U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16872 / January 29, 2001
Securities and Exchange Commission v. Keith J. Kim, Douglas K. Park, and William I. Park, 01 Civ. 0451 (CRB) (N.D. Cal. filed Jan. 29, 2001).
COMMISSION CHARGES TWO VENTURE CAPITALISTS, AND THE BROTHER OF ONE OF THEM, WITH INSIDER TRADING
Information Misappropriated at a Confidential Young Presidents' Organization Meeting
The Commission today filed a complaint in the United States District Court for the Northern District of California against Keith Kim and Douglas Park, both officers of Brainrush, Inc., an Oakland-based venture capital firm, and William Park, Douglas Park's brother, for insider trading in Meridian Data, Inc. ("Meridian") common stock prior to the May 11, 1999 public announcement that Quantum Corporation ("Quantum") would acquire Meridian. The Commission seeks injunctive relief, disgorgement of profits totaling at least $1,453,301, penalties, and prejudgment interest.
According to the complaint, Kim and the former Chief Executive Officer of Meridian were members of the Young Presidents' Organization ("YPO"), an international organization comprised of company presidents under the age of fifty, whose members meet in small groups, or "forums," to discuss confidential personal and business matters with their peers. In March 1999, Meridian's then-CEO and other YPO members (including Kim) were scheduled to attend a retreat together in Snowmass, Colorado. While on board a private plane en route to the retreat, the YPO forum's moderator announced that Meridian's CEO could not attend the retreat because he was in merger negotiations with Quantum. According to the complaint, Kim misappropriated this material nonpublic information despite the fact that the core values of the YPO emphasize a relationship of trust and confidentiality. The complaint alleges that Kim thereafter purchased Meridian stock in advance of the public announcement of Meridian's merger with Quantum and reaped profits of at least $832,877 as a result of his illegal trading.
The complaint also charges that Kim tipped his friend and business associate, Douglas Park, concerning merger discussions between Meridian and Quantum, and that Douglas Park thereafter traded while in possession of the material nonpublic information that Kim misappropriated through his membership in the YPO. According to the complaint, Douglas Park made profits of at least $200,885 as a result of his illegal trading. The complaint further alleges that Douglas Park, in turn, tipped his brother William Park, who also purchased Meridian in advance of the merger transaction with Quantum and made profits of at least $361,000 as a result of his illegal trading. Furthermore, the complaint alleges that Kim caused his brother, his brother-in-law, and a friend and business associate to purchase Meridian in advance of the merger transaction with Quantum, and that these three men collectively made profits of at least $58,539 as a result of their trading.
In addition, the complaint charges that Kim's purchases of Meridian common stock caused him to acquire more than five percent of the security, but that Kim did not file with the SEC the statement required by Section 13(d) of the Securities Exchange Act of 1934 ("Exchange Act").
The Commission alleges that Kim, Douglas Park, and William Park violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and that Kim further violated Section 13(d) of the Exchange Act and Rule 13d-1 thereunder. In its action, the Commission is seeking a permanent injunction, disgorgement, prejudgment interest, and civil penalties from each of the defendants for their conduct in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and, in addition, a permanent injunction and civil penalties from Kim for his conduct in violation of Section 13(d) of the Exchange Act and Rule 13d-1 thereunder.
Also today, the United States Attorney for the Northern District of California announced the filing of a criminal complaint against Kim for violations of the federal securities laws and Kim's arrest by the FBI.
The Commission acknowledges the assistance of NASD Regulation, Inc. in the investigation of this matter.