LITIGATION RELEASE NO. 18314 / August 28, 2003
SECURITIES AND EXCHANGE COMMISSION V. TERRY L. KIRCH (United States District Court for the Northern District of Illinois, 02-C-7195).
Former Member of Software CEO Roundtable Found Liable for Insider Trading
On August 22, 2003, Judge Milton Shadur of the United States District Court for the Northern District of Illinois entered Final Judgment against Terry L. Kirch with respect to the Securities and Exchange Commission's ("SEC") Complaint against Kirch. On June 20, 2003, Judge Shadur granted the SEC's Motion for Summary Judgment against Kirch, finding the SEC entitled to judgment as a matter of law, and ordering Kirch pay the SEC the disgorgement sum of $45,687.50, plus prejudgment interest of $12,813.42, for a total payment of $58,500.92 as well as a civil penalty in the amount of $43,875.69. Kirch is the former President and CEO of Resource Information Management Systems.
The SEC's Complaint, which was filed on October 7, 2002, alleged that on or about October 1, 1999, Kirch attended a meeting in Westport, Connecticut of software executives from various companies, ("Software Executive Roundtable"), at which Kirch learned material, non-public information concerning ShowCase Corporation earnings. The SEC alleged that while in possession of this material, non-public information, Kirch sold 8,500 shares of ShowCase, avoiding losses of approximately $45,688. The SEC alleged that Kirch violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 by trading in the stock of ShowCase while in possession of material, non-public information.
On June 20, 2003, Judge Shadur granted the SEC's Motion for Summary Judgment against Kirch, finding the SEC entitled to judgment as a matter of law. Judge Shadur found that Kirch owed ShowCase's Chief Executive Officer and the other Executive Roundtable members an express duty to keep confidential all of the business information that Kirch learned at the October 1, 1999 Roundtable meeting. Judge Shadur held that a duty of loyalty and confidentiality was created by policy and expectations that were present in the Software Executive Roundtable relationships. Judge Shadur stated that Kirch's actions in trading on the nonpublic information, in violation of this duty, were "obviously motivated by greed." Judge Shadur held, therefore, that Kirch violated the securities laws by his improper sale of 8,500 shares of ShowCase on October 1, 1999.
On August 22, 2003, Judge Shadur entered Final Judgment in this case. Kirch was ordered to pay the SEC the disgorgement sum of $45,687.50, plus prejudgment interest of $12,813.42, for a total payment of $58,500.92. In addition, Kirch was ordered to pay a civil penalty in the amount of $43,875.69. In the Final Judgment, Kirch made certain undertakings. Specifically, in the Final Judgment, Kirch has given an undertaking: (1) that he will not violate the securities laws at any time in the future; (2) that he will have his attorneys review all future trades in stock of companies with which Kirch has any relationship to determine that such trades are in accordance with the federal securities laws; (3) that he will not seek or obtain reinstatement in the Software Executive Roundtable; and (4) that he will not appeal the Court's Order or Judgment. If Kirch violates any of these undertakings, the Final Judgment provides that the SEC has the right to seek additional relief against Kirch, including a civil injunction and additional civil penalties.