Risk & Compliance

Former Capital One CFO to Pay $1.8 Million

Three years after he quit amid insider trading allegations, David Willey agrees to an SEC deal that temporarily bars him from serving as an officer...
Stephen TaubNovember 21, 2006

A former chief financial officer of Capital One Financial agreed to pay $1.8 million to settle insider trading charges by the Securities and Exchange Commission.

The regulator filed its complaint against David M. Willey in July 2004, alleging he traded securities of the bank holding company knowing that a negative news announcement concerning supervisory action by the Federal Reserve Board of Governors was imminent.

Under the settlement, Willey also agreed to be barred for five years from serving as an officer and director of a public company, without admitting or denying the allegations. Capital One and Willey’s attorney did not immediately return CFO.com’s request for comment.

Of the $1.8 million settlement, Willey agreed to pay $801,434 in disgorgement, $218,180 in prejudgment interest, and an insider trading penalty of $801,434. The commission is also dismissing its relief defendant claim against Willey’s wife.

According to the SEC’s complaint, the examiner in charge of investigating Capital One’s lending policies advised Willey that the Fed was likely to downgrade Capital One’s supervisory assessment, and that such a downgrade would result in some form of supervisory action.

Without informing other senior managers or his board of directors of this material information, Willey “engaged in a series of transactions” in Capital One stock in May 2002 and obtained profits in stock and cash through his “fraudulent” trading valued at several million dollars, according to the SEC. He sold $3.1 million of Capital One stock, and his wife sold 26,291 shares. Two months later, when the credit-card issuer announced that the Fed had ordered it to change its lending practices and increase debt reserves, its stock price sank 39 percent.

In March 2003, Willey resigned as president and CFO after receiving a Wells notice from the SEC saying the agency’s staff intended to bring civil action against him.

In 2001, the last year Willey appeared in Capital One’s proxy, the company reported he earned $6.9 million from exercising stock options. He also earned $1.2 million in salary and bonus compensation.