UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16515 / April 12, 2000
Securities and Exchange Commission v. Liberato A. Iannone and Creg W. Dance, 1:00CV00788 (EGS) (D.D.C.)
SEC CHARGES IOWA CARDIOLOGIST AND COMPANY INSIDER WITH INSIDER TRADING
Defendants To Pay Over $4.0 Million To Settle Charges
The Securities and Exchange Commission today charged Dr. Liberato A. Iannone, a cardiologist in Des Moines, Iowa, and Creg W. Dance, a former Vice President of Arterial Vascular Engineering, Inc. ("AVEI") from Lynden, Washington, with insider trading in advance of the public announcement on November 30, 1998 that AVEI, a coronary surgical products company, would be acquired by Medtronic, Inc. Without admitting or denying the allegations in the complaint, the two defendants have agreed to settle the charges by agreeing to the relief sought and paying a total of $4,186,893.11. The complaint alleges that Dance tipped Iannone who traded in advance of the public announcement, and that Iannone's trading generated illicit trading profits of $1,160,500. The complaint alleges that Iannone also recommended the purchase of AVEI securities to several friends, colleagues and a relative, whose trading generated additional illicit profits of $279,631.
The complaint alleges that Dance, then AVEI's Vice President of International Operations, learned of the potential acquisition of his company on or before November 19, 1998, and that Dance told Iannone about the possible AVEI merger at the hospital where Iannone performs coronary procedures. (Iannone has a computer at the hospital from which he places orders to buy and sell securities through his on-line brokerage account.) Thereafter, between November 19 and November 24, 1998, Iannone purchased 250 AVEI call options contracts in nine separate transactions through two different brokerage accounts. On November 25, 1998, Dance told Iannone more information about the possible merger, at which time Iannone began purchasing riskier AVEI call options in greater amounts. Between November 25 and November 27, 1998, Iannone purchased 800 AVEI call option contracts in seven separate transactions through four different brokerage accounts. The complaint also alleges that Iannone recommended the purchase of AVEI securities to several friends, colleagues and a relative, and that between November 19 and November 27, 1998, these individuals purchased 2,414 shares of AVEI common stock and 235 AVEI call options. The AVEI acquisition was announced publicly before the opening of the market on November 30, 1998. As a result of the announcement, the price of AVEI's stock closed that evening at $48.88, up $16.50 from the previous day's close. Following the announcement, Iannone and his tippees sold their AVEI securities, and realized total illicit profits of $1,160,500, and $279,631, respectively.
The Commission alleges that as a result of the conduct described above, Iannone and Dance violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. In its action, the Commission is seeking permanent injunctions, disgorgement, prejudgment interest and monetary penalties against the defendants. Both Iannone and Dance have consented to the entry of final judgments permanently enjoining them from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, without admitting or denying the facts alleged in the complaint. The final judgment also orders Iannone to pay disgorgement of $1,440,131, plus prejudgment interest thereon of $146,131.11, and a civil penalty of $1,440,131, for a total of $3,026,393.11. Dance, who did not purchase any AVEI securities prior to the announcement, has been ordered to pay a civil penalty of $1,160,500.
The Commission gratefully acknowledges the assistance provided by The Chicago Board Options Exchange in the investigation of this matter.