The SEC filed a partially settled insider trading case against the now husband of a corporate officer, his long time friend and a broker. Collectively the defendants are alleged to have netted over $1 million in trading profits. SEC v. Murrell, Civil Action No. 2:13-cv-12856 (E.D. Mich. July 1, 2013).
The case centers on the acquisition of Rohm & Haas Co. by The Dow Chemical Company, announced on July 10, 2008. Prior to the acquisition defendant Mack Murrell resided with his now wife Stacey Murrell. She was an administrative assistant to Dow’s CFO. Mr. Murrell had known Defendant David Teekell since high school. Although the two men lived in different parts of the country, they kept in touch and were involved in an investment with others. Mr. Teekell’s long time broker was defendant Charles Adams. Mr. Adams was a registered defendant at Raymond James Financial Services, Inc. which is named as a relief defendant because it obtained trading profits from option positions abandoned by Messrs. Teekell and Adams.
The compliant is built largely on circumstantial evidence, cobbling together the events of take-over deal with emails, telephone calls and securities transactions. In early June 2008 Rhom began discussions about the possible sale of the company with Dow and two others. Discussions proceeded quickly with Dow and by mid-June due diligence was underway and a possible price per share had been discussed. By the end of the month Stacey Murrell and the CFO for whom she worked execute confidentiality agreements. The two women discussed the proposed transaction at the time they executed the agreements.
On July 2, 2009 Dow held a special meeting. The Board approved a cash offer for Rohm at a price of up to $78 per shares. The next morning Mr. Murrell emailed David Teekell asking him to call, noting he had lost the phone number. Later that day the two men spoke in what became a series of telephone calls. That same day Mr. Teekell called his broker, Defendant Adams.
On Sunday July 6 Mr. Murrell left for the Middle East on a business trip. Nevertheless, he continued to communicate with David Teekell. Indeed, over the weekend prior to the trip Messrs. Murrell and Teekell communicated several times by telephone and email.
The next day, Monday July 7, 2008, Mr. Adams made his first securities purchase, buying 1,000 shares of Rohm stock in Mr. Teekell’s SEP IRA account for $45,000. That same day Mr. Teekell went to the brokerage firm, deposited $200,000 and executed forms for option trading. On Tuesday he began purchasing options. Mr. Adams also purchased options that day.
Messrs. Teekell and Adams continued purchasing Rohm shares and options up to the day of the announcement. The day before the public announcement Mr. Adams purchased options for IBM and Cicso in Mr. Teekell’s account. He also tried to sell 180 of Mr. Teekell’s Rohm options. The order did not fill. By the end of the day shares of Rohm closed at $44.83. Following the deal announcement those shares closed at $73.62, up 64%. Mr. Teekell had profits of $534,526. Mr. Adams had profits of $64,450. Two customers for whom Mr. Adam traded through discretionary accounts had profits of $42,596. The complaint alleges violations of Exchange Act Section 10(b).
David Teekell agreed to settle with the Commission, consenting to the entry of a permanent injunction prohibiting future violations of Exchange Act Section 10(b). He also agreed to disgorge his trading profits, pay prejudgment interest and a penalty equal to the amount of the disgorgement. The other defendants did not settle. See also Lit. Rel. No. 22738 (July 1, 2013).