M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Monday, March 7, 2011

Still more bad lawyers

If you're on the deal team and you trade in the target's stock ... well ... it goes without saying that you're a bad lawyer.  The latest to learn this lesson?  Todd Leslie Treadway, a former employee benefits and executive comp associate at Dewey & LeBouef's New York office.  Here's the litigation release from the SEC

The Commission today charged attorney Todd Leslie Treadway with insider trading in advance of two separate tender offer announcements during 2007 and 2008. According to the complaint, while employed as an attorney in the New York office of Dewey & LeBoeuf, LLP, Treadway provided advice on, among other things, the employee benefit and executive compensation consequences of mergers and acquisitions and had access to material nonpublic information concerning contemplated corporate acquisitions. The SEC alleges that in 2007, and again in 2008, Treadway used material, non-public information he obtained through his position at D&L to purchase stock in two separate companies prior to the announcement of the acquisition: In June 2007, Treadway purchased securities in Accredited Home Lenders Holding Company, and in May 2008 Treadway purchased securities in CNET Networks, Inc. According to the complaint, Treadway’s illegal trading resulted in profits of approximately $27,000.

The Commission’s complaint charges Treadway with violations of Sections 10(b) and 14(e) of the Securities and Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The Commission is seeking permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and monetary penalties against Treadway.

The Commission acknowledges the assistance of FINRA.

See that little bit there - at the bottom -- that thanks FINRA for its assistance?  My guess is that FINRA popped up Mr. Treadway's trades as anamolous trades and then compared the insider lists it got from the companies to the list of people making trades.  Seems like a pretty easy case to make.  You'd think that Dewey would instruct its associates not to be so stupid. 


Update:  The Am Law Daily has posted the complaint.  Here's what you need to know about the trading alleged by the SEC:

On June 1, 2007 - the same day he reviewed a draft of the merger agreement -Treadway purchased 290 shares of Accredited common stock at $13.76 per share for a total purchase price of $3,990.40. Treadway purchased the shares through an online brokerage account from his office computer at D&L. Treadway used all of the available cash in the account to purchase the Accredited stock. ... 

Additionally, on May 6, 2008, from approximately 8:00 p.m. until midnight,Treadway received at least thirteen emails related to the CNET matter, including an email sent to Treadway around 9:00 p.m. that attached a draft of the CBS and CNET merger agreement. The subject line of that email read: "FW: Agreement & Plan ofMerger CNET_v2.DOC." By at least May 6, 2008, Treadway was aware that CNET was D&L's client.

On May 7, 2008 at around 2:36 p.m., Treadway purchased from his computer at D&L 7,079 shares of CNET common stock at prices ranging from $7.49 to $7.56 per share. The total purchase price was $53,499.58. At that time, this was the largest securities purchase Treadway had made in terms of share and dollar amounts. Treadway purchased the CNET stock in four separate online brokerage accounts - three of which Treadway owned.  The other was in the name of his fiance. Treadway sold his entire portfolio of stock holdings in each of the four online brokerage accounts to purchase the CNET stock.

Uh ... a couple of things.  First, he bought the stock using his office computer?!  It's hard to know what to say about that, so I won't say anything.  It's just too ridiculous.  Second, he apparently used all of his available cash to make the purchases.  If you've got a good feeling about a stock, you invest some of your money in it.  If you have a REALLY good feeling about a stock, I guess you invest it all.  Finally, the guy used his fiance's brokerage account to make some of the purchases.  Hint to her - it's not really love.  I'd move on.



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