SEC Charges Former Executive with Insider Trading On Nonpublic Information Obtained as Part of Professional Group
The Securities and Exchange Commission today charged a former corporate executive living in South Florida with insider trading based on confidential information that he learned as part of a professional organization.
The SEC alleges that Mark D. Begelman purchased stock in Bluegreen Corporation in advance of a public announcement by BFC Financial Corporation that it was acquiring the company. Begelman was a member of the World Presidents’ Organization (WPO), which is a global professional group of business leaders who are current or former executives at major companies. The WPO has a specific written policy that discussions of a confidential nature are to be kept confidential. Nonetheless, Begelman took advantage of confidential information he learned from another WPO member and illegally traded ahead of the merger announcement for nearly $15,000 in illicit profits.
Begelman has agreed to pay more than $30,000 to settle the SEC’s charges.
“As a longstanding member of a group of executive professionals, Begelman disregarded his obligation of trust and confidence by abusing and illegally profiting from his extraordinary access to material, nonpublic information,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.
According to the SEC’s complaint filed in U.S. District Court for the Southern District of Florida, Begelman joined the WPO in 1991 while he was president and chief operating officer at Office Depot. He later served as an officer at BankAtlantic Bancorp and as vice chairman of the board at Canyon Creek Food Company. Begelman was part of a small, tightly-knit group of WPO members called Forum 91. Begelman gleaned the nonpublic information about the merger from a fellow Forum 91 member who was a high-ranking executive at both Bluegreen and BFC.
According to the SEC’s complaint, Begelman and his fellow Forum 91 members gathered for their annual retreat in the Florida Keys from Nov. 1 to Nov. 3, 2011. During the retreat, Begelman learned from the executive that Bluegreen and BFC were in merger negotiations and planned to enter into a business combination. Begelman e-mailed his stockbroker on November 2 instructing him to buy 25,000 shares of Bluegreen. The next day, Begelman and his stockbroker spoke by phone, and minutes later the stockbroker entered an order to purchase 25,000 Bluegreen shares at $2.25 per share. The purchase order was filled by Nov. 9, 2011.
The SEC alleges that Begelman purchased the shares despite the duty of trust and confidence he owed to the WPO member from whom he learned the material, nonpublic information. After BFC issued a press release on November 14 announcing the acquisition, Bluegreen’s share price rose nearly 46 percent and Begelman sold all 25,000 of his Bluegreen shares at higher prices for $14,949.34 in illegal trading profits.
The SEC’s complaint charges Begelman, who lives in Delray Beach, Fla., with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Without admitting or denying the charges, Begelman agreed to disgorge his ill-gotten gains of $14,949.34 and pay prejudgment interest of $377.22 and a penalty of $14,949.34. He also agreed to be prohibited from serving as an officer and director of a public company for a period of at least five years. The settlement is subject to court approval.
The SEC’s investigation was conducted in the Miami Regional Office by Senior Investigations Counsel Gary M. Miller under the supervision of Assistant Regional Director Elisha L. Frank. Regional Trial Counsel Robert K. Levenson will lead the district court action. The SEC appreciated the assistance of FINRA’s Office of Fraud Detection and Market Intelligence.