Risk & Compliance

Rhino Trading Ruled Illegal

A Wachovia Securities rep is convicted in an insider-information case.
Stephen TaubJanuary 7, 2008

A federal district judge has convicted a registered representative of Wachovia Securities in an insider-trading scheme — one that, like numerous cases this year, involved information passed between family members or close friends.

Mark Michel illegally traded in the shares of Blue Rhino Corp. in the week leading up to the company’s 2004 merger announcement with Ferrellgas Partners, the Securities and Exchange Commission had charged.

In a 61-page opinion in the civil case, the court found that a longtime friend — a co-defendant in the case who had previously settled — tipped Michel about the merger negotiations in a telephone call. The following morning, having conducted minimal research on the stock and having ignored it after reading a magazine article about it just four months earlier, Michel began a six-day spree in which he bought $1.4 million of Blue Rhino stock for himself, relatives, and customers.

The court ordered Michel to disgorge $277,881 in illegally received profits and to pay prejudgment interest of $68,307.

The opinion also found that several other individuals had received the same information as Michel, all of whom were friends or relatives of a business partner of a Blue Rhino director and made large purchases of Blue Rhino in the week before the merger. The judge cited numerous “shifting, contradictory and implausible or inadequate explanations” of the purchases.

The SEC previously sued four other defendants in the case, all of whom settled.

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