SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16422 / February 2, 2000
Securities and Exchange Commission v. Arthur Tab Williams, Jr., 1:00CV00177 (JR) (D.D.C.) (February 2, 2000)
SEC Files Settled Insider Trading Action Against Former Bank Director
On February 2, 2000, the Securities and Exchange Commission filed a settled insider trading case in the United States District Court for the District of Columbia against Arthur Tab Williams, Jr., a former director of Southern National Corporation ("SNC"), a North Carolina bank holding company which has since changed its name to Branch Banking and Trust Company. The complaint alleges that the defendant, while a director of SNC, purchased shares of Fidelity Financial Bankshares Corporation ("Fidelity") based upon material, nonpublic information about a proposed merger between SNC and Fidelity and improperly benefited in the amount of $160,196.
The Complaint alleges that on June 25, 1996, Williams attended a SNC board of directors meeting during which SNC's chairman informed the board that SNC was in negotiations with Fidelity concerning a business combination. According to the Complaint, SNC's chairman described Fidelity as a "$35 million thrift in Richmond, Virginia with a huge equity base." SNC's chairman also informed the board that Fidelity's management expressed interest in SNC's proposal, and that SNC would continue to discuss a potential merger transaction with Fidelity. In addition, the Complaint alleges that SNC's chairman told the board members, including Williams, that if Fidelity's management expressed serious interest in the proposed business combination, SNC would make an offer to acquire Fidelity at a premium.
According to the Complaint, after the board meeting, Williams returned to his office, called his stock broker, and instructed him to buy as much Fidelity stock as was possible using the available funds in his brokerage account. While still on the phone, the Complaint alleges, the broker calculated that Williams could buy 15,000 shares at the current market price. Williams directed him to execute the order. The next day, June 26, 1996, the broker purchased 15,000 shares of Fidelity common stock for Williams at $14 per share, at a total cost of $210,004. On August 22, 1996, SNC issued a press release publicly announcing that the boards of both companies had agreed that SNC would purchase all outstanding shares of Fidelity common stock in a stock exchange deal valued at $59.4 million. The announcement caused Fidelity's stock price to increase by $6.75, from $15.875 to $22.625, or 42.52 percent.
The Complaint alleges that in March 1997, when SNC completed the acquisition of Fidelity, Williams exchanged his Fidelity shares for SNC shares and, as a result of the exchange, benefited in the amount of $160,196.
Simultaneously with the filing of the Complaint, Williams consented, without admitting or denying the allegations of the Complaint, to a permanent injunction enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and ordering him to pay a total of $373,295.53, comprised of $160,196 in disgorgement, $52,903.53 of prejudgment interest thereon, and an Insider Trading Sanctions Act penalty of $160,196.http://www.sec.gov/litigation/litreleases/lr16422.htm