U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19232 / May 19, 2005
Securities and Exchange Commission v. David W. Butler, Civil Action No. 00-1827 (W.D. Pa.)
The Securities and Exchange Commission ("Commission") today announced that, on April 18, 2005, the Honorable David Stewart Cercone entered judgment in favor of defendant David W. Butler ("Butler"). The Commission had charged Butler with violating the federal securities laws by trading on the basis of material and non-public information concerning anticipated quarterly financial results of ForeSystems, Inc. ("ForeSystems").
The Commission alleged that, approximately two weeks prior to the end of ForeSystems' fiscal year 1997 fourth quarter, Butler placed option trades betting on a drop in the price of ForeSystems' stock. He placed these trades immediately after participating in a management conference call during which the participants discussed ForeSystems' quarterly financial condition. The Commission alleged that, during that conference call, Butler learned that ForeSystems likely would not meet analyst revenue predictions for the fourth quarter of 1997. In fact, ForeSystems ultimately announced financial results for that quarter that were substantially below results predicted by analysts. The Commission charged Butler 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.
After a four day trial, and upon a motion by the defendant pursuant to Federal Rule of Civil Procedure 52(c), Judge Cercone found by a preponderance of the evidence that the information possessed by Butler was speculative at best; and that the information did not significantly alter the total mix of information made available to the public.
SEC v. Butler, 00-cv-1827 (W.D. Pa.)