SEC v. Stephen H. Guth, Civil Action No. 1:12-cv-00842 (RBW) (D.D.C. filed May24, 2012)
Stephen H. Guth Settles SEC Insider Trading Charge Concerning Omrix Tender Offer
The U.S. Securities and Exchange Commission recently filed a settled civil injunctive action in the U.S. District Court for the District of Columbia alleging that Stephen H. Guth violated Section 14(e) of the Securities Exchange Act of 1934 and Rule 14e-3 promulgated thereunder, by buying Omrix Biopharmaceuticals, Inc. common stock ahead of a November 2008 public announcement that Johnson & Johnson, Inc. was making a tender offer for the outstanding shares of Omrix stock. Guth, a U.S. citizen residing in the United Kingdom, is a self-employed consultant and had been the Chief Financial Officer of Omrix from 1996 to 2000.
The Commission’s complaint alleges the following: On October 3, 2008, after Johnson & Johnson had taken substantial steps to commence the tender offer, Guth received an unsolicited communication from the Chief Executive Officer of Omrix requesting assistance with due diligence questions pertaining to transactions that occurred while Guth worked for the company. In October and November 2008, the Chief Executive Officer of Omrix had additional communications with Guth related to due diligence questions. As a result of his communications with the Omrix CEO, Guth learned that an acquisition of Omrix was likely, and he purchased 7,000 shares of Omrix common stock. Guth purchased Omrix securities while in possession of material information relating to the tender offer, which he knew or had reason to know was nonpublic and had been acquired from an officer of the issuer whose securities were to be sought. On November 23, 2008, Omrix and Johnson & Johnson jointly announced the tender offer. Thereafter, defendant Guth tendered his shares of Omrix stock, realizing profits exceeding $60,000.
Without admitting or denying the allegations in the Commission’s complaint, Guth has consented to entry of a proposed Final Judgment that would enjoin him from future violations of Section 14(e) of the Exchange Act and Rule 14e-3 thereunder, order him to disgorge $63,517, with prejudgment interest of $7,695.49; and impose a civil penalty of $31,758. The proposed settlement is subject to the approval of the district court.