U.S. Securities and Exchange Commission
Litigation Release No. 18693 / May 4, 2004
FORMER ADAPTEC, INC. SALES VICE PRESIDENT PENALIZED FOR INSIDER TRADING
SECURITIES AND EXCHANGE COMMISSION v. MICAHEL A. OFSTEDAHL, ET AL.
United States District Court for the Northern District of California, Civil Action No. C 02-03685 JW
The Securities and Exhange Commission today announced that it has obtained a $100,000 insider-trading penalty against Michael A. Ofstedahl, a former vice president of Adaptec, Inc., a Milpitas, California developer of computer components and software. The Commission also obtained a permanent injunction prohibiting Ofstedahl's further violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In January 1999, Ofstedahl engaged in illegal insider trading when he tipped insider information in advance of Adaptec's pre-announcement of positive earnings to his friend and dentist, Robert Rutner. The penalty was imposed on April 30, 2004 by Judge James Ware of the U.S. District Court for the Northern District of California following a one-day bench trial. Previously, Ofstedahl had stipulated to the entry of a judgment of liability on the Commission's insider trading claims. Ofstedahl had also entered a guilty plea, and been sentenced, for obstructing the Commission's investigation into Dr. Rutner's trading.
The Commission's complaint filed on July 31, 2002 alleged that in January 1999, Ofstedahl learned that Adaptec planned to pre-announce its preliminary third-quarter earnings for the 1999 fiscal year, which exceeded analyst's estimates. On the morning of January 6, 1999, Ofstedahl tipped information about the pre-announcement to Rutner pursuant to their earlier agreement to share profits that Rutner might make by trading on inside information. Rutner in turn tipped William Kuncz, Rutner's friend and business associate, who also traded in Adaptec securities. Following Adaptec's release of the pre-announcement on January 6, 1999, Rutner realized profits of $648,936 on his Adaptec trading, while Kuncz gained $26,013.
In settlement of the Commission's insider trading charges against them, Rutner and Kuncz have paid the Commission a total of $1,167,047.87 in disgorgement of unfair profits, penalties and interest.