Securities and Exchange Commission
Litigation Release No. 17998 / February 25, 2003
SEC Settles Insider Trading Case Against Timothy P. Horne, Former CEO and Chairman of North Andover-Based Watts Industries
SEC v. Timothy P. Horne, (United States District Court for the District of Massachusetts, C.A. No. 02-11634-WGY)
The Securities and Exchange Commission ("Commission") announced that on February 21, 2003, the Honorable William G. Young, of the United States District for the District of Massachusetts, entered a final judgment against former Watts Industries executive Timothy P. Horne in an insider trading matter. Horne, the former CEO and chairman of Watts Industries of North Andover, Massachusetts, agreed to pay a civil penalty of $317,971, disgorge his trading profits of $317,971, and pay prejudgment interest of $94,442, and he consented to the judgment, without admitting or denying the allegations in the Commission's lawsuit. The judgment permanently enjoins Horne from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, which prohibit fraud including insider trading.
The Commission alleged in its complaint, filed on August 15, 2002, that Horne received a call in May 1999 from an investment banker inquiring whether Watts Industries would be interested in acquiring Central Sprinkler Corporation, indicating that an auction process was underway and Watts would need to move quickly if interested. Further, the Commission alleged that Horne told the investment bank that Watts might be interested in acquiring Central Sprinkler. The complaint alleged, however, that Horne did not inform the Watts board of this acquisition opportunity and instead began buying stock of Central Sprinkler in his personal brokerage account, spending over $500,000 to accumulate 30,000 shares over the next three business days. According to the complaint, Horne never informed anyone at Watts of his trading, which violated a Watts written policy prohibiting trading in any company's securities on the basis of nonpublic information. Shortly thereafter, when Tyco International, Ltd. publicly announced its acquisition of Central Sprinkler, Horne sold his stock for a profit of $317,971.
The Commission acknowledges the assistance of the National Association of Securities Dealers in the matter.
See also, Litigation Release No. 17680 (August 15, 2002).