SEC Charges Denver-Based Businessman with Insider Trading
The Securities and Exchange Commission today charged a prominent Denver-based businessman with insider trading based on confidential information he obtained from the CEO of an oil and gas company that was about to secure a huge investment.
An investigation by the SEC’s Enforcement Division found that Scott Reiman obtained inside information about Delta Petroleum ahead of the company’s announcement that it had secured a $684 million investment from private investment firm Tracinda. After the major investment was publicly announced, Delta Petroleum’s stock price jumped almost 20 percent and Reiman reaped substantial illicit profits. The SEC previously charged Reiman’s source, then-CEO Roger Parker, as well as another trader, Michael Van Gilder, in this insider trading investigation.
To settle the SEC’s charges, Reiman agreed to pay nearly $900,000 and be barred from the securities industry and from serving as an officer or director of a public company for at least five years.
“Reiman took advantage of highly confidential information that he obtained through his friendship with Parker and traded on it for significant and entirely illegal profits,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit.
Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office, added, “These enforcement actions against Reiman, Parker, and Van Gilder show that the SEC will unravel the story behind suspicious trades and root out corporate insiders who give away confidential information as well as those who can’t resist the temptation to trade on it.”
According to the SEC’s order instituting proceedings, Reiman is the founder and president of the Denver-based investment firm Hexagon Inc. He received repeated tips from Parker about Tracinda’s potential investment in Delta Petroleum. On three occasions in late November and early December 2007, Reiman bought Delta Petroleum stock or highly speculative option contracts shortly after speaking to Parker, including once within minutes after getting off the phone with him. When Delta publicly announced the Tracinda investment on Dec. 31, 2007, the value of Reiman’s fraudulently obtained Delta Petroleum securities soared nearly 20 percent.
The SEC’s order charged Reiman with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Reiman neither admitted nor denied the charges. Reiman agreed to pay disgorgement of $398,000 plus prejudgment interest of $93,567 and a penalty of $398,000. The order bars Reiman from acting as an officer or director of any public company for a period of five years, bars him from the securities industry with the right to reapply for reentry after five years, and requires him to cease-and-desist from future violations.
The SEC’s investigation has been conducted by members of the Enforcement Division’s Market Abuse Unit — Michael Holland, Jeffrey Oraker, Joseph Sansone, and Jay Scoggins — with substantial assistance from Neil Hendelman in the New York Regional Office and Thomas Krysa in the Denver Regional Office. The case has been supervised by Daniel M. Hawke and Sanjay Wadhwa.
The SEC appreciates the assistance of the U.S. Attorney offices in the Southern District of New York and the District of Colorado as well as the Federal Bureau of Investigation.