January 18, 2006
Another Loss Avoided Insider Trading Case
Has anyone heard this one before? The SEC filed a settled civil enforcement action against Deog Jeong, a co-founder of Silicon Image, Inc., a Silicon Valley-based semiconductor company. According to the SEC's litigation release (here):
[O]n November 7, 2003, Jeong was informed by Silicon Image's Chief Executive Officer that the audit committee of the company's board of directors had launched an internal investigation into revenue recognition issues at the company. The complaint further alleges that within hours of learning this material, non-public information, Jeong sold 40,000 shares of Silicon Image at a price of $7.80 per share, in breach of the duty of trust and confidence he owed Silicon Image as a corporate insider.
As the complaint alleges, a week later, after the close of the market on November 14, 2003, Silicon Image publicly announced that it would not timely file its Form 10-Q for the third quarter of 2003, because of the audit committee's recently launched internal investigation. After the announcement, the price of Silicon Image stock fell sharply the next trading day to close at $6.40 per share -- a 28% decline from the prior trading day's closing price. The complaint alleges that by unlawfully selling his shares of Silicon Image in advance of the announcement, Jeong avoided losses of $56,000.
We've recently seen loss avoided cases against the former general counsel for Biogen (civil) and the former CEO of Qwest Communications (criminal). In addition to disgorging the $56,000, Jeong paid a similar amount as a civil penalty. It still isn't worth it. (ph)
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