SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17124 / September 10, 2001
SECURITIES AND EXCHANGE COMMISSION v. HARRY PARKER DAILY, JAMES FRANCIS HEALEY, PAUL MICHAEL HEALEY, and ROBERT GEORGE VAN HOECKE, Civil Action No. 01 CV 8432 (TPG)(S.D.N.Y.)(filed September 10, 2001)
SEC SUES FOUR PERSONS, INCLUDING TWO FORMER MAPCO EMPLOYEES, FOR INSIDER TRADING PRIOR TO THE WILLIAMS COMPANIES' ACQUISITION OF MAPCO, INC. SETTLING DEFENDANTS PAY OVER $107,000 IN DISGORGEMENT AND PENALTIES
On September 10, 2001, the Securities and Exchange Commission filed an injunctive action in the United States District Court for the Southern District of New York, alleging that Harry Daily, James Healey, Paul Healey, and Robert Van Hoecke engaged in illegal insider trading prior to the November 24, 1997 public announcement that Mapco Incorporated would be acquired by The Williams Companies in a deal worth approximately $3.46 billion. The Commission's complaint describes three insider trading schemes involving, among others, two former Mapco employees. In a separate complaint also filed on September 10, 2001, the Commission alleged that four other persons also engaged in insider trading. SEC v. Patrick Joseph Danaher, et al., Civil Action No. 01 CV 8431 (TPG)(S.D.N.Y.); Litigation Release No. 17125 (filed September 10, 2001). All told, the insider trading schemes described in the Commission's two complaints resulted in the investment of over $325,000 in Mapco securities and profits of $134,208.50.
The Commission's complaint in this action specifically alleges that Harry Daily, then a vice-president of marketing at Mapco, learned of the pending acquisition ten days prior to the public announcement. Several days later, despite the fact that his supervisor expressly forbade him to buy Mapco securities, Daily directed that the entire unrestricted balance of his company profit-sharing and retirement plan be invested in units of Mapco stock. Daily realized profits of $11,985.15 as a result of his purchase.
In a second insider trading scheme, James Healey, a vice-president of distribution and transportation in Mapco's Houston subsidiary, also learned of the pending acquisition. The complaint alleges that even after his supervisor confirmed that the information was confidential, James Healey tipped his brother, Paul Healey, a Las Vegas-based CPA. In response, Paul Healey opened a new brokerage account the next morning and purchased 1,500 shares of Mapco stock. After the announcement, Paul Healey realized a profit of $10,568.30. James Healey also illegally tipped his aunt, prompting her to purchase 350 Mapco shares, resulting in a profit to her of $3,228.13.
The complaint also alleges a third insider trading scheme in which a consultant to Mapco, Robert Van Hoecke, learned of the imminent acquisition while visiting Mapco's premises during the week before the announcement. Before returning to his home state, Van Hoecke called to open a new account and purchased Mapco call options, which he sold after the public announcement, realizing a profit of $17,531.92.
Without admitting or denying the allegations in the Commission's complaint, each of the defendants has agreed to settle with the Commission by consenting to the entry of an order enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The settlements also call for the defendants to pay disgorgement, prejudgment interest and penalties totaling $107,098.08, as follows: (1) Daily has consented to pay $23,969.40, representing disgorgement of $11,895.15, prejudgment interest, and a one-time civil penalty of $11,895.15; (2) James Healey has consented to pay a total of $18,045.05, representing disgorgement of $3,228.13 in profits made by his aunt, plus prejudgment interest, a one-time civil penalty of $3,228.13 based on his aunt's profits, and a one-time civil penalty of $10,568.30 based on the profits of his brother; (3) Paul Healey has consented to pay a total of $24,477.51, representing disgorgement of his profits of $10,568.30, plus prejudgment interest, and a one-time civil penalty of $10,568.30; and (4) Van Hoecke has consented to pay $40,606.12, representing disgorgement of his profits of $17,531.92, plus prejudgment interest in the amount of $5,542.28, plus a one-time civil penalty of $17,531.92.