The SEC charged Manouchehr Moshayedi, chief executive officer and chairman of the board of directors of STEC, Inc., with insider trading in a secondary offering of STEC shares. STEC is a California based company that designs, manufactures and markets computer storage devices. According to the complaint, Moshayedi engaged in an insider trading scheme by making false and misleading representations and omissions in connection with the sale of 9 million shares of STEC stock.
The SEC alleges that during the first half of 2009, STEC’s stock rose more than 800%, as the company reported its increased revenues, sales and margins for its products. On July 16, 2009, the company also made public its unique supply agreement with its largest customer, EMC Corporation. The agreement committed EMC to purchase $120 million worth of STEC products in the third and fourth quarters of 2009. In order to take advantage of the run-up in the stock price, Moshayedi and his brother decided to sell a significant portion of their STEC holdings in a secondary offering. A few days before the scheduled secondary offering, Moshayedi learned of critical non-public information that was likely to have a negative impact on the stock price. Instead of calling off the offering and abstaining from selling his shares, Moshayedi engaged in a fraudulent scheme to hide the truth through a secret side deal.
According to the complaint, On August 3, 2009, Moshayedi and his brother each sold 4.5 million shares of their STEC stock, and each received gross proceeds, before expenses, of $133,920,000. Three months later, after Moshayedi disclosed part of the material, non-public information he possessed when he sold his shares, STEC’s price plummeted 38.9%. The SEC stated, “Moshayedi put his own self-interest ahead of his responsibility to lead a public company, and shareholders who placed their trust in him suffered as a result.”
The SEC charged five physicians with insider trading in the securities of a Michigan based holding company. According to the complaint, Apparao Mukkamala served as chairman of the board of directors of American Physicians Capital, Inc. (“ACAP.”). As chairman of the board, he owed a fiduciary duty of trust and confidence to ACAP and its shareholders.
According to the SEC, between March 12, 2010 and July 8, 2010 Mukkamala illegally disclosed material non-public information concerning the anticipated sale of ACAP, to four fellow physicians. Between April 30 and July 7, 2010, Mukkamala and the other four purchased nearly $2.2 million of ACAP stock based on the non-public confidential information learned by Mukkamala. On July 8, 2010, after The Doctors Company publicly announced its acquisition of ACAP, Defendants collectively realized more than $623,000 in profits from their illegal trading in ACAP.
Without admitting or denying the SEC allegation, the five physicians consented to the entry of final judgments ordering them to pay more than $1.9 million to settle the SEC’s charges. The SEC stated, “These physicians made numerous purchases of ACAP shares that were detected as highly unusual when compared to their past trading patterns… [b]oard chairmen and other insiders should never choose greed over duty when possessing confidential information about the companies they serve.”
The Honorable Timothy C. Batten Sr. granted the SEC’s request for a temporary restraining order and entered an asset freeze for the benefit of investors against Aubrey Lee Price, PFG, LLC, PFGBI, LLC – the funds he managed – and his affiliated entities. The SEC alleged that after sending a letter dated June 2012 titled “Confidential Confession for Regulators – PFG, LLC and PFGBI, LLC Summary,” Price went into hiding. In the 22-page letter, Price admitted that he “falsified statements with false returns” in order to conceal between $20-23 million dollars in investor losses.
According to the complaint, Price raised approximately $40 million from approximately 115 investors, living primarily in Georgia and Florida. The SEC alleged that Price began his scheme in 2008, selling membership interests in two unregistered investment funds, PFG, LLC and PFGBI, LLC (“the Funds.”) The funds were managed by Price. According to PFG’s private placement memorandum, the investment objective was to achieve “positive total returns with low volatility” by investing in a variety of opportunities, including equity securities traded on the U.S. markets. Instead, Price used investors funds to invest in South America real estate and a troubled South Georgia bank. Furthermore, PFG’s offering documents stated that investors’ funds would be kept in a custodial account at Goldman Sachs Execution & Clearing, L.P. Between 2009 and 2011, more than 90% of PFG investor funds, around $36.9 million, were placed in a securities trading account at Goldman Sachs The account suffered massive trading losses in addition to the frequent wire-transfers to PFG’s operating bank account. By mid-May 2012, the remaining $480,000 in PFG’s Goldman Sachs account was transferred to PFG’s operating account, at which time the Goldman Sachs trading account was closed. To conceal the depletion of the fund’s assets, Price created and provided false Goldman Sachs account statements and representation letters to investors and bank regulators, indicating fictitious investment returns.
The SEC filed a complaint in U.S. District Court for the Northern District of Georgia charging him with securities fraud. The SEC stated, “Price raised nearly $40 million from investors and made woeful financial transactions that he hid from them … [n]ow both the money and Price are missing.”