SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16464 / March 7, 2000
Securities and Exchange Commission v. John J. Pacowta, Civil Action No. 300-CV-00426 (JCH) (D. Conn. March 7, 2000)
SEC CHARGES JOHN J. PACOWTA, FORMER DIRECTOR OF CENTER FINANCIAL CORPORATION, WITH INSIDER TRADING
The Securities and Exchange Commission today filed and settled insider trading charges against John J. Pacowta, a resident of Middlebury, Connecticut, and a former director of Center Financial Corporation. Center Financial was the holding company for Centerbank, a Connecticut savings bank, until it was acquired by First Union Corporation, a banking company headquartered in Charlotte, North Carolina. The Commission alleged that Pacowta illegally bought Center Financial stock ahead of First Unions public announcement on June 17, 1996, that it intended to acquire Center Financial via merger. Pacowta agreed, without admitting or denying the Commissions allegations, to pay a civil penalty of $4,985.88 and to the entry of an injunction prohibiting him from future violations of the general antifraud provisions of the federal securities laws.
Specifically, the Commission alleged that, on April 23, 1996, Pacowta attended a meeting of Center Financials board of directors at which he learned that First Union was interested in acquiring Center Financial and that Center Financials board of directors had voted to hold a special meeting the following week, with its investment bankers present, to discuss a possible sale or merger. On April 24, 1996, the day after he attended the Center Financial board meeting, Pacowta placed an order to purchase a total of 750 shares of Center Financial stock for both his and his wifes individual retirement accounts. Pacowtas order was executed the following day at an average price of $17 per share. Pacowtas trade came during a forty-eight hour trading black-out period imposed by Center Financial on its directors and senior managers after earnings announcements. Upon First Unions June 17 announcement, Pacowta made a profit of $4,985.88.
The Commission charged Pacowta with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. On a neither admit nor deny basis, Pacowta agreed to pay a civil penalty of $4,985.88, the amount of his insider trading profits. The Commission did not seek disgorgement because Pacowta already had paid to Center Financial more than the full amount of his ill-gotten gains. In October 1996, Pacowta remitted to Center Financial $5,812.50 in short-swing profits resulting from his April 25 purchase and a subsequent sale. Pacowta also consented to the entry of a permanent injunction prohibiting future violations of the above-referenced provisions.
Separately, the Commission also today filed and settled insider trading charges against Nicholas M. Mihalas, another former director of CFC. The Commission alleged that Mihalas made illegal profits of $175,085 from trading in advance of the June 17 takeover announcement. Mihalas, who resides in Kiawah Island, South Carolina, agreed to pay $404,925 in disgorgement, prejudgment interest and a penalty. Mihalas also consented to the entry of a permanent injunction prohibiting him from future violations of the general antifraud provisions of the federal securities laws. See Litigation Release No. 16465 (March 7, 2000)
The Commission acknowledges the assistance of the Connecticut Department of Banking in this matter.http://www.sec.gov/litigation/litreleases/lr16464.htm