UNITED STATES DISTRICT COURT
Securities and Exchange Commission,
03 Civ. 2938 G
Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint against defendant Richard Wilson ("Wilson"), alleges as follows:
1. This action involves illegal insider trading by Richard Wilson, who bought stock in H.D. Vest, Inc. ("H.D. Vest") after misappropriating nonpublic information about an upcoming merger between H.D. Vest and Wells Fargo & Co. ("Wells Fargo"). Wilson obtained non-public information about the upcoming merger by reading a confidential document that he found in his daughter and son-in-law's home in or about early January 2001. Wilson's son-in-law was an H.D. Vest insider who had knowledge about the Wells Fargo merger through his participation in business presentations made by H.D. Vest to Wells Fargo and to other companies. The confidential document that Wilson read was an H.D. Vest slide presentation pertaining to a possible acquisition of H.D. Vest. On February 12, 2001, Wilson opened a brokerage account with Merrill Lynch, Pierce, Fenner & Smith, Inc. ("Merrill Lynch") and bought 1,000 shares of H.D. Vest stock for $6.25 per share, and on March 6, 2001, Wilson bought an additional 500 shares of H.D. Vest stock for $6.375 per share, at a total cost of $9,437.50. When Wilson used the information gleaned from the confidential document to purchase H.D. Vest stock, he breached a duty of trust and confidence he owed to his son-in-law. On March 23, 2001, after a press release announced the merger, H.D. Vest stock skyrocketed to a closing price of $20.38.
2. By virtue of the conduct alleged herein, Wilson has engaged, directly or indirectly, in transactions, acts, practices, or courses of business that constitute violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5. Accordingly, the Commission seeks from Wilson a permanent injunction against further violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, disgorgement of all of his ill-gotten gains plus prejudgment interest thereon, and civil penalties.
3. The Commission brings this action pursuant to Sections 21(d) and 21A of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u-1.
4. This Court has jurisdiction over this action pursuant to Sections 21(d), 21A, and 27 of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u-1, 78aa.
5. Wilson, directly and indirectly, singly or in concert, made use of the means or instrumentalities of interstate commerce, or of the mails, or of any facility of any national securities exchange, in connection with the transactions, acts, practices, and courses of business alleged herein.
6. Richard Wilson, 74, of Grapevine, Texas, is a retired businessman. Prior to his retirement, Wilson owned three car dealerships in California. Currently, Wilson is employed by the Grapevine-Coleyville Event School District as a diving coach.
7. H.D. Vest is a financial services company, principally headquartered in Dallas, Texas. Before H.D. Vest was taken over by Wells Fargo, H.D. Vest's securities were registered with the Commission and reported on NASDAQ's National Market System. H.D. Vest now operates as a wholly-owned subsidiary of Wells Fargo.
8. Wells Fargo, headquartered in San Francisco, California, is a diversified financial services company organized as a bank holding and financial holding company. Wells Fargo's securities are registered with the Commission and are listed on the New York Stock Exchange.
9. In July 2000, H.D. Vest retained an investment bank for the purpose of seeking a suitor to acquire it. In November 2000, H.D. Vest's management made presentations to seven suitor companies and in mid-December, one of those companies, Wells Fargo, sent H.D. Vest an indication of interest at a price more than three times the market value of H.D. Vest's stock. In February 2001, H.D. Vest entered into exclusive negotiations with Wells Fargo. Between early February 2001 and early March 2001, Wells Fargo conducted extensive due diligence on H.D. Vest's business and operations.
10. On March 22, 2001, after the successful conclusion of due diligence, Wells Fargo and H.D. Vest completed a definitive merger agreement whereby Wells Fargo would acquire all of H.D. Vest common stock for $21.03 per share. On or about March 22, 2001, H.D. Vest's and Wells Fargo's boards of directors approved and executed the merger agreement. Before the stock market opened on March 23, 2001, H.D. Vest and Wells Fargo issued a joint press release announcing the agreement.
