U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19929 / November 30, 2006
SEC v. Robert J. Gallivan, Civil Action No. 06-CV-2632-JAH (NLS) (S.D.Ca.)
SEC Charges Robert J. Gallivan With Insider Trading in the Securities of Five California Community Banks
Gallivan Agrees to Pay $338,000 to Settle Charges
The Securities and Exchange Commission ("Commission") today filed an insider trading complaint against Robert J. Gallivan ("Gallivan") of Cardiff-by-the-Sea, California, alleging that over a 17-month period during 2002 and 2003, Gallivan violated the federal securities laws by serially purchasing, and/or recommending that friends and relatives purchase, the securities of five California community banks after learning material, nonpublic information regarding the proposed acquisition of each of these banks.
The Commission's complaint alleges that:
- Prior to the public announcement of proposed mergers involving Valencia Bank & Trust (announced August 6, 2002), Monterey Bay Bank (announced April 8, 2003), Sun Country Bank (announced April 30, 2003), Mid Valley Bank (announced September 16, 2003) and Harbor National Bank (announced December 1, 2003), Gallivan obtained nonpublic information that each of the five banks was engaged in negotiations to be acquired.
- Gallivan obtained the merger information concerning Valencia, Monterey and Mid Valley through his position as a bank-owned life insurance sales representative with a compensation and benefits consulting firm that had sold insurance to these banks. Gallivan learned of the Valencia and Monterey mergers when consulted by the merging banks, and he learned of the Mid Valley merger when told by his employer that Mid Valley had made a request for merger-related benefits calculations. As to Sun Country and Harbor, Gallivan obtained the information in his capacity as a longtime friend and confidential adviser on California community banks to a prominent private investor negotiating to buy these banks. Gallivan had a duty to keep all of the merger information confidential.
- On the basis of this material, nonpublic information, Gallivan bought Valencia, Monterey and Sun Country stock, in breach of his duty to maintain the confidentiality of the information. Gallivan personally profited by a total of $51,963 from his unlawful trades.
- Gallivan also unlawfully recommended that friends and relatives purchase stock in Valencia, Monterey, Mid Valley and Harbor. Gallivan's friends and relatives collectively profited by $54,748 from their trades in these bank stocks.
Without admitting or denying the allegations in the complaint, Gallivan has agreed to pay a total of $338,000, consisting of: (1) $106,711 in disgorgement of illegal profits from his trading and that of his friends and relatives, (2) $17,867 in prejudgment interest, and (3) a civil penalty of $213,422, equal to two times the total illicit profits. Finally, he also has consented to the entry of a Final Judgment that permanently enjoins him from further violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, which are antifraud provisions of the federal securities laws. The settlement is subject to approval by the United States District Court for the Southern District of California.
In a separate matter, the United States Attorney's Office for the Southern District of California today filed criminal charges against Gallivan with respect to his trading and/or recommending that others trade in the securities of four of the community banks. Gallivan entered a guilty plea to four counts of securities fraud regarding purchases made in Valencia, Monterey, Sun Country and Harbor stock.
The Commission's investigation that led to these actions was conducted in cooperation with the United States Attorney's Office for the Southern District of California and the Federal Bureau of Investigation, which conducted their own separate, parallel investigation. The Commission also acknowledges the assistance provided by NASD Regulation Inc. in connection with this matter.