U.S. Securities and Exchange Commission
Litigation Release No. 19553 / February 2, 2006
Securities and Exchange Commission v. William A. Day, United States District Court for the District of Massachusetts, Civil Action No. 06-CV-10202-RWZ (D. Mass.)
SEC FILES SETTLED INSIDER TRADING ACTION RELATED TO SMITH & NEPHEW, PLC's TENDER OFFER FOR ORATEC INTERVENTIONS, INC.
The Securities and Exchange Commission filed a settled enforcement action today in U.S. District Court for the District of Massachusetts, charging William A. Day with insider trading in the common stock of Oratec Interventions, Inc. Day is a resident of Windham, New Hampshire who owns a business and rental properties in Dracut, Massachusetts. Without admitting or denying the allegations in the Commission's complaint, Day agreed to permanent injunctive relief and to pay a total of $94,464.49 in disgorgement and civil penalty.
The Commission's complaint alleges that on February 14, 2002, London, England-based Smith & Nephew, plc. and Oratec publicly announced that they had entered into an agreement for Smith & Nephew to acquire all outstanding shares of Oratec through a tender offer of $12.50 per share. On February 13, 2002, approximately twenty-four hours before the acquisition was publicly announced, Day made an anonymous posting on an internet message board dedicated to Oratec, the contents of which revealed that he possessed material, nonpublic information regarding the tender offer, including the name of the acquiring company, the price per share, the tender offer structure, and the offer announcement date. According to the Commission's complaint, Day received the inside information either directly or indirectly from an employee of the offering company. Day's posting said:
Be my valentine
by: auntbetty1234
Happy Valentine's Day to my Nephew Smitmie [sic]. He'll be 12 ½ on thursday [sic]. When I take him shopping, he just wants to buy-out everything in the store. He's so cute and much smarter than most.
Love,
Aunt Betty
Day created and used the online alias "auntbetty1234". Day bought 12,000 shares of Oratec common stock on February 12 and 13, and sold these shares for a profit of $42,631.90 on February 14, following the public announcement of the tender offer.
The Commission's complaint charges Day with violating the tender offer insider trading provisions, Section 14(e) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 14e-3 thereunder. To settle the Commission's charges, Day has consented, without admitting or denying the allegations in the Commission's complaint, to the entry of a final judgment permanently enjoining him from committing future violations of Section 14(e) of the Exchange Act and Rule 14e-3 thereunder. Day also has agreed to pay disgorgement in the amount of $42,631.90, prejudgment interest thereon of $9,200.69, and a civil penalty of $42,631.90, for a total payment of $94,464.49. The settlement is subject to the court's review and approval.