SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16970 / April 18, 2001
Attorney Charged With Insider Trading in Merger of Forte Software and Sun Microsystems
SECURITIES AND EXCHANGE COMMISSION v. MALCOLM B. WITTENBERG, United States District Court for the Northern District of California, Civil Action No. C 01 1477 MMC
The Securities and Exchange Commission ("Commission") today announced that it has sued a San Francisco attorney for insider trading prior to the August 1999 merger of Forte Software, Inc. ("Forte") and Sun Microsystems, Inc. ("Sun"). The Commission's action alleges that Malcolm Wittenberg learned about the merger while providing legal services to Forte and then profited by purchasing Forte securities before the merger announcement drove the price of Forte stock up nearly 25%. In a related action, the United States Attorney's Office for the Northern District of California today announced criminal insider trading charges against Wittenberg based on his Forte trades.
Simultaneous with the filing of the Commission's civil complaint, Wittenberg consented, without admitting or denying the allegations in the Commission's complaint, to the entry of a permanent injunction against future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and to pay a total of $29,224.67, including $14,000 in disgorgement of trading profits, $1,224.67 in prejudgment interest and a civil penalty of $14,000.
According to the Commission's complaint, Wittenberg is a partner in the San Francisco office of an Oakland, California-based law firm that served as patent counsel to Forte. The complaint alleges that not later than August 16, 1999, Forte's general counsel informed Wittenberg that Forte was considering a merger with Sun. In connection with the merger negotiations, Forte's general counsel directed Wittenberg to provide information about Forte's patents to the attorneys conducting due diligence for Sun. Forte's general counsel also told Wittenberg that information about the proposed merger was confidential.
Over the next several days, Wittenberg purchased 2,000 shares of Forte common stock at an average price of $14.125 per share. After the merger was announced on August 23, 1999, Forte closed at $21.125 per share, up 24.2% from its prior day closing price. Although Wittenberg retained his Forte shares after the announcement, Wittenberg's profits from his illegal insider trading were $14,000.
The Commission acknowledges the assistance of NASD Regulation, Inc. in this matter.http://www.sec.gov/litigation/litreleases/lr16970.htm