A former Deloitte tax professional has agreed to pay approximately $144,000 to settle insider trading charges with the Securities and Exchange Commission.
The SEC filed settled insider trading charges against four individuals, including John A. Foley, who served as an employee benefits specialist at Deloitte between July 2005 and May 2007. The others who settled the SEC charges were Aaron M. Grassian, Timothy L. Vernier, and Bradley S. Hale. They were accused of participating in insider trading in the securities of four public companies — Crocs, Inc., YRC Worldwide, Inc., Spectralink Corporation and SigmaTel, Inc. — over a 22-month period, yielding illegal profits totaling $210,580.62.
All four defendants have agreed to settle the SEC’s charges without admitting or denying the allegations. Separately, a fifth individual, Tara R. Eisler, was named in a related administrative proceeding that was simultaneously settled.
According to the complaint, Foley learned, through his work on Deloitte client engagements, material, non-public information concerning Crocs’ first earnings release after the footwear company went public; as well as a potential acquisition of YRC by a third party (that ultimately was not consummated); and the acquisition of Spectralink, via tender offer, by another public company.
Foley allegedly traded in all three companies’ securities based on this material, non-public information through nominee accounts. He also tipped his friends Vernier and Grassian on at least some of this information, and both men traded on Foley's communications.
The complaint further alleges that Grassian later reciprocated by, in turn, tipping Foley concerning the acquisition of SigmaTel by Freescale Semiconductor, after learning of that pending acquisition from his friend and former colleague, Hale, who worked on the acquisition for Freescale. Grassian allegedly traded on Hale’s tips for himself, and also passed them on to Foley, who, in turn, both traded in SigmaTel for himself, and also tipped Vernier and recommended SigmaTel to others, who likewise traded.
The complaint further alleges that Vernier substantially assisted Foley’s insider trading violations by allowing Foley to trade in Crocs securities through Vernier's account, while recklessly disregarding Foley’s breaches of duty to Deloitte and to Crocs. Finally, the complaint alleges that, since Crocs was a Deloitte audit client and Foley served on the Crocs audit team at the time of his Crocs trading and tipping, Foley also committed, and caused his firm to commit, an auditor-independence violation, and caused related issuer-reporting violations by the issuer.
Foley agreed to pay disgorgement of $125,538.61, plus prejudgment interest of $18,697.89, with no civil penalty being imposed against him based on his demonstrated inability to pay. Vernier agreed to pay disgorgement of $50,285.08, plus prejudgment interest of $6,320.29 and a civil penalty of $23,138.07, with no further civil penalty being imposed based on his demonstrated inability to pay. Grassian agreed to pay disgorgement of $34,756.93, plus prejudgment interest thereon in the amount of $4,768.39 and a civil penalty of $34,756.93. No civil penalty will be imposed upon Hale, based on his demonstrated inability to pay.