Securities and Exchange Commission v. Frances J. Burkitt and Paul Burkitt, Civil Action No. L 03-cv-2767 (D. Md.)
The Securities and Exchange Commission ("Commission") announced the filing, on September 29, 2003, of a complaint in the United States District Court for the District of Maryland, alleging insider trading in the securities of RMH Teleservices, Inc. by defendant Frances J. Burkitt ("F. Burkitt"), of Arnold, Maryland. F. Burkitt sold RMHT stock while in possession of material, nonpublic information concerning negative financial news to be announced by RMHT, which he had received from defendant Paul Burkitt ("P. Burkitt"), of Wayne, Pennsylvania, his son and an officer of RMHT. The complaint seeks permanent injunctions for violations of the antifraud provisions of the federal securities laws, disgorgement and civil penalties. As described below, the defendants have agreed to settle this matter.
RMHT, headquartered in Newtown Square, Pennsylvania, provides customer relationship management services for corporations in the technology, telecommunications, financial services, insurance, and other industries. Its stock is traded on the NASDAQ National Market. For fiscal year 2001, RMHT reported revenue of $174 million and a net loss of $17.6 million. RMHT's fiscal year ends September 30th.
The Commission's complaint alleges that on January 4, 2001, RMHT announced that it expected a loss for its first fiscal quarter ended December 31, 2000, and lowered revenue estimates for fiscal year 2001. Following the announcement, the price of RMHT stock declined sharply, closing at $3.50 per share, down 50 percent from the previous day's close of $7 per share.
The complaint alleges that P. Burkitt was RMHT's Executive Vice President of Sales and Marketing, and knew throughout the company's first quarter that its financial condition was deteriorating. He also knew that RMHT was going to announce revised revenue and earnings estimates, and that his father owned RMHT stock. In a telephone conversation on the evening of January 2, 2001, P. Burkitt tipped his father about RMHT's upcoming negative announcement. On January 3, 2001, prior to RMHT's announcement, F. Burkitt sold 10,000 shares, his entire holdings of RMHT stock. As a result of his illegal trading, F. Burkitt avoided losses of $33,987.
Simultaneously with the filing of the complaint, and without admitting or denying the Commission's allegations, the defendants consented to the entry of a Final Judgment permanently enjoining them from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; ordering Frances J. Burkitt to pay disgorgement in the amount of $33,987, together with prejudgment interest; and ordering the defendants to each pay a civil penalty in the amount of $33,987.
The Commission acknowledges the assistance of NASD Regulation, Inc. in this matter.
