After resolving insider trading charges against
Diamondback Capital in the Dell insider trading cases, the Commission filed two
more settled insider trading actions. SEC v. Shafer, Civ. Action No.
1:12-CV-00062 (S.D. Ohio Filed Jan. 24, 2012); SEC v. Ward, Civ. Action
No. 1:12-CV-00061 (S.D. Ohio Filed Jan. 24, 2012).
Each case centers on the acquisition of Oak Hill
Financial, Inc. by WesBanco, Inc., announced on July 20, 2007. Each involves a
chain of traders initiated by an insider who learned about the transaction.
Shafer names as defendants Dale
Schafer, interim CFO of Oak Hill, his cousin, Jason Gonski and the cousin's
friend, Joseph Mroz. On May 14, 2007 the President of Oak Hill advised Mr.
Schafer that the company was in merger negotiations with WesBanco, a West
Virginia based holding company. Although Mr. Mr. Schafer understood that this
was material non-public information that he had an obligation not to disclose,
according to the complaint, he called Mr. Gonski the next day and discussed the
matter. At the time he confided to his cousin, as he had done in the past.
During the conversation Mr. Shafer stated that he was angry over the merger
because it might have a negative impact on his career despite all the personal
sacrifices he had made for Oak Hill.
The day after his conversation with Mr. Schafer, Mr.
Gonski purchased shares of Oak Hill and opened a brokerage account in his
girlfriend's name. In a subsequent telephone conversation Mr. Gonski told Mr.
Schafer about the purchase. Mr. Gonski responded "Okay" and later updated him
on the merger. Mr. Gonski bought more stock in his account and in the account
of his girlfriend. He also told his friend, defendant Mroz, who also traded
through an account which contained his funds as well as those of Mr. Gonski.
Following the deal announcement Mr. Gonski had trading profits of about $43,000
while Mr. Mroz had over $7,400.
In November 2007 Mr. Shafer coordinated Oak Hill's
response to a FINRA questionnaire related to suspicious trading in the shares
of the company. Mr. Shafer indicated that he recognized the names of Messrs.
Gonski and his girlfriend but stated that he had no knowledge why they bought
Oak Hill stock.
The defendants in Ward are Robert Ward, a loan
officer at Oak Hill, Benjamin Lewis, his childhood friend, Jamie Lewis, sister
of Benjamin and Stanley Lewis, father of Benjamin and Jamie. Mr. Ward,
according to the complaint, initially observed a series of events which lead
him to believe that Oak Hill was in merger negotiations. Eventually the
Executive Vice President of the bank told him about the merger negotiations and
that he had a fiduciary duty not to disclose the information.
Shortly thereafter Mr. Ward saw his friend Benjamin Lewis
at a wedding reception and told him about the pending merger. Later Benjamin told
his father Stanley who in turn told his daughter Jamie. Each purchased shares.
By July 20, 2007 the Lewis family had accumulated 10,330 shares of Oak Hill
stock for over $238,000. Following the public announcement Jamie sold her
shares at a profit of over $14,995.58. Stanley Lewis transferred about 4,250
shares to his daughter and sold his remaining shares for a profit of
$46,842.66. Benjamin also sold his shares for a profit of $44,574.55.
All of the defendants settled with the Commission. Each
defendant in each case consented to the entry of a permanent injunction,
without admitting or denying the allegations in the complaint, prohibiting
future violations of Exchange Act Section 10(b). In addition, each agreed to
pay as follows:
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