Litigation Release No. 17176 / October 10, 2001
SECURITIES AND EXCHANGE COMMISSION v. BRETT S. HENDERSON AND RICHARD F. RANDALL, United States District Court for the Northern District of California, Civil Action No. 99-3677 PJH
The Securities and Exchange Commission today announced that Final Judgments of Permanent Injunctions and Other Equitable Relief were entered in November 2000 against defendant Brett S. Henderson and Richard F. Randall by Judge Hamilton of the United States District Court of the Northern District of California pursuant to Consents executed by Henderson and Randall. Mr. Henderson is a resident of San Francisco and a former analyst in the Investment Banking/Corporate Finance Division of the Menlo Park office of Morgan Stanley Dean Witter (MSDW), while Mr. Randall is a school teacher who lives in Urbana, Ohio.
According to the Final Judgments, Henderson and Randall are each permanently enjoined from directly or indirectly violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Henderson and Randall were each ordered to disgorge the amount of $54,109.45, plus prejudgment interest, as representing their ill-gotten gains by trading on material, non-public information regarding MSDW clients. In the case of Mr. Henderson, the disgorgement and prejudgment interest amounts were waived in their entirety based upon his demonstrated inability to pay. In the case of Mr. Randall, the disgorgement amount in excess of $37,000 and all of the prejudgment interest amount were waived in light of his demonstrated inability to pay.
The Commission's complaint alleged that, beginning in September 1998 and ending in July 1999, Henderson repeatedly tipped Randall with material, non-public information regarding MSDW clients so that he and Randall could trade on that information through Randall's brokerage account. Henderson and Randall generated profits of approximately $54,000 by their illegal trading.
The complaint further alleged that prior to Henderson's starting work at MSDW in September 1998, he and Randall agreed that Henderson would provide Randall with information he learned from his position at MSDW, and Randall would trade on that information in his online brokerage account. Henderson and Randall also agreed to split the profits from their illegal trading -- 60% to Randall, who provided the capital, and 40% to Henderson, who provided the information. Within days of Henderson's starting work at MSDW, he began to provide Randall with inside information relating to MSDW clients and to instruct Randall on how to trade in the stock of those companies. Henderson typically used pay phones when he called Randall in order to avoid detection. In some instances, Henderson directly made the trades in Randall's brokerage account by representing that he was Randall and using Randall's user identification number and password.
According to the complaint, Henderson and Randall illegally traded in the stock or options of Broadcom Corp., Netscape Communications Corp., I2 Technologies, Inc., Manugistics Group, Inc., Xylan Corp., Broadcast.com Inc., Abacus Direct Corporation, Sequent Computer Systems, Inc., and Egghead.com, Inc.
The U.S. Attorney's Office filed a parallel criminal complaint charging Henderson and Randall with conspiracy to engage in insider trading. Henderson subsequently plead guilty, and was sentenced to home detention. Randall agreed to a diversion program, while forfeiting the proceeds in the brokerage account used for the trading. In paying the $37,000 disgorgement order, Randall is being credited with the amounts forfeited from the brokerage account.
In his Consent, Henderson admitted all allegations in the Commission's complaint that were consistent with his guilty plea in the parallel criminal proceeding. In his consent, Randall did not admit or deny the allegations in the Commission's complaint.