The SEC continued its war on insider trading, bringing another “family and friends” insider trading action. SEC v. Clay Capital management, LLC, Civil Action no. 2;11-cv-05020 (D. N.J. Filed Aug. 31, 2011). Named as defendants are James Turner and his fund, Clay Capital Management, LLC, along with Scott Vollmar, Mr. Turner’s brother-in-law, Scott Robarge, his friend, and Mark Durbin, and a neighbor of Mr. Vollmar. The trading involved the shares of Moldflow Corporation, Autodesk, Inc. and Salesforce.com, Inc.
Initially, the insider trading scheme centered on the tender offer by Autodesk for Moldflow, announced on May 1, 2008. Prior to the deal announcement Mr. Vollmar, illegally tipped James Turner, his long time close friend and relative, and his neighbor Mark Durbin about the deal. At the time Mr. Vollmar was the director of business development for Autodesk. He had been “heavily involved in the acquisition discussions,” according to the complaint.
Mr. Turner traded while in possession of the deal information, and prior to the announcement, in the twelve accounts he controlled. Those included his account and those of his fund and others belonging to family members. Mr. Turner also tipped his brother-in-law, Scott Robarge who in turn recommended the stock to others. Mr. Durbin is also alleged to have traded prior to the deal announcement. Collectively the traders netted $2.3 million in illicit trading profits according to the complaint.
Subsequently, the scheme focused on the fourth quarter 2008 earnings announcement for Autodesk. Prior to its release on February 26, 2008 Mr. Vollmar again tipped Mr. Turner. He had obtained the confidential information about Vollmar’s division revenues and budget from the company finance manager. Again Mr. Turner traded prior to the release in the same group of accounts. Mr. Vollmar also tipped Mr. Robarge who again traded while in possession of the information. Mr. Robarage also recommended the shares to others. Collectively, the trading in Autodesk shares yielded about $1.1 million in illicit trading profits.
Finally, Mr. Robage is alleged to have tipped Mr. Turner about the pending earnings announcement for Salesforce. Specifically, Mr. Robage, a recruiting technology manager for Salesforce, is alleged to have told Mr. Turner about an earnings announcement due to be released on February 27, 2008. Mr. Robage had obtained confidential information about new customers, sales and other key data by accessing company data bases and learning from superiors that the company would exceed its goals for the period. Mr. Turner again traded in the same group of accounts while in possession of the information and prior to the earnings release. He also told Mr. Vollmer who purchase shares and options in Salesforce. Mr. Robarage also traded on the information prior to the announcement and recommended the stock to other friends. Collectively, the trading in the shares of Salesforce yielded about $500,000 in illicit trading profits according to the complaint. The Commission’s complaint alleges violations of Securities Act section 17(a) and Exchange Act Sections 10(b) and 14(e).
Messrs. Robarge and Durbin settled with the SEC. Each consented to the entry of a permanent injunction prohibiting future violations of Exchange Act Sections 10(b) and 14(e). In addition, Mr. Robarge agreed to pay disgorgement of $232,591 along with prejudgment interest and a penalty equal to the amount of the disgorgement. Mr. Durbin also agreed to pay disgorgement in the amount of $8,391.26 along with prejudgment interest and a penalty equal to the amount of the disgorgement. The other defendants did not settled with the SEC.