SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16188 / June 15, 1999
SECURITIES AND EXCHANGE COMMISSION V. GORAN HEDEN ET AL., Civil Action No. 99 Civ. 1418 (S.D.N.Y.) (SAS)
SEC CHARGES FORMER PRICEWATERHOUSECOOPERS MANAGER FOR TIPPING FRIENDS ABOUT ACQUISITION OF PINKERTON’S, INC.
On June 15, 1999, the U.S. Securities and Exchange Commission filed an amended complaint in SEC v. Hedén et al., an insider trading case pending before U.S. District Judge Shira Scheindlin in the Southern District of New York, to add David Drescher as a defendant. The amended complaint alleges that Drescher, a former manager at PricewaterhouseCoopers’ New York office, provided material, nonpublic information to two Swedish friends about the imminent acquisition of Pinkerton’s, Inc., a California based company specializing in security services and products, by Securitas AB. At the time of his tips, Drescher was working on the PricewaterhouseCoopers team advising Securitas, a Swedish security services firm, in connection with the deal. On February 22, 1999, Securitas and Pinkerton announced that Securitas intended to acquire Pinkerton through a cash tender offer. The complaint alleges that Drescher and the other defendants who traded violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The SEC is seeking injunctive relief, disgorgement, and civil penalties against all defendants.
The complaint alleges that in e-mail messages, face to face conversations in Stockholm, and at least one eleventh hour telephone call, Drescher provided two college friends in Sweden with information that enabled them to determine the identity of the acquiror, the target, and the date of the announcement. The complaint also alleges that on Friday, February 19, 1999, the last trading day before the public announcement, Drescher’s friends purchased Pinkerton common stock. The complaint further alleges that one of these friends tipped at least two other Swedish defendants who purchased Pinkerton stock on February 19, one of whom, Göran Hedén, a Stockholm stockbroker, tipped at least one other Swedish defendant who also bought Pinkerton shares before the announcement.
In all, the complaint alleges that the trading defendants purchased a total of 14,400 shares of Pinkerton common stock on February 19, 1999 at a cost of approximately $17 per share -- defendant Heden purchased 10,000 shares, and the other four trading defendants purchased a total of 4,400 shares. On the morning of the next trading day, Monday, February 22, 1999, Securitas and Pinkerton announced Securitas’ plans to acquire Pinkerton through a $29 per share cash tender offer. Pinkerton’s stock price rose 69% to close at $28.56 that day. The trading defendants sold their entire Pinkerton holdings that day.
On May 21, 1999, Judge Scheindlin issued a preliminary injunction continuing an asset freeze of the majority of the proceeds from the defendants’ sales of Pinkerton stock. The preliminary injunction froze over $373,000 of sales proceeds, including approximately $175,000 in allegedly unlawful profits.
The SEC wishes to acknowledge the assistance of the New York Stock Exchange and the Swedish securities regulator, Finansinspektionen, in connection with this case. http://www.sec.gov/litigation/litreleases/lr16188.htm