SEC Settles Insider Trading Charges Against Trader Who Received Illegal Tip From His Broker
Nov. 4, 2022
File No. 3-21234
November 4, 2022 – The Securities and Exchange Commission today announced that Michael E. Mueller of Austin, Texas has agreed to settle charges that he engaged in insider trading in the securities of Layne Christensen Company (“Layne”) before the February 14, 2018 public announcement that Granite Construction Inc. (“Granite”) had agreed to acquire Layne for $565 million. This action is related to the settled action the SEC filed against Mueller’s broker and another individual on September 20, 2022, SEC v. John P. Mendes, et al., No. 4:22-cv-05340 (N.D. Ca.).
According to the SEC’s order, Mueller received material nonpublic information from his friend and broker, John Mendes, and authorized Mendes to purchase Layne stock and options in Mueller’s account from November 27, 2017 through February 12, 2018. The order finds that Mendes told Mueller that a mutual friend was working on structuring and financing a potential acquisition of Layne and that Mendes had received this confidential information in breach of that individual’s duty to the acquiring company. The order further finds that in December 2017, based on the material nonpublic information that he had received from Mendes, Mueller recommended that a close relative purchase Layne securities, which the relative did. As a result of Mueller’s misconduct, he generated a profit of more than $38,000 and his relative generated a profit of more than $14,000.
The SEC’s order finds that Mueller violated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the SEC’s findings, Mueller consented to a cease-and-desist order and agreed to pay disgorgement of $38,075.32, prejudgment interest of $8,003.38, and a civil penalty of $52,118.87.
The SEC’s investigation was conducted by Market Abuse Unit staff Frank Goldman, Ann Marie Preissler, and John Rymas, with assistance from Senior Trial Counsel, Terry Miller, and was supervised by Danielle Voorhees and Market Abuse Unit Chief, Joseph Sansone. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Northern District of California, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.