DOJ and the SEC continue to focus on insider trading. In two new cases the U.S. Attorneys Office, New Jersey and the SEC brought insider trading charges centered on the acquisition of Home Diagnostics, Inc. by Nipro Corporation in a deal announced on February 3, 2010.
The SEC filed a civil complaint against George H. Holley, the co-founder of the company. Home Diagnostics is a leading manufacturer of diabetes testing supplies. The Commission’s complaint also names as defendants Steven Dudas, Mr. Holley’s personal accountant, and Phairot Iamnaita, his friend and business associate.
According to the Commission, Mr. Holley told Messrs. Dudas and Iamnaita that Nipro was about to acquire Home Diagnostics. He then furnished the two men with $121,500 to purchase shares of the company. The two men used a joint brokerage account to acquire shares of the company. When the deal was announced the share price for Home Diagnostics increased by 90% over the closing price the previous day. Messrs. Dudas and Iamnaita liquidated their shares yielding a profit of over $90,000.
Mr. Holley also tipped four other persons between December 2009 and mid-January 2010 according to the Commission. Two were friends, one was a relative and a fourth was a business associate. Mr. Holley furnished at least two of those individuals with research reports about the company as a cover story according to the Commission. Each individual traded. Collectively that trading yielded profits of more than $170,000. SEC v. Holley, Case No. 3:11-cv-00205 (D. N.J. Filed Jan. 13, 2011).
Criminal charges were also brought against Messrs. Holley and Iamnaita. Each defendant is charged with conspiracy. According to the court documents Mr. Holley disclosed inside information about the then pending acquisition of Home Diagnostics to at least three other people. U.S. v. Holley (D. N.J.). These cases are in litigation.
Last Friday another Galleon related case moved toward resolution. Former Ropes and Gray associate Arthur Cutillo pleaded guilty to one count of conspiracy and one count of securities fraud. The charges stem from the Galleon investigation. According to the court papers, in 2007 and 2008 Mr. Cutillo and another firm attorney, Brien Santarlas, furnished inside information to a third attorney, Jason Goldfarb. The information concerned the then pending deals involving 3Com Corporation and Axcan Pharma, Inc. Mr. Goldfarb in turn furnished the information to Zvi Goffer who was known as Octopussy because of his multiple sources of information. The information was exchanged for cash. U.S. v. Cutillo (S.D.N.Y.).
Mr. Cutillo is scheduled to be sentenced on April 27, 2011. Mr. Santarlas previously pleaded guilty to similar charges. The criminal cases against Messrs. Goffer and Goldfarb are pending. The SEC also has an action pending against Mr. Cutillo, SEC v. Cutillo, Case No. 09-cv-9208 (S.D.N.Y.) as well as the others involved here.