U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19130 / March 10, 2005
Securities and Exchange Commission v. Brian E. Pridgeon, Stephon A. Carradine and Craig L. Smith, Civil Action No. 00-009375 FMC (RZx) (C.D. Cal., filed September 1, 2000)
SEC OBTAINS INJUNCTIONS, DISGORGEMENT, AND CIVIL PENALTY IN INSIDER TRADING CASE
On September 22, 2004, the United States District Court for the Central District of California entered consented to injunctions against Stephon A. Carradine and Craig L. Smith enjoining each of them from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The Court also ordered Smith and Carradine each to pay $47,347 in disgorgement, plus prejudgment interest, and Smith to pay a civil penalty of $25,000. The complaint alleges insider trading by Carradine, 55, and his former business partner Smith, 42, both of Long Beach, California. As part of their settlement, Carradine and Smith neither admitted nor denied the Commission's allegations.
The complaint alleges that Brian E. Pridgeon, Carradine's cousin and former Intel Corporation marketing engineer, misappropriated material nonpublic information that he obtained from Intel regarding a transaction Intel was negotiating with Ancor Communications Inc., and that Pridgeon then tipped his cousin, Carradine, who in turn tipped Smith, with this information. Shortly before a December 7, 1999 public announcement about a significant Intel-Ancor transaction, Pridgeon purchased speculative call options in a brokerage account Smith and Carradine had opened in Smith's name. After the public announcement, Smith and Carradine realized an illegal profit of approximately $95,000 from the sale of the Ancor options.
The Commission's case against Pridgeon is still pending. After Pridgeon pled guilty in federal court to criminal insider trading charges brought by the United States Attorney for the Central District of California for similar conduct alleged in the Commission's complaint, Pridgeon entered into a partial settlement with the Commission. As part of that settlement, the Court entered an injunction enjoining Pridgeon from future violations of Section 10(b) of the Securities Exchange Act and Rule 10b-5, and ordered that, for purposes of determining the amounts of disgorgement and civil penalties Pridgeon would pay, Pridgeon cannot dispute his liability for insider trading, and the allegations in the Commission's complaint are deemed true. The Commission's motion for disgorgement, prejudgment interest, and civil penalties is set to be heard on April 25, 2005.