11. In or about October 2000, Wilson's son-in-law joined a team of H.D. Vest employees making presentations about the business of H.D. Vest to approximately five companies, including Wells Fargo, that were considering a strategic alliance with, or a takeover of, H.D. Vest.
12. In late December 2000 or early January 2001, while Wilson was alone in his son-in-law's house, he found a non-public document Wilson's son-in-law used in his presentations to suitor companies while Wilson was searching for paper supplies in the pantry. The document, a paper hardcopy of a slide presentation that was given to Wells Fargo, had a cover page bearing the caption "HD VEST FINANCIAL SERVICES, Investor Presentation, Dallas, TX, November 17, 2000" ("the Investor Slide Presentation"). The Investor Slide Presentation contained business information about H.D. Vest, and handwritten notes made by Wilson's son-in-law. The purpose of the Investor Slide Presentation - and the purpose Wilson gleaned from it - was to describe H.D. Vest to a large prospective investor or suitor.
13. On February 12, 2001 and on March 6, 2001, while aware of material nonpublic information concerning Wells Fargo's impending acquisition of H.D. Vest, Wilson purchased 1,000 and 500 shares of H.D. Vest common stock at $6.25 and $6.375 per share, respectively. At the time he purchased these 1,500 shares of H.D. Vest common stock, Wilson knew or recklessly disregarded the fact that information about Wells Fargo's impending acquisition of H.D. Vest was nonpublic and that he had used that information in breach of his duty of confidentiality and trust to his son-in-law.
14. On March 23, 2001, after the news of Wells Fargo's acquisition of H.D. Vest was made public by the March 23 Announcement, the price of H.D. Vest's common stock closed at $20.375 per share, up $13.38 per share from the previous trading day.
15. The Commission realleges and incorporates by reference the allegations contained in Paragraphs 1 through 14, above.
16. Wilson, directly or indirectly, singly or in concert, in connection with the purchase or sale of H.D. Vest securities, by use of the means or instrumentalities of interstate commerce, or of the mails, or of any facility of any national securities exchange: (a) employed devices, schemes, or artifices to defraud; (b) made untrue statements of material fact or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaged in transactions, acts, practices and courses of business which operated or would have operated as a fraud or deceit upon purchasers of H.D. Vest securities, as more fully described in Paragraphs 1 through 14, above.
17. In February and March 2001, Wilson, in breach of a duty arising out of a relationship of trust and confidence that he owed to his son-in-law, purchased H.D. Vest securities while in possession of information that H.D. Vest was going to be acquired.
18. The information that Wilson possessed was material and non-public.
19. When Wilson purchased H.D. Vest securities on February 12 and March 6, 2001, Wilson knew, or acted in reckless disregard of the fact, that: (1) he possessed non-public information that H.D. Vest was going to be acquired; and (2) he breached a duty of trust and confidence that he owed to his son-in-law.
20. By reason of the foregoing, Wilson, singly or in concert, directly or indirectly, violated, and unless enjoined will again violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5.
WHEREFORE, Plaintiff respectfully requests a Final Judgment:
A. Permanently enjoining Wilson, his agents, servants, employees, and attorneys, and all persons in active concert or participation with him who receive actual notice of the injunction by personal service or otherwise, and each of them, from future violations of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5;
B. Ordering Wilson to disgorge the ill-gotten gains he derived from the purchase of H.D. Vest securities in violation of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, and to pay prejudgment interest thereon;
C. Ordering Wilson to pay civil monetary penalties pursuant to Section 21A(a) of the Exchange Act, 15 U.S.C. § 78u-1(a); and
D. Granting such other and further relief as this Court shall deem just and proper.
Dated: New York, New York
December 8, 2003
WAYNE M. CARLIN (WC-2114)
Attorney for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
New York, New York 10279
Tel: (646) 428-1510
Wayne M. Carlin
Edwin H. Nordlinger
Barry W. Rashkover
Helene T. Glotzer
Eva M. Kolb
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