On September 28, 2004 the Securities and Exchange Commission filed insider trading charges against Mark Kelly, Martin Angel, John Buck and Chad Latvaaho. The Commission's complaint alleges that in early May of 2002, Kelly, who was the chief financial officer of Auto One Finance, a subsidiary of Golden State Bancorp ("GSB"), was asked to assist with due diligence in advance of Citibank's acquisition of GSB. Kelly immediately tipped his friends, Latvaaho and Angel, about the impending acquisition. Between May 10 and May 17, Angel purchased 330 GSB call option contracts based on his advance knowledge that Citibank was planning to acquire GSB. Angel also tipped his colleague, Buck, who purchased 150 call options and 2000 shares of GSB stock for his own account and 34,000 shares of GSB for other accounts that he managed for his employer. During the same period, Latvaaho purchased 100 GSB call options. The following week, Citibank and GSB announced the news to the public, and GSB's stock price rose nearly 9%. Angel, Buck and Latvaaho immediately sold their respective investments in GSB securities, yielding quick profits of nearly $250,000 collectively.
The Commission's lawsuit, brought in federal district court in Dallas, charges Kelly with tipping, and Angel, Buck and Latvaaho with trading, on the basis of material, nonpublic information in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the allegations, Latvaaho has agreed to settle the action by disgorging his profits of $30,857 and paying a civil penalty of $30,857. Latvaaho also consented to a judgment enjoining him from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
The Commission acknowledges the assistance of the U.S. Attorney's Offices for the Northern District of California and the Northern District of Texas, the FBI, the American Stock Exchange and the New York Stock Exchange in this matter.