U.S. Securities and Exchange Commission
Litigation Rel. No. 18080 / April 10, 2003
SEC Charges Former Director of Massachusetts Bank and His Friend in Settled Insider Trading Case
SEC v. Geoffrey E. Fitts and William D. Fabri, Sr. (United States District Court for the District of Massachusetts, C.A. No. 03-CV-10658 (DPW), filed April 10, 2003)
The Commission today filed a settled civil fraud action against Geoffrey E. Fitts of Framingham, Massachusetts, and William D. Fabri, Sr., of Ipswich, Massachusetts, alleging that they engaged in illegal insider trading in the stock of MetroWest Bank, formerly a publicly-traded Massachusetts bank. According to the Commission's complaint, in May 2001, Fitts, then a director of MetroWest, tipped his friend Fabri that MetroWest was going to be acquired. Fabri thereafter purchased MetroWest stock prior to the public announcement in June 2001 that Banknorth Group, Inc. would acquire MetroWest. Without admitting or denying the Commission's allegations, Fitts and Fabri consented to the entry of final judgments permanently enjoining them from violating the antifraud provisions of the federal securities laws. Fitts also agreed to pay $14,800 in civil penalties and to be barred from serving as an officer or director of any publicly-traded company. Fabri consented to pay a total of approximately $25,000 in disgorgement, prejudgment interest, and civil penalties.
The Commission's complaint alleges that Fitts learned at a MetroWest board of directors meeting on May 16, 2001 of MetroWest's plans to be acquired. According to the Commission's complaint, Fitts passed this information on to Fabri during a telephone call on May 21. That day, Fabri wrote a $20,000 check from his bank account to his brokerage account to finance the purchase of MetroWest shares. The Commission's complaint alleges that Fitts and Fabri then spent much of the next day together, during which time they further discussed the impending takeover of MetroWest. On May 23, Fabri purchased 3,000 shares of MetroWest. Between May 21 and May 25, Fabri also caused another individual to purchase 325 shares of MetroWest. On June 11, Banknorth announced its plans to acquire MetroWest, causing MetroWest's stock price to rise. According to the Commission's complaint, through his insider trading, Fabri profited by $10,710, and the other individual profited by $1,130.
The Commission's complaint alleges that Fitts breached his fiduciary duty to MetroWest and its shareholders by disclosing to Fabri the material, nonpublic information concerning MetroWest's acquisition, and that Fabri profited from buying MetroWest stock, and caused another person to purchase the stock, while Fabri was in possession of the material, nonpublic information. In its complaint, the Commission charged Fitts and Fabri with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, based on their illegal insider trading. Fitts and Fabri have each consented to entry of final judgments enjoining them fromviolating these antifraud provisions. In addition, Fitts has consented to pay a civil penalty in an amount equal to 1.25 times the profits of Fabri and the other trader (a penalty of $14,800), and to be permanently barred from serving as an officer or director of any publicly-traded company. Fabri also agreed to disgorge his and the other trader's profits (a total of $11,840), plus prejudgment interest of $1,278.65 thereon, and an additional civil penalty of $11,840 (for total payments by Fabri of $24,958.65).
The Commission acknowledges the assistance of the NASD Regulation, Inc. in the matter.