Wednesday, August 20, 2014
The Securities and Exchange Commission [August 18] charged a former bank executive in Massachusetts and his friend with insider trading in advance of the bank's acquisition of another financial institution.
In a complaint filed in federal court in Boston, the SEC alleges that Patrick O'Neill, then a senior vice president at Eastern Bank Corporation, learned through his job responsibilities that his employer was planning to acquire Wainwright Bank & Trust Company.
According to the complaint, O'Neill tipped Robert H. Bray, a fellow golfer with whom he socialized at a local country club. In the two weeks preceding a public announcement about the planned acquisition, Bray sold his shares in other stocks to accumulate funds he used to purchase Wainwright securities. Bray had never previously purchased Wainwright stock. After the public announcement of the acquisition caused Wainwright's stock price to increase nearly 100 percent, Bray sold all of his shares during the next few months for nearly $300,000 in illicit profits.
According to the SEC's complaint, regulators began requesting information from Eastern Bank and others about trading in Wainwright stock a few months after the trades occurred, and O'Neill quit his job at Eastern Bank rather than respond to such inquiries. O'Neill and Bray each were subpoenaed to testify in the SEC's investigation but asserted their Fifth Amendment privileges against self-incrimination for every question asked of them, including whether they know one another.
The SEC's complaint charges O'Neill, who lives in Belmont, Mass., and Bray, who lives in Cambridge, Mass., with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks to have them be enjoined, disgorge the allegedly ill-gotten gains with interest, and pay civil penalties of up to three times the gain.