A former Dow Chemical Co. (DOW:US) executive and two others were accused by U.S. regulators of reaping more than $1 million from illegal trades ahead of a 2008 announcement that the company would acquire Rohm & Haas Co.
Mack Murrell, who was vice president of information services at Dow at the time, obtained confidential details about the takeover plan from his then-girlfriend, who was an administrative assistant to Dow’s chief financial officer, the Securities and Exchange Commission said in a lawsuit filed today in federal court in Michigan.
Murrell then tipped a friend, David Teekell, who in turn passed the information to his broker, Charles Adams, according to the complaint. Teekell and Adams began purchasing common stock and call options in Rohm & Haas the next business day, the SEC said. Adams purchased call options in his own account and bought stock in two discretionary customer accounts.
Rohm & Haas’ stock jumped 64 percent when the merger was announced on July 10, 2008, leaving Teekell with an illicit profit of $534,526 and Adams and his discretionary clients gains of $107,043, the SEC said.
Teekell has agreed to pay about $1.1 million in disgorgement and penalties to resolve the claims without admitting or denying guilt. SEC claims against Murrell and Adams haven’t been resolved.
Raymond James Financial Inc. (RJF:US), the brokerage where Adams was registered and held accounts, was listed as a relief defendant. The St. Petersburg, Florida-based company wasn’t accused of wrongdoing.
Phone calls to numbers listed for Murrell and Adams weren’t immediately returned. A phone call to a number listed for Teekell wasn’t answered.
Dow agreed to buy Rohm & Haas for $15.4 billion in cash in its biggest acquisition ever at the time. Midland, Michigan-based Dow agreed to pay $78 for each Rohm & Haas share, 74 percent more than the previous day’s closing price.
The acquisition was completed in April 2009 after terms were revised to settle a lawsuit over the terms of the deal.
Dow spokeswoman Nancy Lamb declined to comment on the insider-trading litigation.
“Dow is not a party to the litigation; however, we fully cooperated with the SEC investigation,” Lamb said in an e-mailed statement. “Dow takes compliance with insider trading laws and the company’s securities trading policy very seriously, and it is a critical component of our company’s code of business conduct.”
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