Securities and Exchange Commission
Litigation Release No. 17141 / September 20, 2001
Securities and Exchange Commission v. Randall D. Martin, et al. (United States District Court, W.D.Wash., Civil Action No. C01-1463Z)
The Securities and Exchange Commission ("Commission") announced the filing, on September 19, 2001, of a complaint in the United States District Court for the Western District of Washington, alleging insider trading in the securities of VWR Scientific Products Corp. ("VWR") by Randall D. Martin ("Martin"), of Maple Valley, Washington, a Certified Public Accountant, and Michael R. Brown ("Brown"), of Portland, Oregon, a former VWR manager, while each was in possession of material, nonpublic information concerning a tender offer and merger agreement between VWR and a subsidiary of Merck KGaA. The complaint seeks permanent injunctions for violations of the antifraud and tender offer provisions of the securities laws, disgorgement and civil penalties.
The Commission's complaint alleges that VWR, a distributor of laboratory supplies, chemicals, and equipment, was a Pennsylvania corporation, headquartered in West Chester, Pennsylvania. Until July 1999, when its acquisition by Merck KGaA was finalized, VWR's shares were traded on the NASDAQ National Market. Merck KGaA is a pharmaceutical conglomerate based in Darmstadt, Germany. On June 8, 1999, after several months of negotiations, VWR and Merck KGaA publicly announced a tender offer and merger pursuant to which Merck KGaA affiliates agreed to seek tenders of any and all outstanding VWR shares for $37 per share. The announcement was made after the markets had closed for the day. Following the announcement, on June 9, 1999, VWR stock closed up 30 percent from the previous day's closing price.
The complaint alleges that, on June 8, 1999, several hours before the announcement, Brown, a manager in VWR's Portland office, purchased VWR stock immediately after being told to participate in a telephone conference call, for VWR managers only, scheduled for later that day, after the markets had closed. Together with other information, this led him to conclude that the tender offer and merger was final and about to be announced to the public. Brown realized profits of $16,923 from his illegal trading.
The complaint further alleges that, on June 2, 1999, Martin, a tax planner for a member of VWR's board of directors, purchased VWR stock and options after being told by this individual, in confidence and for the purpose of providing the board member with tax planning advice, that a merger between VWR and a subsidiary of Merck KGaA was imminent. Martin realized profits of $28,940 from his illegal trading.
Simultaneously with the filing of the complaint, and without admitting or denying the Commission's allegations, the defendants consented to the entry of Final Judgments and Orders permanently enjoining them from future violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The Orders also require that Martin disgorge $28,940 plus prejudgment interest, and pay a civil penalty of $28,940, and that Brown disgorge $16,923 plus prejudgment interest, and pay a civil penalty of $16,923.