SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16972 / April 23, 2001
SECURITIES AND EXCHANGE COMMISSION v. Robert K. Gasper and James D. Fairfield (United States District Court for the District of Maine, C.A. No. 01-81-B (filed April 23, 2001)
SEC CHARGES TWO MORE CENTRAL MAINE POWER EMPLOYEES WITH INSIDER TRADING THROUGH 401(k) PLAN
The Securities and Exchange Commission today announced the filing of an injunctive action against Robert K. Gasper and James D. Fairfield for illegal insider trading in the common stock of CMP Group, Inc. The complaint alleges that Gasper and Fairfield, former employees of Central Maine Power Company, a subsidiary of CMP, invested all of the assets in their 401(k) plans in a CMP stock fund on June 14, 1999. The next day, CMP publicly announced its plan to merge with Energy East Corporation and the price of CMP stock rose approximately 28%. Gasper, who invested $336,528, made an illegal profit of $88,604 and Fairfield, who invested $304,556, made an illegal profit of $80,186. Gasper, a resident of Manchester Maine, was the Manager of Interconnection Agreements Administration for Central Maine. Fairfield, a resident of West Gardiner, Maine, was the Manager of Legislative Affairs for Central Maine. Gasper and Fairfield have both agreed to settle the action without admitting or denying the Commission's allegations.
The Commission's complaint alleges that Gasper and Fairfield were in possession of nonpublic information about the merger at the time of their trades. According to the complaint, Gasper first learned about the planned merger in late April or early May 1999 when Energy East was conducting due diligence. Gasper was asked to retrieve information for a "top secret" project and, by his own admission, correctly concluded that someone was "looking at the company." On the day of Gasper's trade, Gasper's supervisor scheduled a highly unusual meeting for 4:01 p.m. After learning of the meeting, Gasper concluded that a buyout announcement was imminent and executed his trade.
The complaint also alleges that Gasper tipped Fairfield. On the day of their trades, Fairfield telephoned Gasper shortly before the close of the market. Gasper informed Fairfield of the unusual 4:01 p.m. meeting, stated that the acquisition of CMP might be announced, and told Fairfield that he was going to transfer all of his 401(k) assets to the CMP stock fund. Minutes after the conversation, Fairfield executed his trade. The complaint also alleges that during the week prior to the merger announcement, Fairfield's supervisor had cautioned Fairfield about trading in CMP stock.
Simultaneously with the filing of the complaint, Gasper and Fairfield, without admitting or denying the Commission's allegations, consented to the entry of a judgment permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Gasper and Fairfield also consented to an entry of a judgment requiring disgorgement of their trading profits. Gasper agreed to disgorge $168,790, representing his profits ($88,604) and his tippee Fairfield's profits ($80,186) plus prejudgment interest of $17,109. Because of Gasper's financial inability to pay, all but $65,000 of the total amount was waived. Fairfield agreed to disgorge $80,186,representing his profits plus prejudgment interest of $8,128. Because of Fairfield's financial inability to pay, all but $30,000 of the total amount was waived.
This is the second insider trading action brought against Central Maine employees arising from the CMP's merger with Energy East. See SEC v. David M. Brooks, Litigation Release No. 16893/February 8, 2000.http://www.sec.gov/litigation/litreleases/lr16972.htm