SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16465 / March 7, 2000
Securities and Exchange Commission v. Nicholas M. Mihalas, Civil Action No. 2:00-0726-23 (D.S.C. March 7, 2000)
SEC CHARGES NICHOLAS M. MIHALAS, FORMER DIRECTOR OF CENTER FINANCIAL CORPORATION, WITH INSIDER TRADING
The Securities and Exchange Commission today filed and settled insider trading charges against Nicholas M. Mihalas, a resident of Kiawah Island, South Carolina, 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 Mihalas illegally bought Center Financial stock ahead of First Union's public announcement on June 17, 1996, that it intended to acquire Center Financial via merger. Mihalas agreed, without admitting or denying the Commission's allegations, to pay $404,925.96 in disgorgement, interest and civil penalties 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, Mihalas attended a meeting of Center Financial's board of directors at which he learned that First Union was interested in acquiring Center Financial and that Center Financial's 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, Mihalas placed an order to purchase 26,000 shares of Center Financial stock. Mihalas placed that order during a forty-eight hour trading black-out period imposed by Center Financial on its directors and senior managers after earnings announcements. Mihalas' order was executed at an average price of $17.35 per share. Upon First Union's June 17 announcement, Mihalas made a profit of $175,085.
The Commission charged Mihalas with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. On a neither admit nor deny basis, Mihalas agreed to disgorge his trading profits of $175,085, plus prejudgment interest in the amount of $54,755.96, and a civil penalty of $175,085. Mihalas also consented to the entry of a permanent injunction prohibiting him from future violations of the above-referenced provisions.
Separately, the Commission also today filed and settled insider trading charges against John J. Pacowta, another former director of CFC. The Commission alleged that Pacowta made illegal profits of $4,985 from trading in advance of the June 17 takeover announcement. Pacowta, who resides in Middlebury, Connecticut, agreed to pay a penalty of $4,985. The Commission did not seek disgorgement from Pacowta, because he already has remitted his profit to Center Financial as a short swing profit. Pacowata 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. 16464 (March 7, 2000).
The Commission acknowledges the assistance of the Connecticut Department of Banking in this matter.