Thursday, December 22, 2005

Loss Avoided Insider Trading Case

A well-timed trade by a company employee sure draws the SEC's attention in a hurry, as demonstrated once again in the Commission's filing against Gregory Champe, an executive of Martek Biosciences Corporation, which make food supplements.  It seems that Champe sold 2,600 shares of Martek on April 26, 2005, and the next day after the close of trading, the company disclosed that its revenues would drop over the next two quarters, which caused the shares to drop an eye-popping 46% the next day.  Champe's loss avoided was over $70,000, according to the SEC's Litigaiton Release (here).  In an example of virtual real-time enforcement in this type of investigation, the SEC announced a settlement of the case within a bit less than nine months from the transaction.  Champe agreed to disgorge $54,825 and will not pay a civil penalty because of his "demonstrated inability to pay," which generally means the person has been fired by the company and the attorney's fees have chewed up the remaining resources to settle the matter.  There's a pretty simple lesson in these types of cases: it ain't worth it! (ph)

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