U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18983 / November 22, 2004
Securities and Exhange Commission v. Michael J. Ricks, John H. Woody, and Mark P. Mead, Civil Action No. 3:04CV576
THE SECURITIES AND EXCHANGE COMMISSION SUES FORMER LENDINGTREE EMPLOYEES FOR INSIDER TRADING
On November 22, 2004, the Securities and Exhange Commission announced that it filed an insider trading complaint in the United States District Court for the Western District of North Carolina against Mark P. Mead, Michael J. Ricks, and John H. Woody, former employees of LendingTree, Inc. ("LendingTree"), a financial services company based in Charlotte, North Carolina. The Commission's complaint alleges that Mead (Vice President of National Accounts), Ricks (Senior Director of Strategy and Sales) and Woody (Senior Director of Sales and Product Management) purchased LendingTree securities prior to the May 5, 2003 public announcement (the "Announcement") of the proposed merger between LendingTree and USA Interactive, after learning of the proposed transaction during the course of their employment. As alleged in the complaint, LendingTree's stock price rose sharply on the day of the Announcement to close at a 41% premium over the closing price of the previous trading day. By trading on this material, nonpublic information, the complaint alleges, Mead, Ricks and Woody realized substantial illicit profits and violated the antifraud provisions of the Securities Exchange Act of 1934 ("Exchange Act").
Without admitting or denying the allegations in the complaint, Mead, Ricks, and Woody consented to the entry of final judgments against them that permanently enjoin them from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The final judgments also require Mead, Ricks, and Woody to disgorge illegal trading profits of $62,756, $62,102.50, and $86,612.50, respectively, and pay prejudgment interest thereon. Finally, the final judgments order each defendant to pay a civil penalty in an amount equal to their disgorgement obligations, pursuant to Section 21A of the Exchange Act.
The Commission's complaint alleges that while working as LendingTree employees, Mead, Ricks, and Woody learned of the pending merger between LendingTree and USA Interactive by observing unusual activity at LendingTree's headquarters related to the merger, including a senior management meeting with USA Interactive. The complaint also alleges that Mead, Ricks and Woody worked in close proximity to LendingTree executives and employees who were aware of the merger negotiations -- and all three had access to pertinent information and documents related to the pending merger. The complaint further alleges that just prior to the Announcement, Mead, Ricks, and Woody approached LendingTree's senior management and asked whether the unusual activity at headquarters signified that LendingTree was going to be acquired. Furthermore, the complaint alleges that most of the illegal trading by Mead, Ricks and Woody in LendingTree securities occurred on Friday, May 2, 2003 -- the last trading day before the Announcement. Finally, the complaint alleges that Mead's, Ricks' and Woody's trades in the days leading up to the Announcement were their first purchases of LendingTree equities in the secondary market - as well as the first purchases by Ricks and Woody of LendingTree option contracts.
The Commission's investigation in this matter is continuing. The Commission wishes to thank the Chicago Board Options Exchange for its assistance in this matter.