Risk Management

Finance Exec’s Loose Lips Sink Old Pal

He blabbed to his friend about his company's improved performance before a public announcement of same. Guess what happened next?
Stephen TaubFebruary 11, 2008

You wouldn’t think finance executives need to be reminded to keep their mouths shut about the material, non-public information they normally possess. But here is yet another example that they do need reminders.

The Securities and Exchange Commission has settled charges with an individual who admitted to illegal insider trading after a talk with an old college buddy, who happened to be a senior financial officer with VITAS Healthcare, a Miami-based subsidiary of Chemed Corp.(Editor’s note: After this story ran, Sherri Warner, Chemed’s director of investor relations, told CFO.com that the senior officer was in operations, not in finance. Since the SEC found no wrongdoing on behalf of the executive, Chemed would not provide the executive’s name, she said.)

William Gordon Williams, the subject of the insider-trading charges, had been in Florida at least once a month since 2006 on consulting assignments, often staying with his finance friend. The SEC charged that on April 30, 2007, he purchased 5,000 shares of Chemed stock at an average price of $51.34 roughly six hours before a public announcement of Chemed’s earnings and improved guidance. He allegedly sold the stock at an average price of $62 one week after the announcement, realizing illicit profits of about $28,550.

The week before the announcement, while staying at his friend’s condominium, Williams received detailed information about the improved financials and placed the stock order on his cell phone, according to the SEC’s complaint.

The SEC did not charge or name the finance executive.

Without admitting or denying the allegations, Williams agreed to disgorge $28,550 in illegal profits and pay a civil penalty in the same amount, plus $1,156 in prejudgment interest.

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