Defendants Agree to Pay Over $3.4 Million in Disgorgement and Civil Penalties
U.S. Securities and Exchange Commission
Litigation Release No. 18383 / October 1, 2003
Securities and Exchange Commission v. Gerhard Andlinger, Jeanne Andlinger, Sallie Donner, Suzanna Dailey and Louis B. Lloyd, Case No. 03-14288-CIV-Middlebrooks (S.D. Fla., filed October 1, 2003).
The Securities and Exchange Commission (Commission) announced that on October 1, 2003, it filed a settled insider trading action involving trading in the common stock of Massachusetts-based NetOptix Corp., now known as Corning NetOptix, Inc. (hereinafter, NetOptix). The Commission's complaint alleges that in January 2000, NetOptix's former CEO, Gerhard Andlinger, learned that Corning Inc. was interested in acquiring NetOptix, and that certain of his relatives (including his wife and two sisters-in-law) and the owner of a registered broker-dealer illegally obtained that information from him. The complaint alleges that after receiving that information, those individuals illegally purchased NetOptix stock. In settling the Commission's action, the defendants, without admitting or denying the allegations in the complaint, have agreed to injunctive relief, to pay disgorgement and civil penalties totaling over $3.4 million, and to the entry of an order barring Andlinger from serving as an officer or director of a public company for five years.
The Commission's complaint alleges that during the week of January 17, 2000, Andlinger learned that Corning was interested in acquiring NetOptix. According to the complaint, after learning of this information, Andlinger's wife Jeanne Andlinger, his sisters-in-law Sallie Donner and Suzanna Dailey, Louis B. Lloyd (the owner of a registered broker-dealer), and four other relatives or employees of the Andlingers, bought more than $2.8 million in NetOptix stock between January 21 and January 24, 2000.
According to the complaint, the purchase of these NetOptix shares came just one week after some of the defendants sold most or all of their NetOptix holdings (which they had purchased in 1998, 1999 or early 2000). The Commission's complaint alleges that Donner, Dailey and Lloyd sold their NetOptix stock after Andlinger expressed the opinion that NetOptix's stock was over-valued.
Corning publicly announced on February 14, 2000 that it would acquire NetOptix. Although only one of the traders sold their stock at that time, and most have continued to hold their stock (which is now Corning stock), the Commission's complaint alleges that the value of the NetOptix shares by Jeanne Andlinger, Donner, Dailey, Lloyd and others that they tipped increased by more than $1.8 million as a result of that announcement.
Andlinger, Jeanne Andlinger, Donner and Dailey, all of Vero Beach, Florida, and Lloyd, of New York, New York, have agreed to settle the charges against them, without admitting or denying the allegations contained in the Commission's complaint. Under the terms of the settlement, the defendants consented to the entry of a final judgment permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10-b5 thereunder. The judgment also orders Jeanne Andlinger, Donner, Dailey and Lloyd to disgorge approximately $1.6 million in profits and imputed profits they earned from their trading, plus prejudgment interest, and orders Andlinger to disgorge approximately $59,000 in profits earned by others on the basis of information he provided. The judgment also orders the defendants to pay a total of $1.8 million in civil money penalties. Finally, the judgment bars Andlinger from serving as an officer or director of a public company for a period of five years.
