U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19104 / February 28, 2005
ARMUND EK SETTLES INSIDER TRADING CHARGES
Securities and Exchange Commission v. Armund Ek, No. 05 CV 2425(SWK) (S.D.N.Y. filed February 28, 2005)
The Securities and Exchange Commission announced today that it filed a settled insider trading case in the United States District Court for the Southern District of New York against Armund Ek (“Ek”). In its Complaint, the Commission alleged that Ek was a close friend of Robert Goehring (“Goehring”), Gerber’s director of corporate communications. In his capacity as director of corporate communications, Goehring received material, nonpublic information about earnings results and other significant corporate developments at Gerber. Ek both bought and sold Gerber stock on three occasions based on tips of material, nonpublic information about Gerber that Goehring provided. Ek had profits and avoided losses totaling $11,438.
The Commission alleged that Goehring learned by July 1, 1998, that Gerber was anticipating a sharp increase in earnings for the quarter ending July 31, 1998. This information about Gerber’s anticipated earnings was material and nonpublic. Prior to July 22, 1998, Goehring communicated information about Gerber’s anticipated first quarter earnings to Ek. On July 22, 1998, Ek purchased 1,000 shares of Gerber stock at $27.875 per share on the basis of this material, nonpublic information. On August 20, 1998, Gerber announced its first quarter earnings. The price of Gerber stock closed that day at $28.50, up $0.8125 from the previous day’s closing price. Ek thus enjoyed a profit of $640.
The Commission further alleged that by the last week of February 2000, Goehring learned that Gerber was going to announce a proposed on-line apparel venture with another company. This information was material and nonpublic. Prior to March 2, 2000, Goehring communicated information about the announcement to Ek. On March 2, 2000, Ek purchased 1,000 shares of Gerber stock at $14.9375 per share on the basis of this information. On March 7, 2000, Gerber announced its plan to form the on-line apparel venture. Gerber’s stock price closed that day at $17.4375 per share, up $0.9375 from the previous day’s closing price. Ek thus enjoyed profits of $2,500 from his trade.
The Commission also alleged that by March 23, 2000, Goehring was aware that Gerber was likely to miss earnings expectations for the fourth quarter of its 2000 fiscal year. After learning this information, and prior to March 24, 2000, Ek’s friend communicated material, nonpublic information about Gerber’s likely fourth quarter earnings miss to Ek. On March 24, 2000, Ek sold 1,000 shares of Gerber stock at $19.8125 per share on the basis of this information. When Gerber announced that its fourth quarter results would likely be lower than expected on April 26, 2000, Gerber’s stock price closed that day at $11.50 per share, down $3.93 from the previous day’s closing price. Ek thus avoided losses of $8,313 by trading in advance of the April 26, 2000, earnings announcement.
The Commission alleged that on each of the three occasions, Goehring knowingly or recklessly communicated the material, nonpublic information to Ek in breach of the duty of trust and confidence that he owed to Gerber and its shareholders. Ek knew or should have known that he was trading on the basis of material, nonpublic information that Goehring communicated to him in breach of that duty of trust and confidence.
As a result of his conduct, Ek violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Exchange Act Rule 10b-5. Without admitting or denying the allegations in the Commission’s Complaint, Ek consented to the entry of a judgment (i) permanently enjoining him from future violations of Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5, (ii) ordering disgorgement of profits and losses avoided of $11,438 plus prejudgment interest of $3,511, and (iii) imposing a civil penalty of $10,798 pursuant to Section 21A of the Exchange Act.
Separately, the Commission announced today that it filed a contested insider trading case in the United States District Court for the District of Connecticut against Robert Goehring (SEC v. Robert Goehring, Civ. Act. No. 3:05-CV-350 (AWT), Lit. Release No. 19105.