U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

Securities Exchange Act of 1934
Release No. 50589 / October 26, 2004

Admin. Proc. File No. 3-11719


In the Matter of

NORMAN C. PAYSON,

Respondent.



:
:
:
:
:
:
:
:
:

ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934

I.

The Securities and Exchange Commission ("Commission") deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"), against Norman C. Payson, M.D. ("Dr. Payson" or "Respondent").

II.

In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement of Norman C. Payson (the "Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, which Respondent admits, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order Pursuant to Section 21C of the Securities Exchange Act of 1934 ("Order"), as set forth below.

III.

On the basis of this Order and Respondent's Offer, the Commission finds as follows:

A. RESPONDENT

Norman C. Payson, M.D., age 56, is a resident of Hopkinton, New Hampshire. Dr. Payson served as the Chief Executive Officer of Oxford Health Plans, Inc. beginning in May 1998 and the Chairman of the Board of Directors of the company beginning in May 1999. On September 19, 2002, he announced his intention to retire from these positions, which he did on November 22, 2002.

B. ISSUER

Oxford Health Plans, Inc. ("Oxford") was a Delaware corporation headquartered in Trumbull, Connecticut. Oxford, a commercial health insurer, primarily served New York, New Jersey, and Connecticut. At all relevant times, Oxford's securities were registered with the Commission pursuant to Section 12(g) of the Exchange Act, and were quoted on the NASDAQ Stock Market, Inc. until April 18, 2001, when they became listed on the New York Stock Exchange. On July 29, 2004, Oxford merged with UnitedHealthcare, a wholly owned subsidiary of UnitedHealth Group, Inc., and Oxford's securities ceased to be publicly listed.

C. SUMMARY

This matter involves violations of the reporting provisions of Section 13(d) of the Exchange Act by Dr. Payson, former Chairman of the Board of Directors and Chief Executive Officer of Oxford. Section 13(d) and the rules promulgated thereunder, require that any person who becomes either the direct or indirect beneficial owner of more than 5% of a class of equity securities registered pursuant to Section 12 of the Exchange Act must file within ten days a statement with the Commission containing information required in the Schedule 13D. Item 4 of Schedule 13D requires the reporting person to disclose any plans or proposals which the reporting person may have, which would, among other things, result in the disposition of securities of the issuer. In addition, Rule 13d-2 requires that a reporting person file an amendment to Schedule 13D promptly after any material change occurs in the facts set forth in a previously filed Schedule 13D.

Dr. Payson violated Section 13(d) of the Exchange Act and the rules promulgated thereunder, when he filed a Schedule 13D, almost ten months late, in which he disclosed that he was the beneficial owner of more than 5% of Oxford's stock.

On February 23, 2000, Dr. Payson's total beneficial ownership of Oxford stock, including his family's holdings, increased to more than 5% of Oxford's outstanding common stock as a result of the vesting of Dr. Payson's employee options, as opposed to the purchase of Oxford stock. Although his crossing the threshold triggered an obligation to file a Schedule 13D within ten days of February 23, 2000, Dr. Payson did not make such a filing until December 2000. The Schedule 13D filed by Dr. Payson on December 15, 2000 stated that he had "inadvertently omitted to file a statement on Schedule 13D prior to the date hereof."1 In addition, Dr. Payson violated Section 13(d) of the Exchange Act , and the rules promulgated thereunder, when he inaccurately described his contemplated plan for the sale of a portion of his family's Oxford holdings in the original Schedule 13D filed on December 15, 2000, and in an amendment to the Schedule 13D that he filed on December 29, 2000.

The filing and disclosure requirements of Section 13(d) of the Exchange Act and Regulation 13D thereunder continue to be as important today as any time since their adoption in 1968. All shareholders subject to Section 13(d) and Regulation 13D are required to be diligent and timely in fulfilling their disclosure obligations. In particular, "boilerplate" or other general disclosures do not suffice when the shareholder has formulated a specific intention with respect to a disclosable matter.2

D. FACTS

Beginning in August 2000, Dr. Payson began taking steps toward reducing the concentration of his family's holdings of Oxford stock. In particular, he considered arranging a sale of Oxford stock held in Kemosabe LLC ("Kemosabe") and the Payson Grantor Retained Annuity Trust ("Payson Trust" and together with Kemosabe, the "Payson Family Entities"), two of Dr. Payson's family-related entities. By December 2000, Dr. Payson had developed a plan involving the sale of Oxford stock held by the Payson Family Entities. Dr. Payson understood that this plan would result in the sale of Oxford stock when Oxford opened its next trading window allowing corporate insiders to transact in Oxford stock.

On December 15, 2000, Dr. Payson signed and filed a Schedule 13D with the Commission in which he reported that he was the beneficial owner of 4,961,011 shares of Oxford common stock, or 5.57% of the shares then outstanding. Due to the vesting of previously granted employee options, Dr. Payson had reached the 5% threshold for filing a Schedule 13D on February 23, 2000. As a result, Dr. Payson filed the Schedule 13D almost ten months late.

The Schedule 13D that Dr. Payson belatedly filed on December 15, 2000, stated that Dr. Payson "may at any time and from time to time sell or otherwise transfer shares or acquire additional shares" and "is presently contemplating a transfer of" his interest in the Payson Family Entities so that such entities "may from time to time dispose of" their shares. This statement was inaccurate and incomplete because it did not fully disclose Dr. Payson's contemplated plan involving the sale of Oxford stock held by the Payson Family Entities.

