Risk & Compliance

Harman Tax Exec Accused of Insider Trading

Dennis Hamilton allegedly used his advance knowledge of Harman's earnings to make a one-day trading profit of more than $130,000.
Matthew HellerFebruary 8, 2016

A senior tax executive at Harman International Industries has been charged with making more than $130,000 in illicit profits by trading on his advance knowledge of the electronics company’s earnings.

The U.S. Securities and Exchange Commission said Dennis Hamilton, Harman’s vice president of tax, bought $1.2 million worth of Harman shares in October 2013, a day ahead of the announcement of its first-quarter earnings for fiscal 2014.

Hamilton, the SEC said in a civil complaint, was “among the first employees to view Harman’s quarterly and annual earnings.” After the first-quarter results were announced, he allegedly liquidated his position, realizing a one-day profit of $131,958.62.

“We allege that Hamilton traded on details known only to company insiders and took advantage of the stock market’s fair and level playing field,” Sharon B. Binger, director of the SEC’s Philadelphia regional office, said in a news release.

Hamilton, 45, was arrested Friday in a parallel criminal case brought by federal prosecutors in Connecticut. He faces up to 20 years in prison if convicted.

According to the SEC, Hamilton reported directly to Harman’s CFO and “has been deeply involved in the preparation of Harman’s earnings announcements,” preparing the CEO and CFO for investor calls and attending audit committee meetings after the close of each fiscal quarter.

On Oct. 18, 2013, the SEC said, he received a draft 10-Q showing Harman’s net sales rose 17% in the first quarter. He also allegedly had access to the draft earnings release and, on Oct. 28, participated in an audit committee meeting to review the earnings documents.

Two days later, “Hamilton spent over $1.2 million to purchase 17,000 shares of Harman stock, using a brokerage account he shared with his wife,” the SEC alleged. After the earnings were released on Oct. 31, the stock jumped more than 12%.

“Hamilton was expressly prohibited from making this purchase because he was in possession of material, nonpublic earnings information, and this purchase occurred during a period where Harman’s employees were not permitted to trade Harman stock at all,”the SEC said.