Litigation Release No. 19992 / February 7, 2007

Securities and Exchange Commission v. Donald A. Erickson, Civil Action No. 3-07-CV-0254-N, United States District Court for the Northern District of Texas (Dallas Division)

SEC Charges Audit Committee Chairman with Insider Trading in Advance of Announcement of Merger Between Magnum Hunter Resources, Inc. and Cimarex Energy Company

On February 6, 2007, the Securities and Exchange Commission filed an insider trading action in United States District Court for the Northern District of Texas against Donald A. Erickson, former audit committee chairman and a former director of Magnum Hunter Resources, Inc. (MHR). The Commission alleges that Erickson engaged in unlawful insider trading in the securities of MHR ahead of the January 26, 2005 announcement of merger between MHR and Cimarex Energy Company (Cimarex).

In its complaint, the Commission alleges that in late December 2004, Donald A. Erickson, while serving as audit committee chairman and a director of MHR, purchased MHR call options during the time MHR was exploring a possible merger or sale of the company. The complaint alleges that Erickson was briefed regularly on the status of negotiations and participated in key decisions regarding the Cimarex deal. The complaint also alleges that in mid-January 2005-just two trading days before the public announcement of the merger, and one day after he attended a board meeting addressing the status of negotiations with Cimarex-Erickson exercised his call options and acquired 30,000 shares of MHR stock. According to the Commission, Erickson purchased and exercised the options based on material, nonpublic information about MHR's merger negotiations and, ultimately, the Cimarex deal.

Further, the Commission alleges that Erickson failed to report to the Commission his purchases of MHR call options, a requirement for corporate insiders. In addition, the Commission alleges that Erickson was late in disclosing to the Commission the exercise of his options, and further alleges that his ultimate disclosure was materially false-indicating, incorrectly, that he had exercised the options after the merger announcement.

The Commission alleges in its complaint that Erickson violated Sections 10(b) and 16(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 16a-3(a), and 16a-3(g)(1) thereunder. The Commission seeks against Erickson a permanent injunction, disgorgement plus prejudgment interest, civil money penalties, and an officer and director bar.