U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17983 / February 13, 2003
SECURITIES AND EXCHANGE COMMISSION v. KENNETH W. MELLERT AND ROMAN D. MAYER, United States District Court for the Northern District of California, Civil Action No. C 03-0619 MHP
SEC CHARGES FORMER PEOPLESOFT SALES DIRECTOR, FRIEND WITH INSIDER TRADING
The Securities and Exchange Commission ("Commission") today charged a former PeopleSoft, Inc., sales director and his friend with using inside information to buy PeopleSoft securities hours before the company announced its quarterly results, allowing them to net nearly $220,000 in illegal trading profits. Named in the Commission's complaint were Kenneth W. Mellert of Naperville, Illinois, at the time a Regional Sales Director in PeopleSoft's Chicago-area office, and Roman D. Mayer of Atlanta, Georgia. Simultaneous with the filing of the Commission's complaint, and without admitting or denying the allegations, Mayer consented to a court order enjoining him from future violations of the securities laws and ordering him to pay disgorgement and penalties. The Commission's litigation against Mellert is ongoing.
The complaint alleges that on April 1, 2002, Mellert learned that PeopleSoft, a San Francisco Bay Area software company, would be preannouncing an earnings shortfall at the end of the day. According to the complaint, Mellert called Mayer, and the two agreed that Mayer would purchase $16,000 in PeopleSoft put options - securities that would rise in value if the Company's stock price fell. Immediately after Mellert's phone call, Mayer called his broker and purchased the options.
Following the close of the market on April 1, PeopleSoft issued a press release announcing that its revenue for the quarter would fall short of analyst expectations. The press release caused the company's stock price to plunge by 33% the next day. Several days later, Mayer sold the put options, netting a profit of $218,173. According to the Commission's complaint, Mayer kept sufficient funds to pay taxes on his trading proceeds, and split the remaining funds with Mellert, paying him approximately $59,000.
The Commission's action charges Mellert and Mayer with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks injunctive relief, disgorgement, and civil monetary penalties. The Commission has accepted Mayer's offer of settlement in which he consents, without admitting or denying the allegations of the complaint, to an injunction against future violations of these provisions, and agrees to pay approximately $161,000 in disgorgement and prejudgment interest and approximately $109,000 in penalties.