SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16319 / September 30, 1999
Securities and Exchange Commission v. Robert A. Kargl, David K. Stenslie, and Monica M. O'Leary, U.S. District Court for the Eastern District of Wisconsin, Civil Action No. 99-C-1142
The Securities and Exchange Commission announced that it filed a complaint in the United States District Court for the Eastern District of Wisconsin on September 28, 1999 against Robert A. Kargl ("Kargl"), a resident of Greenfield, Wisconsin, and David K. Stenslie ("Stenslie") and Monica M. O'Leary ("O'Leary"), residents of Germantown, Wisconsin. The complaint alleges that Kargl, Stenslie and O'Leary violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder in connection with their purchase and/or tipping others to purchase the stock of Sullivan Dental Products, Inc. ("Sullivan Dental"), while they were in possession of material, non-public information regarding Sullivan Dental.
In its complaint, the Commission alleges that in July 1997, Sullivan Dental and Henry Schein were engaged in negotiations regarding a merger between the two companies. At that time, Kargl was the controller of Sullivan Dental, and Stenslie was the director of management information systems at Sullivan Dental. During the first two weeks of July 1997, Kargl and Stenslie were informed of the merger negotiations in the course of their job duties at Sullivan Dental, and both Kargl and Stenslie communicated material, non-public information about the impending merger to O'Leary. The Commission further alleges that shortly thereafter, Kargl purchased Sullivan Dental stock, and O'Leary purchased Sullivan Dental stock on Kargl's behalf with money that Kargl had given O'Leary for this purpose. In addition, Kargl communicated material, non-public information about the impending merger to a relative and two low level Sullivan Dental employees, who also purchased Sullivan Dental stock. Also in July of 1997, Stenslie communicated material, non-public information about the impending merger to a relative, who purchased Sullivan Dental stock. Further, O'Leary herself purchased Sullivan Dental stock and tipped a relative, who also purchased Sullivan Dental stock. On August 4, 1997, Sullivan Dental publicly announced that it had definitively agreed to a stock-for-stock merger with Henry Schein, and Sullivan Dental stock closed at $28.50 per share, an increase of $6.25 from its previous closing price. Kargl, Stenslie, O'Leary, and their tippees received approximately $38,073.75 in realized and unrealized trading profits from their purchases of Sullivan Dental stock.
Kargl, Stenslie and O'Leary have consented, without admitting or denying the allegations in the complaint, to the entry of a Final Judgment and Order of Permanent Injunction, Civil Penalties, and Other Equitable Relief ("Final Judgment"), which will enjoin Kargl, Stenslie and O'Leary from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. In addition, the Final Judgment will require Kargl, Stenslie and O'Leary to pay disgorgement, representing the realized and unrealized profits from their purchases and/or their tippees purchases of Sullivan Dental stock, as well as prejudgment interest thereon, and civil penalties under Section 21A of the Exchange Act. Specifically, the Final Judgment will require that: 1) Kargl pay disgorgement of $31,885.25, prejudgment interest thereon of $6,126.49, and civil penalties of $31,885.25; 2) Stenslie pay disgorgement of $2,162.50, prejudgment interest thereon of $415.51, and civil penalties of $2,162.50; and 3) O'Leary pay disgorgement of $4,026, prejudgment interest thereon of $773.56, and civil penalties of $4,026. This Final Judgment is subject to approval by the Court.
The Commission's investigation into the trading of Sullivan Dental stock in the days preceding the public announcement of the Sullivan Dental/Henry Schein merger is continuing.