Tuesday, September 2, 2008

Insider Trading On Client Confidences Charged

The Illinois ARDC has filed a complaint alleging that an attorney had received confidential information from a client of his law firm, used that information to purchase stock and made false statements to conceal the conduct. The complaint alleges:

7. On May 1, 2006, Leland G. Hansen, another partner in the McAndrews firm, sent an e-mail message to all of the firm’s attorneys entitled "Confidential Conflict Check." In the e-mail message, Hansen requested that the firm’s attorneys provide him any information that might suggest that a conflict would arise if the firm were to represent AMS in connection with its potential acquisition of Laserscope. Respondent received that e-mail message shortly after it was sent.

8. Also on May 1, 2006, Hansen sent a separate e-mail message to all of the firm’s attorneys inquiring as to whether they could identify other matters in which the firm conducted due diligence for a client during an acquisition, including in matters relating to medical device companies. Respondent received to that e-mail message shortly thereafter, and he responded by indicating that he had previously worked on similar matters.

9. The information contained in the e-mail messages described in paragraphs seven and eight, above, was material, nonpublic information pertaining to AMS and Laserscope.

10. Between May 1, 2006 and May 15, 2006, Respondent bought 14,000 shares of Laserscope at approximately $20 per share. He held 13,000 of the shares in a personal brokerage account, and 1,000 of the shares in a brokerage account titled in the names of his parents, both of whom were deceased as of May 2006.

11. Respondent determined to purchase the Laserscope shares referred to in paragraph 10, above, based on the material, nonpublic information contained in the e-mail messages referred to in paragraphs seven and eight, above.

12. Prior to June 5, 2006, neither AMS nor Laserscope made any information concerning AMS’ potential acquisition of Laserscope public.

13. On June 5, 2006, AMS publicly announced that it had reached an agreement with Laserscope by which AMS would acquire Laserscope at a price of $31.00 per share of common stock. On that day, Laserscope’s common stock price closed at $30.65, a 43% increase from its price of $21.41 on June 4, 2006.

14. On June 8, 2006, Respondent sold all of the shares of Laserscope he had acquired between May 1, 2006 and May 15, 2006. As a result, on the basis of the material, nonpublic information referred to in paragraphs seven and eight, above, Respondent realized a profit from the sale of the shares in the amount of $134,970.

The complaint further alleges false statements to outside counsel retained to investigate stock purchases prior to the public announcement. (Mike Frisch)

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