SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16243 \ August 4, 1999
SECURITIES AND EXCHANGE COMMISSION v. BRETT S. HENDERSON AND RICHARD F. RANDALL, United States District Court for the Northern District of California, Civil Action No. 99-3677 CRB
The Securities and Exchange Commission today announced the filing of a lawsuit alleging illegal insider trading by a former analyst for Morgan Stanley Dean Witter & Co. ("MSDW") and his long-time friend. The Commission filed its complaint in the Northern District of California on August 2, 1999 against Brett S. Henderson, 24, a resident of San Francisco and a former analyst in the Investment Banking/Corporate Finance Division of MSDW's Menlo Park office and against Richard F. Randall, 27, a school teacher who lives in Urbana, Ohio.
The Commission's complaint alleges that, beginning in September 1998 and ending in July 1999, Henderson repeatedly tipped Randall with material, non-public information regarding MSDW clients so that he and Randall could trade on that information through Randall's brokerage account. Henderson and Randall generated profits of approximately $54,000 by their illegal trading.
The complaint further alleges that prior to Henderson's starting work at MSDW in September 1998, he and Randall agreed that Henderson would provide Randall with information he learned from his position at MSDW, and Randall would trade on that information in his online brokerage account. Henderson and Randall also agreed to split the profits from their illegal trading -- 60% to Randall, who provided the capital, and 40% to Henderson, who provided the information. Within days of Henderson's starting work at MSDW, he began to provide Randall with inside information relating to MSDW clients and to instruct Randall on how to trade in the stock of those companies. Henderson typically used pay phones when he called Randall in order to avoid detection. In some instances, Henderson directly made the trades in Randall's brokerage account by representing that he was Randall and using Randall's user identification number and password.
According to the complaint, Henderson and Randall illegally traded in the stock or options of Broadcom Corp., Netscape Communications Corp., I2 Technologies, Inc., Manugistics Group, Inc., Xylan Corp., Broadcast.com Inc., Abacus Direct Corporation, Sequent Computer Systems, Inc., and Egghead.com, Inc.
The U.S. Attorney's Office filed a parallel criminal complaint charging Henderson and Randall with conspiracy to engage in insider trading. If convicted, Henderson and Randall each face a maximum sentence of five years imprisonment, and fines of up to $250,000.
In its complaint, the Commission seeks disgorgement of the profits of Henderson's and Randall's illegal insider trading, civil penalties for insider trading, and orders from the court permanently enjoining Henderson and Randall from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder.http://www.sec.gov/litigation/litreleases/lr16243.htm