SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17005 / May 16, 2001
Securities and Exchange Commission v. W. Blake Brock, Kathy O. Brock, and Kenneth L. Unker, No. 1:01CV01067 (D.D.C.) (Judge Kollar-Kotelly)
COMMISSION FILES SETTLED CASE ALLEGING INSIDER TRADING IN THE SECURITIES OF CORRECTIONS CORPORATION OF AMERICA
Defendants Agree to Pay More Than $250,000 in Settlements
On May 16, 2001, the Commission filed a settled insider trading case in the United States District Court for the District of Columbia against W. Blake Brock, his wife Kathy O. Brock, and Kenneth L. Unker, a friend and business associate of Kathy Brock. The Commission's complaint alleges that in October 1997, when he was controller of Corrections Corporation of America, Inc. ("CCA"), a Nashville company that developed prisons and similar correctional facilities, Blake Brock learned that CCA's quarterly earnings would fall short of expectations. According to the complaint, Blake Brock then tipped his wife about the earnings shortfall and directed her to buy CCA put options in anticipation of the company's negative earnings release. The complaint further alleges that the Brocks tipped Blake Brock's father, who then sold his existing CCA call options and bought CCA put options, and that Kathy Brock tipped Unker, who then sold all of his CCA stock, bought CCA put options, and tipped two friends, both of whom promptly bought CCA put options and one of whom sold short CCA stock. After CCA announced its earnings shortfall on October 23, 1997, its stock price immediately fell by approximately 25%. In all, the defendants collectively are alleged to have realized trading profits and avoided trading losses totaling more than $110,000.
Without admitting or denying the Commission's allegations, the defendants consented to entry of final judgments that would permanently enjoin all of them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and would also permanently enjoin Unker from violating Section 17(a) of the Securities Act of 1933. In addition, Blake and Kathy Brock have agreed to disgorge $34,450 in trading profits and avoided losses (including prejudgment interest) and to pay a $57,712 civil penalty, and Kenneth Unker has agreed to disgorge $127,008 in trading profits and avoided losses (including prejudgment interest) and to pay a $31,343 civil penalty.
The Commission acknowledges the assistance of the American Stock Exchange in this matter.