(Courtesy of the SEC)
SACRAMENTO – Two Bay Area men have settled federal charges that they used information gleaned from their wives about Valley tech companies to profit illicitly in the stock market.
The Securities and Exchange Commission charged San Jose resident Ching Hwa Chen, 61, and Tyrone Hawk, 46, of Los Gatos with insider trading in separate and unrelated civil cases, according to complaints filed in the U.S. District Court for the Northern District of California on Monday. According to the SEC, both men traded on information they overheard listening to their wives’ business calls, reaping nearly $300,000 in total illicit gains.
Documents also filed Monday show that Chen will pay $280,000 in disgorgement, interest and civil penalties to settle those charges. Hawk has agreed to pay more than $300,000. Neither man admitted to or denied the allegations lodged against them.
“Spouses and other family members may gain access to highly confidential information about public companies as part of their relationship of trust,” Jina Choi, director of the SEC’s San Francisco regional office, said in a prepared statement. “In those circumstances, family members have a duty to protect and safeguard that information, not to trade on it.”
Chen is represented by David Cohen of Bay Area Criminal Lawyers in San Francisco. Hawk’s attorney is Edward Swanson of Swanson & McNamara in San Francisco. Both attorneys declined to comment on Monday. Settlement terms in both cases limit what the parties can say publicly about the complaints.
According to the SEC, Chen, in June 2012, was traveling to Reno, Nev., with his wife, the senior tax director at Informatica Corp., when he overheard her talking on the phone with coworkers about the Redwood City company’s expected failure to meet second quarter revenue projections. In the following days, Chen bought put options and sold short Informatica’s common stock. When the software development company’s stock price plummeted 27 percent on July 6 on news of lower revenues, he walked away with $138,000.
Chen’s wife, who was not named in the complaint, “expected him to maintain in confidence any nonpublic information related to Informatica,” the SEC said.
Hawk, too, overheard phone conversations involving his wife, an Oracle Corp. finance manager who was working on the company’s acquisition of Acme Packet Inc. Hawk’s wife, also unnamed in the complaint, told him that “there was a blackout window for trading Oracle securities” because of a pending purchase, the SEC said.
Hawk used the information to buy more than $600,000 worth of Acme stock over a two-week period. After Oracle’s acquisition was announced in February 2013, Acme’s stock price increased by 23 percent. Hawk cashed out, earning $151,480 from the sales.
In the last few years, the SEC has gone after several spouses accused of trading on information misappropriated from their wives. In 2011, William Marovitz agreed to pay $168,352 to settle charges that he used confidential information gleaned from his wife, former Playboy CEO Christie Hefner, to gain a trading advantage in the stock market over a five-year period. Last year, the SEC settled with the husband of a Baker & Hostetler partner accused of using confidential information from her practice to profit on a National Semiconductor deal.
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