U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21698 / October 19, 2010
SEC v. Carl E. Binette and Peter E. Talbot, Civil Action No. 3:09-cv-30107-MAP (D. Mass.) (Ponser, J.)
Grand Jury Issues Indictments for Conspiracy, Securities Fraud, and Obstruction of Justice for Making False Statements to the SEC during Insider Trading Investigation.
The Securities and Exchange Commission (Commission) announced that on October 14, 2010, the United States Attorney's Office for the District of Massachusetts announced Peter E. Talbot and Carl E. Binette were charged in a seven-count indictment with conspiracy and securities fraud related to an insider trading scheme. Binette was also charged with obstruction of justice for making false statements to the Commission during its attempts to discover and investigate that very scheme. U.S. v. Talbot et al., Criminal Action No. 3:10-cr-30036-MAP (D. Mass.) (Ponser, J).
As part of the indictment, Binette is accused of obstructing the SEC's investigation of his trading activities in Safeco securities. In particular, Binette is accused of making several false statements to SEC investigators regarding whether he had spoken to anyone prior to engaging in trading of Safeco securities. Binette repeatedly denied speaking to anyone before trading, even though in fact his trading was based on the tip he received from Talbot. Binette also claimed that his trades were based on a dream he had in which a deceased relative told him that she was "safe."
In addition, the indictment alleges that in April 2008, Talbot, who was then employed by the Hartford Investment Management Company (HIMCO), determined, through confidential information obtained through the course of his employment, that the insurance company Safeco Corp. was a potential acquisition target of the Hartford Financial Services Group, Inc. (HIMCO's parent company). Talbot tipped his nephew, Binette, and the two set up a brokerage account in Binette's name to buy Safeco securities. Less than a week after Talbot and Binette bought Safeco common stock and call option contracts, the acquisition of Safeco by a third insurance company, Liberty Mutual, was announced. Talbot and Binette sold all of the Safeco securities for a profit of approximately $615,833.
On July 13, 2009, the Commission filed a civil injunctive complaint alleging Binette's and Talbot's insider trading in Safeco securities violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Talbot and Binette each consented to the entry of a judgment without admitting or denying the allegations in the SEC's complaint. On February 25, 2010 and July 23, 2010, the U.S. District Court for the District of Massachusetts entered judgments permanently enjoining Talbot and Binette, respectively, from committing or aiding and abetting future violations of the above provisions; and ordering them to pay disgorgement of ill-gotten gains, prejudgment interest thereon, and civil penalties, in amounts to be determined by the court upon the Commission's motion. Additional information may be found in Litigation Release No. 21133 (July 15, 2009).