SEC Charges Husband with Insider Trading Ahead of Announcements by Wife's Employer

Litigation Release No. 24340 / November 8, 2018

Securities and Exchange Commission v. James E. Hengen, No. 18-cv-03135 (D. Minn. filed Nov. 8, 2018)

The Securities and Exchange Commission today charged James E. Hengen with insider trading based on material, nonpublic information that he misappropriated from his wife, a human resources executive at a healthcare company who worked on corporate acquisitions.

The SEC alleges that Hengen, whose wife worked for a subsidiary of UnitedHealth Group, Inc., misappropriated material, nonpublic information concerning UnitedHealth's pending acquisitions of two companies, USMD Holdings, Inc. and Surgical Care Affiliates, Inc. According to the complaint, Hengen learned of the pending acquisition of USMD in June 2016 when he overheard one of his wife's phone calls while she was working from home. In breach of his duty to his wife, Hengen then purchased USMD stock based on that information and tipped four other individuals, who also purchased the stock. After the acquisition was announced in August 2016, the price of USMD stock increased, and Hengen sold his stock, realizing profits of $32,315. His tippees, who also sold their stock, realized profits of $8,340. Six months later, Hengen again misappropriated information from his wife, this time concerning UnitedHealth's pending acquisition of Surgical Care, and purchased stock in that company. After the acquisition announcement in January 2017, the price of Surgical Care stock increased, and Hengen sold his stock, realizing $31,489 in illicit profits.

The SEC's complaint, filed in federal district court in the District of Minnesota, charges Hengen with violations of the antifraud provisions of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. Without admitting or denying the allegations in the SEC's complaint, Hengen consented to the entry of a final judgment that permanently enjoins him from future violations, and orders him to pay disgorgement of $63,804, prejudgment interest of $3,865, and a civil penalty of $72,144.

The SEC's investigation was conducted by David T. Frisof and Darren E. Long, and supervised by Brian O. Quinn and Carolyn M. Welshhans. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.