U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19457 / November 3, 2005
Securities and Exhange Commission v. One or More Unknown Purchasers of Call Options for the Common Stock of Placer Dome Inc., Civil Action No. 05 CV 9300 (S.D.N.Y.)
SECURITIES AND EXCHANGE COMMISSION OBTAINS EMERGENCY ASSET FREEZE AGAINST UNKNOWN PURCHASERS OF CALL OPTIONS FOR PLACER DOME STOCK PRIOR TO ACQUISITION ANNOUNCEMENT
Orders Placed From Foreign Accounts Just Prior to $9.2 Billion Acquisition Announcement; $3 Million Now Frozen
On November 2, 2005, the Honorable George B. Daniels, U.S. District Judge for the Southern District of New York, entered a Temporary Restraining Order freezing assets of certain Unknown Purchasers of Call Options for the common stock of Placer Dome, Inc. ("Unknown Purchasers"). The Commission's complaint alleges that the Unknown Purchasers engaged in illegal insider trading, in violation of the antifraud provisions of the federal securities laws. In addition to freezing approximately $3 million in assets, the Court's order (i) requires that the Unknown Purchasers identify themselves, (ii) provides for expedited discovery, and (iii) prohibits the defendants from destroying evidence.
The Commission's complaint alleges that on Monday, October 31, 2005, prior to the opening of the market, Barrick Gold Corporation ("Barrick"), a Canadian-based gold mining company, announced that it was making an offer to purchase Placer Dome Inc. ("Placer"), also a Canadian-based gold mining company ("Announcement"). Under the proposed offer, the complaint alleges, Placer shareholders would receive $20.50 per share. The Complaint further alleges that as a result of this Announcement, the price of Placer stock jumped to open at $19.82 per share - a 20% increase over its prior closing price on Friday, October 28, 2005.
The Commission further alleges that on October 25 and 26, while in possession of material, nonpublic information regarding this acquisition offer, the Unknown Purchasers, using overseas accounts, purchased over 10,000 call option contracts for Placer stock in an account at a broker-dealer in the United States. As the complaint alleges, over 5,000 call option contracts were "out of the money" and set to expire in November, within weeks of the purchase date. The complaint further alleges that, as a result of the increase in price of Placer stock following the Announcement, the unrealized illicit profits on these option contracts total over $1.9 million.
The Commission alleges that the Unknown Purchasers in this case engaged in insider trading in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission is seeking permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest thereon, and civil monetary penalties.
The Commission wishes to thank the Securities Commission of the Commonwealth of the Bahamas, the Bundesanstalt fur Finanzdienstleistungsaufsicht in Germany, and the Chicago Board Options Exchange for their assistance in this matter.