U.S. Securities and Exchange Commission
Litigation Rel. No. 18406 / October 9, 2003
SEC Wins Jury Verdict Against Former Director Robert D. Happ in Insider Trading Case
SEC v. Robert D. Happ (United States District Court for the District of Massachusetts, C.A. No. 00-12051-REK)
The Commission announced that a Massachusetts federal jury today returned a verdict in favor of the SEC after a two-week trial against Robert D. Happ for insider trading in the stock of Galileo Corporation, formerly a Sturbridge, Massachusetts company. The SEC had alleged that, in late June 1998, while Happ was a director of Galileo and the chairman of the board of directors' audit committee, Happ learned from the company's chief executive officer that Galileo was experiencing difficulties in its fiscal 1998 third quarter and that the CEO needed to meet with him to discuss those difficulties. According to the SEC, upon receiving this information, Happ sold all his shares of the company's stock on June 29, 1998. When the company eventually announced these difficulties and their effect on the company's 1998 third quarter results to the public, the stock price dropped 64%. The court will determine the amount of the loss Happ avoided as a result of his June 29 sale.
The jury heard closing arguments in the two week-trial yesterday and announced its verdict today. In rendering its verdict, the jury found, among other things, that
- Happ possessed and used material, nonpublic information about the company when he sold his stock as a company insider;
- Happ acted with intent, knowledge and recklessness; and
- Happ violated the duty of trust and confidence that he owed Galileo and its shareholders.
The SEC's complaint, originally filed on October 5, 2000 and amended on May 18, 2001, charged Happ with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Honorable Robert Keeton of the United States District for the District of Massachusetts presided over the trial. The SEC and defendant Happ have been given two weeks to submit written arguments regarding the remedies the court should impose against Happ for his insider trading. For further information, please see Litigation Release No. 16755 (October 5, 2000).