SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17125 / September 10, 2001
SECURITIES AND EXCHANGE COMMISSION v. PATRICK JOSEPH DANAHER, JOHN THOMAS DOHERTY, ROBERT PAUL WITTMAN, and TIMOTHY FREDRICK WARD, Civil Action No. 01 CV 8431 (TPG)(S.D.N.Y.) (filed September 10, 2001)
SEC SUES FOUR PERSONS FOR INSIDER TRADING PRIOR TO THE WILLIAMS COMPANIES' ACQUISITION OF MAPCO
On September 10, 2001, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Southern District of New York alleging that Patrick Danaher, John Doherty, Robert Wittman, and Timothy Ward engaged in illegal insider trading prior to the November 24, 1997 public announcement that Mapco Incorporated would be acquired by The Williams Companies in a deal worth approximately $3.46 billion. The Commission's complaint alleges that Patrick Danaher, a Mapco employee, learned of the impending acquisition and then tipped a friend who, in turn, tipped others. In a separate complaint also filed on September 10, 2001, the Commission alleged that four other persons also engaged in other insider trading schemes. SEC v. Harry Parker Daily, et al., Civil Action No. 01 CV 8432 (TPG)(S.D.N.Y.); Litigation Release No. 17124 (filed September 10, 2001). All told, the insider trading schemes set forth in the two complaints resulted in the investment of over $325,000 in Mapco securities and profits of $134,208.50.
The Commission's complaint in this action specifically alleges that, during the week before the public announcement, Patrick Danaher, a general manager of supply and trading at Mapco's Houston subsidiary, tipped a childhood friend, John Doherty. The complaint alleges that Danaher told Doherty that Mapco was going to be acquired, that each Mapco share would be valued at approximately $46 per share in the acquisition, and that an announcement would be made soon. Based on this information, Doherty purchased Mapco call options four days before the announcement and made illegal profits of $20,375.
In addition to his own trading, Doherty also tipped a number of other people, including Timothy Ward and Robert Wittman, both of whom worked with Doherty as oil futures brokers in New York City. Ward and Wittman, who was also a registered securities professional, purchased Mapco securities based on Doherty's tip, profiting by $15,506.25 and $10,062.50, respectively.
Without admitting or denying the allegations in the Commission's complaint, three of the four defendants (Danaher, Wittman and Ward) have agreed to settle with the Commission by consenting to the entry of an order enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The settlements also call for the defendants to pay a total of $79,595.43 in disgorgement, prejudgment interest and penalties, as follows: (1) Patrick Danaher has consented to pay a total of $20,375, representing a one-time civil penalty based on the profits of his tippee, John Doherty; (2) Robert Wittman has consented to pay a total of $23,306.01, representing disgorgement of his profits of $10,062.50, plus prejudgment interest, and a one-time civil penalty in the amount of $10,062.50; and (3) Timothy Ward has consented to pay $35,914.42, representing disgorgement of his profits of $15,506.25, plus prejudgment interest, and a one-time civil penalty of $15,506.25.
John Doherty has not settled with the Commission. The Commission's complaint against Doherty seeks, in addition to injunctive relief, an order requiring him to disgorge his own profits of $20,375 and the profits of his tippees. In addition to the profits made by Ward and Wittman, Doherty's other tippees made profits of $44,931.25. The Complaint also seeks prejudgment interest and civil monetary penalties.