U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Rel. No. 18675 / April 22, 2004
SEC Charges Former Director of Banknorth Group, Inc. and MetroWest Bank In Settled Insider Trading Case
SEC v. Allen M. Glick et al. (United States District Court for the District of Massachusetts, C.A. No. 04-CV-10801(MEL)
The Commission today filed a settled civil fraud action against Allen M. Glick, a former director of both MetroWest Bank and Banknorth Group, Inc., and four of his associates – Arthur H. Freedman, Jeffrey S. Epstein, Steven T. Moore and Romeo J. Pendolari – for illegal insider trading in three publicly-traded Massachusetts banks – MetroWest Bank, Medford Bancorp and Warren Bancorp. Without admitting or denying the Commission's allegations, Glick, Freedman, Epstein, Moore and Pendolari consented to the entry of final judgments permanently enjoining them from violating the antifraud provisions of the federal securities laws. The defendants also agreed to pay a total of over $437,000 in disgorgement of trading profits, prejudgment interest and civil penalties, and Glick consented to a permanent bar from serving as an officer or director of any publicly-traded company.
The Commission's complaint alleges that in May 2001, Glick, then a director of MetroWest, learned that MetroWest would potentially be acquired. Shortly thereafter, Glick tipped Freedman, Epstein and Moore to the acquisition and directly or indirectly caused five other individuals to buy MetroWest stock prior to the public announcement of the acquisition of MetroWest by Banknorth. According to the Commission's complaint, Glick's tippees and the other individuals then purchased a total of 33,140 shares of MetroWest stock. On June 11, 2001, Banknorth announced it was acquiring MetroWest, causing MetroWest's stock price to rise by $1.47, or approximately 15% from its price per share at the close of the market the prior day. The Commission's complaint alleges that Glick's tippees and the others whom he caused to buy MetroWest stock profited by approximately $100,000.
According to the Commission's complaint, Glick became a director of Banknorth after it acquired MetroWest. On or about June 6, 2002, Glick learned at a Banknorth board meeting that Medford was seeking to be acquired, and that Banknorth was interested in potentially acquiring Warren. The Commission's complaint alleges that Glick thereafter caused another individual to purchase 3,900 shares of Medford stock and 10,000 shares of Warren stock. Glick also tipped Pendolari to inside information concerning the potential acquisition of Warren. According to the Commission's complaint, Pendolari subsequently purchased 800 shares of Warren stock for himself and caused another individual to purchase 1,100 shares of Warren stock. Glick also illegally purchased a total of 43,700 shares of Warren stock for himself, but sold those shares prior to Banknorth's August 8, 2002 public announcement that it would be acquiring Warren. After the announcement on June 13, 2002 that it was going to be acquired by another bank, Medford's stock price rose $5.37, or approximately 18% from its price per share at the close of the market the prior day, and the individual who Glick caused to buy Medford stock profited by $32,211. Banknorth's August 8, 2002 announcement that it was going to acquire Warren caused Warren's stock price to rise by $4.08, or approximately 35% from its price per share at the close of the market the prior day, and Pendolari and the two individuals who Glick and Pendolari caused to buy Warren stock profited by a total of $43,769.
The Commission's complaint alleges that Glick breached fiduciary duties he owed to MetroWest, Medford, Warren and/or Banknorth when he disclosed material, nonpublic information to Freedman, Epstein, Moore and Pendolari, and when he caused others to buy MetroWest, Medford and Warren stock while he was in possession of material, nonpublic information concerning those companies. According to the Commission's complaint, Freedman, Moore, Epstein and Pendolari each breached the duty they assumed to MetroWest, Warren and/or Banknorth when they purchased stock, and in certain instances, caused others to buy stock.
In its complaint, the Commission charged Glick, Freedman, Epstein, Moore and Pendolari with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, based on their illegal insider trading. Glick, Freedman, Epstein, Moore and Pendolari have each consented to entry of final judgments enjoining them from violating these antifraud provisions. Glick has also agreed to be permanently barred from serving as an officer or director of any publicly-traded company. In addition, Glick has consented to pay a civil penalty in an amount equal to the trading profits of all individuals who he tipped and directly caused to buy stock (a penalty of $165,875.25). Glick also agreed to pay disgorgement of $98,823.50 and prejudgment interest of $10,555.82 for the trading profits of the individuals (other than Freedman, Epstein, Moore and Pendolari) whom he directly caused to buy stock. For their part, Freedman, Epstein, Moore and Pendolari each agreed to pay disgorgement of their respective trading profits plus prejudgment interest (and in the case of Epstein and Pendolari, also the trading profits of those whom they caused to buy stock while they were in possession of material, nonpublic information). Freedman, Epstein, Moore and Pendolari also each agreed to pay a civil penalty equal to their respective trading profits (and in the case of Epstein and Pendolari, also equal to the trading profits of those whom they caused to buy stock while they were in possession of material, nonpublic information). In total, Freedman consented to pay $60,360.10, Epstein consented to pay $72,532.06, Moore agreed to pay $16,056.51, and Pendolari agreed to pay $13,550.96.
The Commission acknowledges the assistance of the NASD in this matter.