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United States Securities and Exchange Commission

Litigation Release No. 16844 / December 28, 2000

SEC v. HAROLD W. ANDREWS SR. AND HAROLD W. ANDREWS JR., U. S. District Court for the District of Columbia, 1:00CV03101(CKK)

SEC SETTLES WITH TWO FOR INSIDER TRADING BEFORE SUN/REGENCY TENDER OFFER

The Securities and Exchange Commission today filed an insider trading Complaint in the United States District Court for the District of Columbia against Harold W. Andrews Sr. ("Andrews Sr.") and Harold W. Andrews Jr. ("Andrews Jr."). The Complaint alleges that Andrews Jr., who was controller and vice president of finance at Regency Health Services ("Regency"), tipped his father, Andrew Sr., that Sun Healthcare Group, Inc. ("Sun") would commence a tender offer for Regency. The Complaint further alleges that Andrews Sr. bought 7,127 shares of Regency stock before the tender offer was announced. Simultaneously with the filing of the Complaint, Andrews Sr. consented to a permanent anti-fraud injunction and agreed to disgorge $52,561.62 in trading profits and prejudgment interest thereon, and pay a $52,561.62 civil penalty, totaling $121,743.08. Andrews Jr. consented to a permanent anti-fraud injunction and agreed to pay a $52,561.62 civil penalty. Both defendants settled without admitting or denying the Complaint's allegations.

Specifically, the Complaint alleges the following:

  • Management of Regency and Sun began discussing an acquisition of Regency in late May 1997. By mid-June 1997, Andrews Jr. was an active participant in the negotiations. In connection therewith, Andrews Jr. performed extensive analyses of Sun's contemplated acquisition of Regency.

  • By early July, Regency and Sun had taken substantial steps to commence a tender offer, including engaging investment bankers to advise them in negotiations, entering into exclusive negotiations and confidentiality agreements, and commencing due diligence examination of Regency.

  • Over the weekend of July 12 and 13, 1997, Sun informed Regency management that it proposed to acquire all of Regency's outstanding common stock for $21 per share in cash. That weekend, Andrews Jr. was at Regency's offices working on the proposed transaction.

  • Over the weekend of July 12 and 13, 1997, Andrews Jr. and Andrews Sr. spoke repeatedly by telephone. In the course of these conversations, Andrews Jr. tipped Andrews Sr. with material nonpublic information concerning Sun's plans to acquire Regency.

  • On Monday morning, July 14, 1997, Andrews Sr. purchased a total of 7,127 shares of Regency in three brokerage accounts. The orders were executed for $14.625 per share. On Sunday July 27, 1997, Sun and Regency jointly announced the tender offer, causing Regency's stock price to increase. On October 9, 1997, Andrews Sr. tendered his 7,127 Regency shares for $22 per share for a profit of $52,561.62.

The Complaint alleges that the defendants violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5 and 14e-3 thereunder. Simultaneously with the filing of the Complaint, the defendants, without admitting or denying the allegations of the Complaint, consented to the entry of Final Judgments enjoining them from future violations of Exchange Act Sections 10(b) and 14(e), and Rules 10b-5 and 14e-3 thereunder; and requiring Andrews Sr. to disgorge his illegal trading profits which, together with prejudgment interest, total $69,181.46, and requiring Andrews Sr. and Andrews Jr. to pay civil penalties of $52,561.62 each.

The Commission acknowledges the assistance of the New York Stock Exchange and Chicago Board Options Exchange in this matter.

http://www.sec.gov/litigation/litreleases/lr16844.htm


Modified:12/28/2000