U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19091 / February 17, 2005
Securities and Exchange Commission v. Robert J. Prevett, et al., 19091 / February 17
The Securities and Exchange Commission ("Commission") today announced it has obtained a judgment against Robert J. Prevett ("Prevett") ordering disgorgement of ill gotten gains, imposing an injunction against future violations, and imposing civil penalties for illegal insider trading in the securities of nVidia Corporation.
On December 16, 2003, U.S. District Court Judge James Ware entered final judgment for the Commission by permanently enjoining and restraining Prevett from violating Section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b), and ordering Prevett to disgorge illegal profits plus prejudgment interest in the total amount of $401,032, and pay a civil penalty of $300,000 pursuant to Section 21A of the Securities and Exchange Act of 1934, 15 U.S.C. § 78u 1 in light of Prevett's willful conduct.
As described in the Commission's filings and/or the Court's December 16, 2003 order, on Sunday, March 5, 2000, nVIDIA and Microsoft entered into an agreement providing for nVIDIA to design and manufacture the 3D computer graphics and multimedia sub system for Microsoft's planned video game console, the X Box. That evening, nVIDIA's president and chief executive officer sent an email entitled "X is Ours!" to all nVIDIA employees, informing them of the agreement and its huge revenue impact on nVIDIA. The next morning, March 6, nVIDIA's vice president of marketing sent an email to all nVIDIA employees entitled "xbox shhhhhh...", reminding them that news of the X Box agreement was confidential.
On the morning of March 6, 2000, after reading both emails, Prevett purchased 10,000 shares of nVidia stock on the open market at a total price of $629,768. From March 7 through March 9, 2000, nVIDIA's share price soared, as rumors about the X Box contract circulated on the Internet and in the press. After Microsoft announced the X Box agreement to the public on the morning of March 10, 2000, nVIDIA shares continued to rise, closing that day at $118 per share, more than twice the closing price on March 6.
The Commission filed its lawsuit against Prevett on November 19, 2001. A criminal proceeding, which resulted in a conviction, was also filed against Prevett at the same time.
In its civil suit, the Commission named Prevett, his then girl friend, Wendy Goody, and her father, Clifford Goody, as defendants. In July 2003, a civil jury found that Prevett had violated Section 10(b) of the Exchange Act by purchasing 10,000 nVIDIA shares on March 6, 2000 while possessing material non-public information. The jury did not find, however, that Prevett tipped material non-public information to Wendy Goody or that Wendy Goody traded upon or tipped material nonpublic information. The jury also failed to find that Clifford Goody traded upon material non-public information.
The Commission filed lawsuits against sixteen individuals, including Prevett, for trading in nVidia securities in March 2000 prior to the public announcement of the X Box contract. At the current time, only the civil litigation against Atul Bhagat is still pending.