U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19252 / June 8, 2005
Securities and Exchange Commission v. Gary D. Force, 05 CV 5411 (VM) (S.D.N.Y.)
KENTUCKY BUSINESSMAN GARY FORCE AGREES TO PAY OVER $4 MILLION TO SETTLE SEC INSIDER TRADING CHARGES
The Securities and Exchange Commission (“Commission”) today filed an insider trading action against Gary D. Force, the owner of automobile dealerships in Kentucky and Tennessee. The Commission’s complaint alleges that from June 1998 through December 1999, Force engaged in highly profitable, illegal securities trading based on inside information he received from his broker, Chad Conner, about seven upcoming mergers or acquisitions. According to the complaint, Force knew or was reckless in not knowing that the stock recommendations he received from Conner were based on information misappropriated from two investment banking firms in New York City. Based on the inside information, Force made substantial investments in these seven stocks, purchasing as much as $1 million worth of stock in a single transaction. After the deals were announced, Force made more than $1.5 million in profits from his trading, often obtaining high returns in a matter of days or weeks. Force also shared some of the recommendations with his daughter, who purchased stock in advance of four deals and reaped more than $220,000 in profits.
Conner’s source for the inside information was James Cooper, one of Conner’s clients, who obtained the information from a source at the New York investment banks. The Complaint alleges that Force compensated Cooper by purchasing stock in one of the seven companies on behalf of Cooper and his brother. Force then authorized Conner to pay $20,000 out of Force’s account to the Coopers, representing the profits from that stock purchase. According to the complaint, Force also arranged for and guaranteed $250,000 in loans from his bank to Cooper and his brother, enabling the Coopers to continue to trade on the inside information. At the time that Force arranged these loans and paid the $20,000 to the Coopers, Force had never met or spoken to them.
Force has agreed to settle the charges against him by consenting, without admitting or denying the findings in the Commission’s Complaint, to the entry of a final judgment by the U.S. District Court for the Southern District of New York ordering him to pay a total of $4,152,197. This amount includes disgorgement of Force’s profits in the amount of $1,515,213 and disgorgement of his daughter’s profits in the amount of $221,062; prejudgment interest in the amount of $900,709; and a civil penalty of $1,515,213. The final judgment also enjoins Force from future violations of the antifraud provisions of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3. The settlement terms are subject to court approval.
The Commission’s complaint alleges that Force’s trading was part of a broader insider trading scheme that was launched on the Internet and ultimately involved more than twenty individuals located in and around New York City and Bowling Green, Kentucky. Eighteen individuals have been convicted criminally for their roles in the scheme and the Commission has also obtained civil judgments against those eighteen individuals, including Cooper and Conner.