U.S. SECURITIES & EXCHANGE COMMISSION
Litigation Release No. 17700 /August 27, 2002
SECURITIES AND EXCHANGE COMMISSION v. MICHAEL W. FOTI, 02 CV 4177 (FSH) (D. N.J.)
NEW YORK -- The Securities and Exchange Commission announced today that it filed and simultaneously settled insider trading charges against Michael W. Foti, an insider of Boron LePore and Associates, Inc. ("Boron LePore"). Boron LePore, formerly based in Fair Lawn, New Jersey, was a company that provided marketing and other services to the pharmaceutical industry. (On June 25, 2002, Cardinal Health, Inc., acquired Boron LePore in a tender offer.) The Commission's complaint alleges that Foti sold Boron LePore stock on February 2-3, 1999, while in possession of materially adverse non-public information about Boron LePore's financial condition. Foti agreed to settle the Commission's action without admitting or denying the Commission's allegations. Foti agreed to be permanently enjoined from violating the antifraud provisions of the federal securities laws, and to pay $533,686, including $288,700 in disgorgement and prejudgment interest, and $244,986 as a civil penalty.
The Commission's complaint alleges the following:
In October 1998, Boron LePore announced the loss of its largest client, Glaxo Welcome, Inc. During January and into early February 1999, Foti learned that Boron LePore was having difficulty replacing the revenue lost from Glaxo. During January and early February, Foti also learned negative information concerning Boron LePore's earnings for the quarters ended December 31, 1998, and March 31, 1999. For instance, at an Executive Committee meeting on January 27, 1999, Foti learned that Boron LePore's two largest divisions projected revenue for the first quarter of 1999 that were significantly below prior projections.
On February 2-3, 1999, Foti sold 20,900 shares of Boron LePore stock at prices between $30.00 and $31.00 per share. On February 4, 1999, Boron LePore issued a press release stating, among other things, that: (1) its fourth quarter earnings were $0.01 short of analysts' expectations; and (2) Boron LePore was uncertain about its future earnings. After the press release was issued, the price of Boron LePore's common stock fell $13.55 per share, from $28.75 per share, its February 3rd closing price, to $17.50 per share, its February 5th closing price. As a result of his insider trading, Foti avoided losses of at least $244,985.
In its complaint, the Commission charged that Foti engaged in insider trading and violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The Commission sought a permanent injunction from violating these provisions, disgorgement and a civil penalty.