Tuesday, January 13, 2009
The SEC announced that the United States District Court for the Northern District of Illinois entered a Final Judgment as to defendant John Zeglis, in his capacity as Executor to the Estate of James D. Zeglis ("Zeglis, as Executor" or "the defendant") on January 7, 2009. James D. Zeglis died on August 15, 2008.
The SEC's Complaint, filed on September 16, 2008, alleged fraud by James D. Zeglis ("Zeglis"), Gautum Gupta ("Gupta") Jim W. Dixon ("Dixon") and Lance D. McKee ("McKee") in connection with insider trading in the securities of Georgia-Pacific Corporation. The Complaint alleged that Zeglis misappropriated material nonpublic information from his brother, a member of Georgia-Pacific's board of directors, and further alleged that on November 10, 2005, three days before a public announcement that Georgia-Pacific had agreed to be acquired by Koch Industries, Inc., Zeglis tipped Dixon and Gupta, both of whom purchased Georgia-Pacific securities. Gupta, in turn, tipped McKee, who also purchased Georgia-Pacific securities. Further, the Complaint alleged that on Sunday, November 13, 2005, Koch Industries, Inc. ("Koch") publicly announced a definitive agreement for a Koch subsidiary to make a cash tender offer for all shares of Georgia-Pacific. The following day, Georgia-Pacific's stock price increased 36% in response to the announcement. McKee then sold his Georgia-Pacific securities, realizing a profit of $7,157.60. Dixon also realized a profit of $116,000 from the sale of Georgia-Pacific options. Thereafter, over the course of several months, Dixon paid Zeglis kickbacks from his ill-gotten gains of approximately $25,000.
The Court ordered disgorgement and prejudgment interest against Zeglis, as Executor, in the respective amounts of $25,000 and $5,254.67. Zeglis, as Executor, consented to the entry of the judgment without admitting or denying any of the allegations of the Commission's Complaint.
On October 9, 2008, final judgments were also entered against Dixon and McKee.