On December 28, 2000, Dr. Payson signed papers transferring his membership interest in Kemosabe to his wife, resigning from his position as manager of Kemosabe, and resigning as trustee of the Payson Trust. The papers that Dr. Payson signed also appointed his family's financial advisor as the manager of Kemosabe and trustee of the Payson Trust. Dr. Payson and his family's financial advisor understood that Dr. Payson was executing these documents as part of his plan involving the sale of Oxford stock held by the Payson Family Entities when Oxford opened its next trading window for corporate insiders.

On December 29, 2000, Dr. Payson signed and filed an amendment to the December 15, 2000 Schedule 13D in which Dr. Payson disclosed the changes with respect to Kemosabe and the Payson Trust described above. However, in his amendment to the Schedule 13D, Dr. Payson did not fully disclose his plan involving the sale of Oxford stock held by the Payson Family Entities. In the filing, Dr. Payson represented that Kemosabe and the Payson Trust had adopted trading plans under Exchange Act Rule 10b5-1 to permit the disposition of Oxford stock "from time to time."3 Dr. Payson also stated in the amendment that "[e]xcept to the extent set forth above [concerning Kemosabe and the Payson Trust], the Reporting Person has no plans to effect any of the transactions required to be described in Item 4 of Schedule 13D." These disclosures were inaccurate and incomplete, in that they did not fully reveal Dr. Payson's above-described plan to sell shares held by Kemosabe and the Payson Trust when Oxford opened its next trading window for corporate insiders.

Kemosabe and the Payson Trust sold shares of Oxford stock beginning at the opening of Oxford's trading window for corporate insiders on February 8, 2001. Between February 8 and February 14, 2001, Dr. Payson's family's financial advisor endeavored to sell up to one million shares of Oxford stock, or approximately 1.1% of the outstanding shares, held by Kemosabe and the Payson Trust, but due to market conditions Dr. Payson's family's financial advisor sold 590,000 shares, or 0.6% of the total shares of Oxford's common stock outstanding.

E. LEGAL DISCUSSION

Section 13(d) of the Exchange Act and Rule 13d-2 thereunder, provide that if there is any material change to the information set forth in the Schedule 13D, the reporting person must promptly file an amendment disclosing the change. Any inaccurate disclosure undermines the purpose of Section 13(d); therefore, this provision requires "the making of a completely truthful statement." SEC v. Savoy Industries, Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1977). The inaccurate disclosure must be material. Id. at 1166-67. Further, Item 4 of Schedule 13D requires the reporting person to disclose any plans or proposals which the reporting person may have which would result in the disposition of securities of the issuer. Disclosure is required even if the plan relates to a prospective event and even though the event may not occur. See In the Matter of Douglas A. Kass, 50 S.E.C. 1110, Release No. 31046 (Aug. 17, 1992) (citing Otis Elevator Co. v. United Technologies Corp., 405 F. Supp. 960, 970 (S.D.N.Y. 1975)); Marshall Field v. Icahn, 537 F. Supp. 413 (S.D.N.Y. 1982).)

Dr. Payson violated Section 13(d) of the Exchange Act and Exchange Act Rule 13d-1 by not filing a timely Schedule 13D upon becoming the beneficial owner of over 5% of Oxford stock. Section 13(d) of the Exchange Act, and Rule 13d-1 thereunder provide that any person who becomes either the direct or indirect beneficial owner of more than 5% of a class of equity securities registered pursuant to Section 12 of the Exchange Act must file within ten days a statement with the Commission containing information required in the Schedule 13D. Through the vesting of employee stock options, Dr. Payson became the beneficial owner of over 5% of Oxford stock on February 23, 2000. He did not file a Schedule 13D with the Commission, however, until December 15, 2000. Therefore, Dr. Payson violated Section 13(d) and Rule 13d-1.

As discussed above, Dr. Payson violated Section 13(d) of the Exchange Act and Exchange Act Rules 13d-1 and 13d-2 by inaccurately describing his plan involving the sale of Oxford stock held by the Payson Family Entities, both in his original Schedule 13D filed on December 15, 2000, and the amendment to his Schedule 13D that he filed on December 29, 2000. In these filings, Dr. Payson represented that he might dispose of shares of Oxford stock "at any time" and "from time to time" and that, "[e]xcept to the extent set forth above [concerning Kemosabe and the Payson Trust], the Reporting Person has no plans to effect any of the transactions required to be described in Item 4 of Schedule 13D."

These statements were inaccurate and incomplete in that Dr. Payson had developed a plan involving the sale of Oxford stock held by the Payson Family Entities, a plan that Dr. Payson knew would result in the sale of Oxford stock when Oxford opened its next trading window for corporate insiders. By inaccurately describing his plan regarding the disposition of the Oxford stock held by the Payson Family Entities, Dr. Payson violated Section 13(d) of the Exchange Act and Exchange Act Rules 13d-1 and 13d-2.

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondent's Offer.

Accordingly, it is hereby ordered that, pursuant to Section 21C of the Exchange Act, Dr. Payson cease and desist from committing or causing any violations and any future violations of Section 13(d) of the Securities Exchange Act of 1934 and Exchange Act Rules 13d-1 and 13d-2 thereunder.

By the Commission.

Jonathan G. Katz
Secretary


Endnotes


http://www.sec.gov/litigation/admin/34-50589.htm


Modified: 10/26/2004