Corporate Audit Director Charged with Securities Fraud for Allegedly Engaging in Insider Trading

Corporate Audit Director Charged with Securities Fraud for Allegedly Engaging in Insider Trading

 A certified public accountant who was involved in the auditing process at a publicly traded company based in Chicago has been indicted on federal fraud charges for allegedly engaging in insider trading of the company’s securities that made him an illegal profit of more than $286,000 in 2012.

The defendant, Steven M. Dombrowski, who was the director of corporate audit for Allscripts Healthcare Solutions Inc., was charged with 16 counts of securities fraud.

At the same time, the Securities and Exchange Commission announced that it had filed a civil enforcement action involving the insider trading allegations against Dombrowski in U.S. District Court in Chicago.

According to the indictment, Dombrowski misused material, non-public information he knew about Allscripts’ performance for the first quarter of 2012 and purchased put options and engaged in short sales of stock through a trading account in his wife’s maiden name that he controlled, which resulted in illegal profits of approximately $286,211. The indictment seeks forfeiture of that amount from Dombrowski.

Prosecutors said that Dombrowski and the employees he supervised were responsible for auditing and testing the processes and procedures Allscripts used to compute and report its financial performance. Allscripts provides information technology solutions to the health care industry, and its common stock is traded on the NASDAQ stock market under the symbol MDRX.

Between April 10 and April 28, 2012, a quarterly blackout period was in effect at Allscripts. Prosecutors said that the blackout prohibited certain employees, including Dombrowski, who were given written notice and who had access to material, non-public information, from engaging in insider trading 15 days before the end of a quarter and ending after the second full business day following the company’s quarterly earnings announcement.

Dombrowski allegedly learned in April 2012 through his employment that Allscripts’ first quarter financial results were going to be less favorable than market expectations when they were publicly announced on April 26, 2012. Throughout April, Dombrowski conducted securities transactions that he designed to be profitable if the price of Allscripts stock declined, including purchasing put options and short selling stock, which he knew was prohibited, the indictment alleges. Allscripts’ stock, in fact, declined when its 2012 first quarter announcement revealed lower sales, less revenue, and lower earnings per share than the first quarter of 2011, according to the charges.

After Allscripts stock declined on and after April 26, 2012, Dombrowski allegedly offset his Allscripts securities positions and profited approximately $286,211 from insider trading, the charges allege.

 Contact the author at smeyerow@optonline.net

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