SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16261 \ August 26, 1999
SECURITIES AND EXCHANGE COMMISSION V. THOMAS R. ALLEN, U.S. District Court for the Northern District of Illinois, Civil Action No. 99 C 5086 (N.D. Ill. August 4, 1999)
On August 5, Judge Joan Gottschall of the U.S. District Court the Northern District of Illinois entered an order of permanent injunction, civil penalties and other equitable relief against Thomas R. Allen. On August 4, the Commission filed a complaint alleging that Allen sold Westell stock while he was in possession of material non-public information regarding Westell's failure to win the award of a substantial contract. The complaint further alleges that Allen's conduct violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Allen consented to the entry of the order without admitting or denying the allegations contained in the Commission's complaint. Allen, a California resident, is a former regional sales account manager of Aurora, Illinois based Westell Technologies, Inc. The order imposed the following relief: (1) an injunction against future violations of the antifraud provisions of the federal securities laws, (2) an order of disgorgement in the amount of $9,114.00, plus prejudgment interest of $2,132.67, and (3) a civil penalty of $9,114.00.
The complaint alleges that in the late summer of 1996, Westell was a finalist in a competitive bidding process to supply certain high-speed data transfer equipment to a consortium of buyers (Consortium). The contracts were substantial and could have greatly increased Westell's revenues. On the morning of Friday, October 4, 1996, Westell learned that the Consortium had chosen another company to supply the equipment. Soon after learning of the Consortium's decision, Allen sold 744 shares of Westell stock. After the close of the market on October 4, the Consortium publicly announced its selection. On Monday, October 7, the next day of trading, Westell's stock price dropped substantially and continued to fall in the following days. Allen thereby avoided a loss of $9,114.00 by selling his stock before the public announcement.