U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20054 / March 23, 2007
Securities and Exchange Commission v. Roger Blackwell et al, 03 Civ. 63 (S.D. Ohio, filed January 21, 2003)
SEC Obtains Summary Judgment against Roger Blackwell and Other Defendants in Insider Trading Scheme
On March 20, 2007, the Honorable Algenon L. Marbley of the U.S. District Court for the Southern District of Ohio granted summary judgment based on facts primarily established in an earlier criminal prosecution in favor of the Commission and against Defendants Roger D. Blackwell, Kelly Hughes, Kevin Stacy and Roger D. Blackwell in his capacity as trustee of the Roger Blackwell and Associates Pension Plan Trust ("Pension Plan"). The Court held Blackwell, Hughes, Stacy and the Pension Plan liable for illegal insider trading in the stock of Worthington Foods, Inc. in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court also granted summary judgment in favor of the Commission and against Blackwell for his violation of Section 16(a) of the Exchange Act and Rule 16a-2, 16a-3 and 16a-8 thereunder for his failure to report changes in his beneficial ownership of Worthington stock, purchased through the Pension Plan. Finally, the Court also ruled that the Commission's claim that Blackwell violated Section 16(a) and Rule 16a-2, 16a-3, and 16a-8 with respect to Black-Jack Enterprises was inappropriate for summary judgment and remained for trial.
Furthermore, the Court ruled that Blackwell, Hughes and Stacy should be permanently enjoined from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and ordered the following amounts of disgorgement against the defendants: (1) Blackwell, Hughes and Stacy were held jointly and severally liable for $104,954.72 in disgorgement and $51,363.49 in prejudgment interest; and (2) Blackwell and the Pension Plan were held jointly and severally liable for $57,023.29 in disgorgement and $27,906.47 in prejudgment interest. The Court also permanently enjoined Blackwell from committing future violations of Section 16(a) of the Exchange Act.
In granting this relief, the Court found that "the degree of scienter in this case is nothing if not compelling. Blackwell worked assiduously to inform multiple persons and organizations of the impending Worthington merger. Hughes and Stacy risked their entire savings to invest in one single stock, illustrating that they had inside information on which to base this decision."
In its Complaint, the Commission alleged that during August and September 1999, Blackwell illegally disclosed inside information he obtained while serving as a director of Worthington about Kellogg's proposed acquisition of Worthington to: (1) his father Dale Blackwell, (2) son Christian Blackwell, (3) his office assistant and close friend Kelley Hughes and her husband Kevin Stacy, (4) his close business associate attorney Arnold Jack, (3) Black-Jack Enterprises, Roger Blackwell's 50/50 investment partnership with Jack, and (6) the Roger Blackwell and Associates Pension Plan Trust, Roger Blackwell's marketing company's pension plan (the "Blackwell Group"). In total, the Blackwell Group made approximately $245,000 in ill-gotten profits by illegally trading on the inside information. (See Litigation Release No. 17944, January 21, 2003).
Blackwell, Hughes and Stacy were previously convicted for insider trading based on the same illegal transactions recounted in the above referenced Complaint. The three defendants were also convicted on numerous counts of conspiracy to commit insider trading, conspiracy to obstruct justice, making false statements in violation of 18 U.S.C. § 1001 and obstruction of the Commission's investigation.
The Commission is continuing the litigation against the remaining defendants in this case.