U.S. Securities and Exchange Commission
Litigation Release No. 21414 / February 16, 2010
Securities and Exchange Commission v. Gerald D. Horn, Civil Action No. 1:10-CV-00955 (N.D. Ill.)
The Securities and Exchange Commission announced that on February 11, 2010, the SEC filed securities fraud charges against Gerald D. Horn ("Horn"), a resident of Deerfield, Illinois, for his illegal insider trading in the securities of LCA Visions, Inc. ("LCA") that resulted in total illicit gains of approximately $1.4 million.
LCA is a public company headquartered in Cincinnati, Ohio that provides laser surgery vision correction services in 31 states. Horn, a doctor of ophthalmology, is both an employee of LCA and the owner of the Illinois professional corporation that operates LCA facilities in the Chicago area.
The SEC's complaint, filed in the U.S. District Court for the Northern District of Illinois, alleges that, between December 2005 and August 2006, Horn traded on the basis of material, non-public information when he made six separate purchases of LCA call and put options, resulting in illicit gains of approximately $869,629. Horn also traded on the basis of material, non-public information when he decided to exercise LCA stock option grants and sell the stock, resulting in a loss avoided of approximately $533,603.
According to the SEC complaint, Horn traded on the basis of information contained in LCA's internal Eyes by Laser Reports, which provided non-public information regarding LCA's total number of laser eye surgeries performed and revenue generated from these procedures. These reports also allowed him to successfully predict whether LCA's earnings would miss or beat LCA's previous earnings guidance previously provided to the public.
The SEC complaint further alleges that, because Horn had material nonpublic information about LCA, Horn never lost money on any of his multiple trades in LCA options, despite his complete lack of prior experience in options trading. Moreover, according to the complaint, Horn was able, with great precision and agility, to switch his trades between calls and puts, predicting that LCA's earnings would either beat or miss its targets, and thus that the price of LCA stock would either rise or fall, and remarkably made the correct decision every time.
The complaint alleges that, during sworn testimony before the SEC, Horn provided numerous false explanations for his timely trading in LCA securities.
According to the SEC complaint, Horn violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Through its civil action, the SEC seeks a permanent injunction against Horn prohibiting him from future violations of the federal securities laws. The SEC also seeks an order requiring Horn to pay disgorgement of his ill-gotten gains plus prejudgment interest, and a civil penalty.
The Commission acknowledges the assistance of the Options Regulatory Surveillance Authority (“ORSA”) in this matter.
See Also: SEC Complaint