U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16676 / September 1, 2000
Securities and Exchange Commission v. Brian E. Pridgeon, Stephon A. Carradine and Craig L. Smith, Civil Action No. 00 -009375 FMC (RZx) (C.D. Cal.)
On September 1, 2000, the Securities and Exchange Commission ("Commission") filed a complaint in the United States District Court for the Central District of California alleging illegal insider trading by Brian E. Pridgeon, a resident of San Jose, California and former Intel Corporation marketing engineer, Stephon A. Carradine, his cousin, and Craig L. Smith, Carradine's business partner. The complaint alleges that Pridgeon misappropriated material nonpublic information that he obtained from Intel regarding a transaction the company was negotiating with Ancor Communications Inc., that he used that information to trade in Ancor securities and that he tipped his cousin, Stephon A. Carradine, who in turn tipped his business partner, Craig L. Smith. Carradine and Smith are residents of Long Beach, California, where they own a Century 21 - Coastline Realty office.
On the same day, the United States Attorney for the Central District of California criminally charged Pridgeon, Carradine and Smith for similar conduct alleged in the Commission's complaint.
The complaint alleges that in the summer and fall of 1999, within months of first being employed at Intel, Pridgeon learned that the company planned to enter into an agreement with Ancor in which the two companies would collaborate to develop Intel's Spider chip for use in Ancor's products and Intel would purchase $14 million in Ancor stock. On December 7, 1999, Ancor and Intel announced their deal. The price of Ancor stock rose $23 1/8 per share or 36.7% on news of the announcement. The complaint further alleges that in the preceding four weeks, Pridgeon purchased 5,600 shares of Ancor stock, ultimately realizing illegal profits of over $137,000.
The complaint further alleges that Pridgeon tipped his cousin, Carradine, who tipped his business partner, Smith. On December 2, 1999, Smith and Carradine purchased speculative call options in a brokerage account they had opened in Smith's name the previous day. Smith and Carradine realized an illegal profit of $95,000 from the sale of those options.
The Commission charged the defendants with insider trading in violation of the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks an injunction against the defendants from future antifraud violations, disgorgement of their insider trading profits, and civil penalties of up to three times their trading profits.
The Commission acknowledges the assistance provided by the Chicago Board Options Exchange in connection with this matter.