U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22965 / April 3, 2014
Securities and Exchange Commission v. Walter D. Wagner and Alexander J. Osborn, Civil Action No. 8:14-cv-01036 (D. Md.)
SEC Charges Two Friends with Insider Trading Ahead of Impending Acquisition Announcement
The Securities and Exchange Commission announced that it charged two friends with insider trading on confidential information from an investment banker about the impending acquisition of The Shaw Group Inc. ("Shaw").
The SEC alleges that Walter D. Wagner of Rockville, Maryland, and Alexander J. Osborn of Alexandria, Virginia realized nearly $1 million in combined profits by trading on material, nonpublic information concerning the impending acquisition of Shaw by Chicago Bridge and Iron Company. Wagner was tipped by his longtime friend and college classmate John W. Femenia, who worked at a firm that was considering whether to participate in financing the transaction. Wagner then tipped his friend Osborn with the inside information. Both Wagner and Osborn traded heavily in Shaw securities ahead of the July 30, 2012 announcement of the acquisition, after which Shaw's closing stock price jumped approximately 55 percent from the previous day.
Wagner has agreed to settle with the SEC's charges by disgorging his ill-gotten gains plus interest, with any additional financial penalty to be determined by the court at a later date. In a parallel action, the U.S. Attorney's Office for the Western District of North Carolina announced criminal charges against Wagner.
According to the SEC's complaint filed in federal court in Greenbelt, Maryland, Femenia collected nonpublic details about the acquisition while at work and communicated them to Wagner via text messages and phone calls in violation of the duty he owed his firm to keep the information confidential. Wagner knew Femenia was employed in investment banking at Wells Fargo Securities. Wagner in turn tipped Osborn, who knew that Wagner's source was employed in the finance industry. Wagner and Osborn used the nonpublic information to obtain illegal trading profits of approximately $517,784 and $439,830 respectively.
The SEC's complaint charges Wagner and Osborn with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the financial sanctions, Wagner has consented to the entry of a judgment permanently enjoining him from violations of Section 10(b) and Rule 10b-5.The SEC's investigation was conducted by Monifa F. Wright and supervised by Matthew F. McNamara in the Atlanta Regional Office. The SEC's litigation is being handled by Paul T. Kim. The SEC appreciates the assistance of the U.S. Attorney's Office for the Western District of North Carolina, Federal Bureau of Investigation, Financial Industry Regulatory Authority, and Options Regulatory Surveillance Authority.