Insider trading continues to be a key focus of the SEC as well as the DOJ. In SEC v. Griggs, Case No CV 12-2203 (C.D.Ca. Filed March 15, 2012) the Commission brought an action against Noah J. Griggs, Jr., a person who worked his way up at CKE Restaurants, Inc., the operator of the Hardee’s fast food chain, from summer employee to executive vice president of U.S. restaurant operations. Now his career has ended.
The case centers on the acquisition of CKE by private equity fund Thomas H. Lee Partners or THL, announced on February 26, 2010. The deal traces to at least September 2009. At that time Andrew Puzder, CKE CEO, and other firm executives, began meeting with THL officials and investment banking representatives about the possibility of a merger. Subsequently, on Friday, November 20 Mr. Puzder informed his executive team that the company was in discussions about the possibility of being acquired. The CEO cautioned the executives that the information was nonpublic and confidential and that they should not act on it. Mr. Greggs made a presentation at the meeting that day.
On Monday, November 23, 2009 Mr. Griggs purchased 30,000 shares of CKE stock at an average price of $8.76. Over the prior eighteen months he had twice purchased shares in the company. Each was for 10,000 shares.
THL submitted an initial non-binding indication of interest to acquire all the stock of CKE at $10 per share on December 17, 2009. Due diligence was conducted by investment banking personnel at CKE’s offices on January 5, 2010, the same day Mr. Griggs met with the CEO. Three days later Mr. Griggs purchased an additional 20,000 shares of CKE stock at $8 per share.
Following the deal announcement the stock price increased and closed on February 26, 2010 at $11.37 per share. The complaint alleges violations of Exchange Act Section 10(b).
Mr. Griggs resolved the action by consenting to the entry of a permanent injunction prohibiting future violations of Exchange Act Section 10(b) without admitting or denying the allegations in the complaint. In addition, he agreed to pay disgorgement of $145,430, prejudgment interest and a penalty of $11,730. The order also bars him from serving as an officer or director of a public company for ten years.