Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

A Member of the Law Professor Blogs Network

Thursday, November 13, 2008

SEC Charges Two Former McKesson Employees with Misappropriating Inside Information

The SEC has instituted two separate enforcement actions against former employees of McKesson Corp. for insider trading in connection with its 2005 acquisition of D&K Healthcare: 

It filed a complaint against William M. Gallahair, a former Vice President of Sales, for insider trading in advance of McKesson Corporation's public announcement on July 11, 2005 that it intended to acquire D&K Healthcare Resources.  According to the complaint, filed in the United States District Court for the Northern District of California - San Francisco Division, Gallahair misappropriated material, non-public information from McKesson about its planned acquisition of D&K through a tender offer and purchased shares of D&K stock based on that information.  The SEC alleges that Gallahair first learned about the planned acquisition eighteen days before McKesson publicly announced its tender offer for D&K when he overheard a telephone conversation by his supervisor about McKesson's integration plans for D&K. According to the Commission's complaint, Gallahair's supervisor had been selected to lead the team of McKesson employees preparing to integrate D&K's operations into McKesson. The complaint alleges that shortly after overhearing his supervisor's conversation, Gallahair purchased 20,000 shares of D&K stock and, when McKesson publicly announced its tender offer for D&K, Gallahair placed orders to sell all of his shares of D&K stock and realized profits of over $120,000.  The complaint also alleges that on several occasions when he has been questioned about his trading, Gallahair has given conflicting explanations of his reasons for purchasing shares of D&K stock.

The SEC also filed a settled civil injunctive action against Jonathan Wilson, a former senior manager in McKesson's finance department, for insider trading in advance of McKesson Corporation's public announcement that it intended to acquire D&K Healthcare Resources, Inc.  The complaint alleged that Wilson misappropriated material, non-public information from McKesson about its planned acquisition of D&K through a tender offer and purchased shares of D&K stock in several accounts belonging to his family members based on that information. According to the SEC, Wilson learned about McKesson's acquisition plans for D&K through his supervisor, who along with others conducted due diligence on D&K in April and May 2005. Wilson worked close to and regularly visited his supervisor's cubicle. The complaint alleges that while Wilson did not personally receive official advance notice of McKesson's acquisition of D&K, Wilson learned about the acquisition by overhearing his supervisor's meetings and phone calls about D&K and viewing documents regarding D&K left in plain view on his supervisor's desk. According to the complaint, after learning of McKesson's anticipated acquisition of D&K, Wilson purchased 17,530 shares of D&K in 12 different brokerage accounts belonging to various members of his family.

Wilson consented upon the filing of the Commission's complaint to the entry of a final judgment permanently enjoining him from violating the antifraud and tender offer provisions of the federal securities laws and requiring him to pay disgorgement of $117,045.87.

http://lawprofessors.typepad.com/securities/2008/11/sec-charges-two.html

SEC Action | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef010535ed94a0970b

Listed below are links to weblogs that reference SEC Charges Two Former McKesson Employees with Misappropriating Inside Information:

Comments

What Gallahair done its completely agains the company rule. Becuse there was Gallahair display the news 18 days before the original announcement that McKesson Corporation hired D&K Healthcare. Before McKesson Corporation give his tender offer, 20,000 share is under Gallahai. Then they sell all their share to McKesson and got a profit of $120,000. So what ever punishment Gallahair got is correct.

Posted by: Ryan For McKesson Corporation Stock Market | Mar 20, 2009 10:27:03 PM

Post a comment