of investing in other companies, and was headed by former senior TMC executives.
9. The Chandler Family Trust is a trust held on behalf of the Chandler Family based in Los Angeles, California. The Chandler Family Trust owned a majority of the voting shares of TMC prior to the TMC-Tribune transaction.
10. In and around early 2000, senior Tribune executives informed RCG, in confidence, of Tribune's interest in acquiring the assets of TMC. RCG was hired by the Chandler Family Trust for advice on this proposed purchase.
11. From February 2000 through March 2000, RCG negotiated, on behalf of the Chandler Family Trust, with Tribune and TMC concerning Tribune's acquisition of TMC.
12. In connection with these negotiations, RCG was provided with material non-public information concerning the TMC-Tribune transaction, with the understanding that such information would not be publicly disclosed or acted upon for the personal benefit of any individual.
13. On March 13, 2000, Tribune and TMC executed an acquisition agreement and publicly announced Tribune's acquisition of TMC (the "TMC-Tribune transaction").
14. Between January 1 and March 10, 2000, TMC stock traded between $46 and $66 per share. On March 13, 2000, TMC and Tribune announced the TMC-Tribune transaction and TMC stock closed at $85 5/8, with an intraday high of $91 per share. The closing price represents a gain of $37 11/16 per share, or a 78% increase, from the previous day.
15. From January 1, 2000, through June, 2001, Wooten was employed at RCG as its Controller. As the Controller for RCG, Wooten was regarded as a trusted member of RCG's staff and periodically received confidential information.
16. On or about March 6, 2000, Wooten attended a senior staff meeting at RCG and was told of the impending TMC-Tribune transaction.
17. Wooten understood that he had been provided with the information because he was regarded as a trusted member of the RCG staff. Wooten knew, or was reckless in not knowing, that the information regarding the TMC-Tribune transaction was nonpublic and that he owed a fiduciary duty or similar duty of trust and confidence to RCG not to use this information or convey it to any person without RCG's consent.
18. Wooten also knew that the share price of TMC would likely increase once news of the TMC-Tribune transaction was made public.
19. On March 8, 2000, Wooten used the inside information he had obtained as the basis for purchasing 2,000 shares of TMC common stock for approximately $99,774. Wooten placed his purchase order through an online stock brokerage account he had established at Ameritrade. Wooten purchased the 2,000 shares on margin.
20. On March 10, 2000, Wooten used the inside information again as the basis for purchasing an additional 285 shares of TMC stock for approximately $13,706, in an IRA account in his name at Ameritrade.
21. At the time Wooten purchased his TMC shares, he knew, or was reckless in not knowing, that the information he possessed concerning the TMC-Tribune transaction was confidential and that trading for his own benefit while using that information was a misappropriation of that information and a breach of fiduciary duty or similar duty of trust and confidence that he owed to RCG.
22. On March 13, 2000, before the stock market opened, a press release was issued announcing the TMC-Tribune transaction. On the same day, after the public learned of the TMC-Tribune transaction and the stock price increased as a result, Wooten sold 2,000 shares of TMC stock for approximately $166,236 and 285 shares of TMC stock for approximately $23,896. Wooten realized a combined profit of approximately $76,652 on his transactions.
23. Wooten did not disclose his trades to RCG prior to the trades nor did he obtain RCG's consent to use material nonpublic information concerning the TMC-Tribune transaction in effecting those trades.
24. On June 29, 2001, Wooten was questioned by Special Agents of the Federal Bureau of Investigation concerning his TMC stock trading and confessed to engaging in insider trading.
25. Wooten cooperated with the staff of the Securities and Exchange Commission by appearing before them voluntarily, confessing to engaging in insider trading, and accepting responsibility for his conduct.
26. Paragraphs 1 through 25 are realleged and incorporated herein by reference.
27. Wooten, by engaging in the conduct described in paragraphs 1 through 25 above, directly or indirectly, in connection with the purchase or sale of securities, by the use of means or instrumentalities of interstate commerce, or of the mails, or of a facility of a national securities exchange, with scienter:
a. employed devices, schemes or artifices to defraud;
b. made untrue statements of material fact or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or
c. engaged in acts, practices or courses of business which operated or would operate as a fraud or deceit upon other persons.
28. By reason of the foregoing, Wooten violated, and unless enjoined will continue to violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
WHEREFORE, the Commission respectfully requests that the Court:
Issue findings of fact and conclusions of law that defendant Wooten committed the violations alleged and charged herein;
Issue, in a form consistent with Fed. R. Civ. P. 65, an order permanently enjoining defendant Wooten from violating, directly or indirectly, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder;
Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered, or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court; and;
Grant such other and further relief as this Court may determine to be just and necessary.
DATED: January 22, 2002
______________________________
Lorraine B. Echavarria
Attorney for Plaintiff
Securities and Exchange Commission
http://www.sec.gov/litigation/litreleases/comp17330.htm
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