U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20464 / February 22, 2008
Securities and Exchange Commission v. Vencent A. Donlan, Defendant, and Robin D. Colls Donlan, Relief Defendant, Civil Action No. 07 CV 793 JAH (LSP) (S.D. Cal.)
SEC Settles With Former Stock Options Administrator for Stock and Stock Options Theft
The SEC announced today that it settled its enforcement action with Vencent A. Donlan ("Donlan"), former stock options administrator at Wireless Facilities, Inc. ("WFI") (now Kratos Defense & Security Solutions, Inc.) for his violations of the federal securities laws in fraudulently obtaining stock and stock options from WFI. The SEC also settled with Donlan's wife, Robin D. Colls Donlan ("Colls"), who was named as a relief defendant to recover proceeds from the fraud.
The Honorable John A. Houston, United States District Judge for the Southern District of California, entered a permanent injunction against Donlan enjoining him from violations of the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 and the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Judge Houston also ordered Donlan to pay disgorgement in the amount of $6,252,715.42, plus prejudgment interest thereon in the amount of $153,611.23, but payment was waived for the amount exceeding $5.5 million and civil penalties were not imposed against Donlan based on his sworn representation of his financial condition. Colls was held jointly and severally liable for the disgorgement and prejudgment interest, and she also made a sworn representation of financial condition. Donlan and Colls were ordered to pay the disgorgement by turning over to WFI all assets related to the fraud, including bank and brokerage accounts, retirement accounts, and real property.
The Commission's first amended complaint alleged that between November 2002 and November 2003, Donlan abused his position as WFI's stock options administrator to issue and transfer over 700,000 shares of WFI stock and stock options to a brokerage account. According to the amended complaint, Donlan caused these transfers by making false entries in WFI's stock options software to create and then hide the unauthorized stock options grants and by providing false information to WFI's brokerage firm and transfer agent. Donlan sold the fraudulently obtained stock and stock options for a net gain of approximately $6.3 million.
On October 26, 2007, under the terms of a plea agreement with the United States Attorney's Office for the Southern District of California, Donlan began serving a forty-six month prison sentence for federal wire fraud and tax evasion violations related to his fraudulent scheme.