The Securities and Exchange Commission today filed insider trading charges against two internal auditors who repeatedly traded on and/or tipped confidential information that they obtained through their respective employers.
The SEC’s complaint, filed in the U.S. District Court for the Western District of Tennessee, alleges that Lloyd Schuman, of Cordova, Tennessee, learned that his employer, Verso Corporation, had confidential plans to acquire privately-held NewPage Holdings Inc. According to the SEC’s Complaint, Schuman purchased Verso shares before Verso publicly announced the acquisition. Schuman also allegedly tipped a relative, who also purchased Verso shares before the public announcement. Immediately after the announcement, Schuman sold all of his Verso shares realizing more than $107,000 in profits. Schuman’s relative also sold his Verso shares, realizing more than $2,500 in profits.
The SEC further alleges that Schuman also engaged in insider trading based on tips that he received from his close friend, Dane Janes, of McKinney, Texas. Janes worked for Ashford Hospitality Trust and allegedly obtained confidential information through his employer about Ashford Hospitality Trust and Ashford Hospitality Prime, including plans to issue more shares and a quarterly earnings release. According to the SEC’s complaint, Janes tipped Schuman with this information before it became public. Schuman allegedly traded based on Janes’s tips, avoiding $10,478 in losses and realizing profits of $4,672.
Without admitting or denying the allegations in the SEC’s complaint, Schuman and Janes consented to a permanent injunction prohibiting them from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Schuman further agreed to pay $122,574 in disgorgement, $21,341 in prejudgment interest, and a civil penalty of $125,134. Janes agreed to pay a civil penalty of $15,150.
This is the second insider trading case that the SEC has filed arising from Verso’s acquisition of NewPage.
The SEC’s investigation was conducted by Brianna Ripa and Andrew Elliott and was supervised by Carolyn Welshhans and Amy Friedman, with the assistance of trial counsel Matthew Scarlato, supervised by Jan Folena. The SEC thanks the Financial Industry Regulatory Authority for its assistance in this matter.