SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16591 / June 15, 2000
Securities and Exchange Commission v. Michael R. Hendrix, Douglas S. Sawamura, Jeffrey S. Summerlin, James A.S. Lewis, Craig A. Larrew, San H. Mai, Bich Thi Hoang, Linh Ngoc Vu, Nick S. Park, John H. Oh, Timothy J. Helms and Raymond L. Helms, Civil Action No. C-00-20655 JW (N.D. Cal.)
SEC SUES TWELVE FOR INSIDER TRADING
The Securities and Exchange Commission today filed a civil injunctive action against twelve defendants alleging insider trading and tipping before a September 6, 1995, announcement that Bay Networks, Inc. would acquire Xylogics, Inc. According to the complaint, the defendants' illegal profits were at least $680,000.
The complaint, filed in the United States District Court for the Northern District of California, alleges the following: While working for Bay Networks, Michael Hendrix learned of Bay Networks' agreement to acquire Xylogics before its public announcement. Hendrix then purchased 6,215 shares of Xylogics stock in five accounts during the two trading days before the announcement, selling nearly all of his, his wife's, and their minor children's securities to fund the purchases. Hendrix and his family made approximately $105,000 in profits from these trades. Hendrix also contacted several friends and former colleagues who quickly bought Xylogics and who, in turn, contacted others who also quickly bought. Hendrix and others who learned of the merger before its announcement directly or indirectly through him included the following nine defendants: James A. S. Lewis, Jeffrey S. Summerlin, Douglas S. Sawamura, Craig A. Larrew, San H. Mai, Bich Thi Hoang, Linh Ngoc Vu, John H. Oh and Nick S. Park. Hendrix, these nine defendants, and others whose trading stemmed directly or indirectly from Hendrix's recommendation, made at least $644,000 in illegal profits from their purchases of Xylogics, in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The complaint further alleges that separate and apart from Hendrix, while working in Bay Networks' public relations department, Timothy Helms learned of Bay Networks' imminent acquisition of Xylogics. After learning this information, Helms telephoned his father, Raymond, who bought 3,000 shares of Xylogics stock the day before the announcement. The elder Helms made $36,000 in profits from his trading. Timothy and Raymond Helms were each named as defendants.
Two of the defendants, Lewis and Summerlin, agreed to settlement with the Commission. Without admitting or denying the Commission's allegations, each consented to the entry of a final judgment permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Lewis also agreed (1) to disgorge $62,175 (plus prejudgment interest of $28,381.88), which includes his trading profits and the profits of an individual to whom he recommended the purchase of Xylogics stock, and (2) to pay a one-time civil penalty of $62,175 on his own profits and his recommendee's profits. Likewise, Summerlin agreed (1) to disgorge his insider trading profits of $39,200 (together with prejudgment interest of $17,894.16) and (2) to pay civil penalties equal to his trading profits.
The Commission thanks the NASDR for its assistance in this matter.
SEC Complaint in this matter
SEC First Amended Complaint in this matter