SEC Brings Another Insider Trading Case Tied To Golf

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Golf is becoming a recurring theme in insider trading cases. Last month the SEC brought an insider trading action against a group of golf friends. That action, detailed here, was supported by a series of e-mails among the group which documented their scheme. Now the SEC has brought another insider trading case related to golf. This action is also tied to golf but is not supported by e-mails. SEC v. O’Neill, Civil Action No. 1:14-cv-13381 (D. Mass. Filed August 18, 2014).

The action focuses on the June 29, 2010 announcement that Wainwright Bank & Trust Company was going to be purchased by Eastern Bank Corporation. It involves then Eastern Senior Vice-President and Senior Credit Officer J. Patrick O’Neill and Robert Bray, an affiliate of R&B Construction Company.

Mr. O’Neill joined Eastern Bank in early 2010 as a Senior Vice President. At the time he read and acknowledged the insider trading policy of the bank. A few days later the bank asked him to also execute a confidentiality agreement. That agreement stated in part that Eastern was involved in a possible transaction regarding Wainwright and that he would likely receive confidential information. It also noted that he likely would conduct due diligence on the proposed deal and that the information he would obtain was “inside information” under the applicable securities laws. Subsequently, Mr. O’Neil conducted due diligence on Wainwright’s loan portfolios. That work was completed by June 28, 2010.

Messrs. O’Neill and Bray had been friends for many years. Both were golfers and members of the same local country club. Both socialized at the country club bar. The year before Mr. O’Neil joined Eastern Bank R&B Construction hired his college freshman son to do computer work. In June 2010 the son listed Mr. Bray as an employer reference.

On one or more days between May 20 and June 13 the two men were together, according to the complaint. On Monday June 14, 2010 Mr. Bray sold the shares of three other stocks in his brokerage account for total proceeds of over $261,000. He used the proceeds to purchase Wainwright shares. Over a period of days beginning on June 14 he accumulated 31,000 shares of Wainwright stock at a cost of over $288,000. When the deal was announced the share price spiked up 94% giving Mr. Bray profits of almost $300,000.

In August 2010 Mr. O’Neill resigned from the bank after the legal department circulated a FINRA letter which was part of an insider trading inquiry. It iisted names which included his. Just before his resignation from the bank Mr. O’Neill transferred the family home into the name of his wife. Later, when requested to testify during the Commission’s investigation both Mr. O’Neill and Mr. Bray declined to testify, citing their Fifth Amendment privilege. The Commission’s complaint alleges violations of Exchange Act Section 10(b). The case is pending. See Lit. Rel. No. 230790 (August 18, 2014).

The U.S. Attorney’s Office for the District of Massachusetts has filed parallel criminal charges against Mr. O’Neill.

 

Topics:  Enforcement Actions, Fifth Amendment, FINRA, FINRA Hearing Panel, Golf, Insider Trading, SEC

Published In: Criminal Law Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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