SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17223 / November 6, 2001
JURY FINDS MICHAEL G. SARGENT AND DENNIS J. SHEPARD LIABLE FOR INSIDER TRADING IN PUROLATOR PRODUCTS COMPANY STOCK
SECURITIES AND EXCHANGE COMMISSION v. MICHAEL G. SARGENT, et al., Civ. No. 96-10609-NG (D. Mass. Nov. 1, 2001)
On November 1, 2001, a jury found that defendants Michael G. Sargent and Dennis J. Shepard violated section 14(e) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act rule 14e-3 in connection with trading in the common stock of Purolator Products Company. In its complaint, the Commission had alleged that, in September 1994, Sargent, Shepard, and a third defendant, Robert J. Scharn violated sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Exchange Act rules 10b-5 and 14e-3 by tipping or trading in Purolator common stock based on material, nonpublic information about a proposed tender offer for Purolator stock by Mark IV Industries, Inc. According to the complaint, Shepard tipped Sargent about the transaction. Sargent then bought Purolator common stock and tipped Scharn, who also bought the stock. In addition to finding that Sargent and Shepard violated section 14(e) and rule 14e-3, the jury found that Sargent violated section 10(b) and rule 10b-5. The jury, however, found that Shepard did not violate section 10(b) or rule 10b-5 and that Scharn did not violate section 10(b) or 14(e) or rule 10b-5 or 14e-3. The Court will hold further proceedings concerning remedies.
Previously, in a related criminal trial, a jury convicted Sargent and Scharn of willfully making false statements in violation of 18 U.S.C. § 1001 to attorneys at the Commission in connection with the Commission's inquiry into possible insider trading in Purolator securities. Thereafter, in the Commission's civil action against Sargent, Shepard, and Scharn, Judge Joseph Tauro of the United States District Court for the District of Massachusetts granted a motion for judgment as a matter of law in favor of the defendants and against the Commission. The United States Court of Appeals for the First Circuit subsequently reversed that decision and remanded the case for a new trial, which resulted in the verdict rendered on November 1, 2001.
See also Litigation Releases Nos. 16820, 16373, 15935, and 14854.