U.S. Securities and Exchange Commission
Litigation Release No. 18407 / October 9, 2003
Securities and Exchange Commission v. Stephen A. White, William D. White, III, Ernest J. Bieling and Robert W. Hughes, Civil Action No. 3:03-CV-2351-G (USDC / N.D.Tex.).
SEC Charges Four Individuals with Insider Trading in Advance of the Announcement of Univision Communications Corporation's Agreement to Acquire Hispanic Broadcasting Corporation
On October 9, 2003, the U.S. Securities and Exchange Commission (SEC) filed an insider trading case, in the United States District Court for the Northern District of Texas, against a Dallas stock broker, the stock broker's brother, a former employee of Univision Communications Corporation (Univision), and a director of Hispanic Broadcasting Corporation (Hispanic Broadcasting). The SEC charged each of those individuals with engaging in insider trading in the stock of Hispanic Broadcasting, ahead of the June 12, 2002 announcement that Univision would acquire Hispanic Broadcasting in an all-stock transaction. The defendants have agreed, without admitting or denying the SEC's allegations, to pay, in the aggregate, over $450,000 to settle the SEC's claims against them.
Named in the action are: (1) Stephen A. White of Dallas, Texas, a registered representative with the Dallas office of Stephens, Inc., an SEC-registered broker-dealer and investment adviser; (2) Stephen White's brother, William D. White, III, of Dallas, Texas; (3) Ernest J. Bieling, of Wayne, New Jersey, a former employee in Univision's corporate finance department; and (4) Robert W. Hughes, of Austin, Texas, a member of the board of directors of Hispanic Broadcasting.
In its complaint, the SEC alleges that, in May and June of 2002, the defendants separately obtained material nonpublic information regarding the acquisition of Hispanic Broadcasting by Univision, and based on that information, each of the defendants purchased or recommended that others purchase Hispanic Broadcasting stock, prior to the public announcement of the acquisition. Specifically, according to the SEC, Stephen White, after learning about the acquisition from a potential client a large Hispanic Broadcasting shareholder recommended Hispanic Broadcasting shares to a personal friend and a brokerage customer, both of whom then purchased the stock ahead of the announcement. The SEC further alleges that William White purchased the stock ahead of the announcement, based on material nonpublic information about the impending acquisition, which he had misappropriated from his mother. Bieling and Hughes each purchased the stock ahead of the announcement, based on material nonpublic information about the impending acquisition that they acquired in the course of their positions and responsibilities at Univision and Hispanic Broadcasting, respectively.
By their conduct, each of the defendants violated a duty of trust and confidence: Stephen White and William White violated duties of trust and confidence that they owed to the parties from whom they learned of the acquisition; Bieling violated a duty of trust and confidence that he owed to Univision, his employer; and Hughes violated a fiduciary duty that he, as a member of the board of directors, owed to Hispanic Broadcasting's shareholders. Following the public announcement of the acquisition on June 12, 2002, the price of Hispanic Broadcasting's stock increased, and Hughes, Bieling, William White, and the two individuals who purchased the stock based on Stephen White's recommendations, earned trading profits.
Without admitting or denying the allegations in the complaint, each of the individual defendants has made, and the SEC has accepted, an offer of settlement in which each defendant consents: to the entry of a permanent injunction enjoining them from further violations of the below-listed provisions of the federal securities laws; to disgorgement of trading profits, plus prejudgment interest; and to payment of a civil money penalty. Specifically, (1) Stephen White will disgorge $195,333 in profits that were earned by the individuals who purchased Hispanic Broadcasting shares based on his recommendations, plus prejudgment interest of $11,825, and pay a civil money penalty of $195,333; (2) William White will disgorge $9,790 in illicit profits, plus prejudgment interest of $549, and pay a civil money penalty of $14,685; (3) Ernest Bieling will disgorge $500 in illegal profits, plus prejudgment interest of $28, and pay a civil money penalty of $1,000; and (4) Robert Hughes will disgorge $13,060 in illicit profits, plus prejudgment interest of $790, pay a civil money penalty of $13,060, and consent to the entry of an order permanently barring him from acting as an officer or director for any publicly held company. Stephen White will also consent to the institution of public administrative proceedings against him by the SEC, and entry of an order by the SEC, barring him from association with a broker-dealer or investment adviser, with a right to reapply for association after four years.
The SEC's complaint alleges that the individual defendants violated Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The complaint further alleges that Hughes violated Section 16(a) of the Exchange Act and Rule 16a-3 thereunder, because he failed to report to the SEC his purchases of securities of a company for which he serves as a director.
The SEC staff acknowledges the assistance of the New York Stock Exchange and the Chicago Board Options Exchange in the investigation of the facts leading to this action.