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.”