UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Rel. No. 17680 / August 15, 2002
SEC Charges Timothy P. Horne, Chairman of Watts Industries, With Insider Trading Using Misappropriated Corporate Information
SEC v. Timothy P. Horne (United States District Court for the District of Massachusetts, C.A. No. 02 11634-WGY , filed August 15, 2002)
The Securities and Exchange Commission today filed a civil lawsuit against Timothy P. Horne, an Andover, Massachusetts executive who allegedly made more than $300,000 in illegal profits through insider trading using confidential information he misappropriated from his own company.
The complaint alleges that Timothy P. Horne, Chairman and CEO of Watts Industries of North Andover, Massachusetts, received a call in May 1999 from an investment banker inquiring whether Watts Industries would be interested in acquiring Central Sprinkler Corporation, indicating that an auction process was underway and Watts would need to move quickly if interested. According to the complaint, Horne said that Watts might be interested in acquiring Central Sprinkler and agreed to receive the confidentiality agreement Watts would need to execute to receive more detailed information about Central Sprinkler. The complaint alleges, however, that Horne did not inform the Watts board of this acquisition opportunity and instead began buying stock of Central Sprinkler in his personal brokerage account, spending over $500,000 to accumulate 30,000 shares over the next three business days. According to the complaint, Horne never informed anyone at Watts of his trading, which violated a Watts written policy prohibiting trading in any company's securities on the basis of nonpublic information. Shortly thereafter, when Tyco publicly announced its acquisition of Central Sprinkler, Horne sold his stock for a profit of $317,971.
In its complaint, the SEC charges Horne with securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, based on illegal insider trading. The complaint alleges that Horne committed securities fraud when he misappropriated material nonpublic information about Central Sprinkler from his own company, Watts, and made undisclosed, self-serving use of the information to trade for his personal profit, in breach of his fiduciary duty of loyalty to Watts. The Commission seeks a permanent injunction, disgorgement of illegal trading profits, prejudgment interest and civil penalties. In addition, the Commission seeks an order barring Horne from serving as an officer or director of any public company.
The Commission acknowledges the assistance of the National Association of Securities Dealers in the matter.