U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19205 / April 27, 2005
SEC v. John E. Martin, Case No. SACV05-383 DOC (ANx)
SEC CHARGES FORMER GOOD GUYS DIRECTOR WITH INSIDER TRADING
The Securities and Exchange Commission today filed insider trading charges against a former member of the board of directors of Good Guys, Inc., who bought stock in 2003 based on the non-public information that Good Guys was going to merge with CompUSA, Inc. The Commission alleges that former director John E. Martin of Irvine, California, began buying Good Guys stock during the merger negotiations, then netted nearly $75,000 in illegal profits by selling the shares after news of the merger boosted Good Guys' stock price. Without admitting or denying the allegations, Martin has agreed to settle the enforcement proceeding by paying approximately $150,000 in disgorgement, prejudgment interest, and civil money penalties and agreeing to a five-year bar from serving as an officer or director of a public company.
According to the civil complaint filed by the Commission in the United States District Court for the Central District of California, Martin was summoned to a special meeting of the Good Guys board in early August 2003. On August 5, 2003, Martin purchased 100,000 shares of Good Guys stock on margin. Hours later, Martin participated in a board meeting concerning the potential acquisition of the company by CompUSA. The board members, including Martin, continued to discuss the merger during August and September 2003, and Martin purchased several thousand additional shares of Good Guys stock during this time. When the company later announced the news of the merger on September 29, 2003, Good Guys' stock price rose 33% to $2.00 per share. Shortly thereafter, Martin sold his Good Guys holdings, realizing an illicit profit of $73,625. Martin also failed to file the required forms publicly reporting his purchases and sales of Good Guys stock.
The Commission's lawsuit charges Martin with trading on the basis of material, nonpublic information in violation of the antifraud provisions of the federal securities laws. It also alleges that Martin, as a director of the company, failed to file with the Commission Form 4s reflecting his transactions in Good Guys. Under the settlement, Martin will pay $76,360.52 in disgorgement and prejudgment interest, and a $73,625 civil penalty. In addition, the judgment enjoins Martin from violating Sections 10(b) and 16(a) of the Exchange Act and Rules 10b-5 and 16a-3(g)(1) thereunder. Finally, Martin has agreed to a five-year prohibition from acting as an officer or director of any public company. Martin agreed to settle the Commission's action without admitting or denying the allegations.
The Commission acknowledges the assistance of the National Association of Securities Dealers (NASD) in this matter.