One of the two chief financial officers charged by the
Securities and Exchange Commission in an $8 million insider trading
ring worked at activist hedge-fund firm ValueAct Capital at the
time of those alleged trades, ValueAct confirmed Friday.
Ronald Yee, who was charged with giving his brother-in-law
inside information about Acxiom Corp. (ACXM), worked as chief
financial officer of ValueAct at the time.
George Hamel, a partner, co-founder and chief operating officer
at ValueAct, told Dow Jones Newswires the SEC notified ValueAct in
early 2008 that they were investigating some transactions involving
Yee and Acxiom's stock. A few weeks later, Yee was placed on
administrative leave. He voluntarily left the firm in June
2008.
ValueAct received a no-action letter from the SEC, meaning it
wasn't the target of an investigation.
"If in fact Ronald did anything, he did it as an individual,"
Hamel said.
One of ValueAct's founders is Jeff Ubben, who used to run the
Fidelity Value Fund and served on Acxiom's board of directors from
August 2006 to October 2008. Ubben isn't a target of the
investigation.
In a civil lawsuit filed in a California federal court, the SEC
said that 39-year-old Chen Tang of Fremont, Calif., learned about
non-public information while working as the chief financial officer
of a private-equity fund and from receiving illegal tips from Yee,
his brother-in-law. The SEC doesn't name their firms in the
complaint.
The SEC said that Tang and his trading partners, which included
his brother and friends, traded on the information through their
personal brokerage accounts and retirement accounts, the accounts
of various relatives and also through the accounts of privately
offered investment funds that Tang and his friends managed.
"As the CFO of a private-equity firm, Tang was entrusted with
highly confidential and material information, and he violated that
trust by misusing the information to generate enormous illegal
profits," said Rose Romero, the director of the SEC's Fort Worth
Regional Office.
After a buyout of Acxiom was announced in the spring of 2007,
the SEC said that Yee learned the deal was facing trouble and
passed the information to Tang. Tang then tipped off his friends,
his brother James Tang and Yee's brother Eddie Yu. ValueAct and
private equity firm Silver Lake Partners in 2007 agreed to buy
Acxiom, but the deal fell through in October 2007.
The SEC complaint says that on May 2, Chen Tang speculated on a
Yahoo! Inc. (YHOO) message board that an Acxiom sale might be in
the works, reasoning that the Acxiom CEO had stopped selling
shares. "In reality, however, his statement was based on the inside
information he had previously received from his brother-in-law
Ronald Yee," the complaint says.
A Yahoo! spokeswoman said, "Yahoo complies with legal process to
the extent permitted by Federal law. For a variety of reasons,
including the protection of our users' privacy, Yahoo! does not
discuss the details of individual cases."
A search Friday of the word "Acxiom" on the Yahoo message boards
shows a five-year gap in messages between July 2002 and October
2007.
An Acxiom spokesman said, "There is no allegation that Acxiom or
any current or former employees did anything improper, and the
indictments have no implications for Acxiom's business or its
people. Apart from one individual in the employ of a venture
capital fund that made a failed attempt to buy Acxiom, the
defendants had nothing to do with our company."
Tang also allegedly profited on private information regarding
Tempur-Pedic International Inc. (TPM) after he learned of plans by
his firm to make a large purchase of Tempur-Pedic securities a few
days after the pre-announcement. On the same day of the purchase,
Tang and his partners sold their Tempur-Pedic stock holdings and
subsequently reaped $800,000. Tempur-Pedic didn't return a call
seeking comment.
Tang also traded on confidential information after learning in
2008 about a pending surprise pre-announcement that Tempur-Pedic
wouldn't meet its earnings forecast, the SEC said.
He then tipped off his friends Joseph Seto of San Francisco,
Ming Siu of Hayward, Calif., and Zisen Yu of Fremont. All three
traders also were charged in the SEC's complaint along with Yee,
Tang's brother James Tang of San Gabriel, Calif., and Yee's brother
Eddie Yu of Fremont.
The SEC said that when Tempur-Pedic made its pre-announcement,
the traders made $1.2 million in illegal profits.
A spokesman for San Francisco private equity firm Friedman
Fleischer & Lowe said that Chen Tang worked there, but that the
firm immediately suspended and later fired him after it was
notified of the SEC investigation, in April 2008.
It appears that some of the alleged trading under scrutiny
occurred when Tang was at the firm.
Tang's attorney, Jahan Raissi, with Shartsis Friese, said, "We
disagree with the SEC's allegations. And, unfortunately, Mr. Tang
will have to clear his name in court."
Michael Celio, at Keker & Van Nest LLP, a lawyer for Yee,
said, "Mr. Yee denies he did anything wrong and intends to contest
the charges vigorously."
A lawyer for co-defendant Seto said he will review the complaint
when he receives it and decide what action to take. The lawyer said
he was retained by Seto in April 2008 when he received a
subpoena.
Lawyers for the other co-defendants didn't immediately return
calls seeking comment.
-By Joseph Checkler; Dow Jones Newswires; 212-416-2152;
joseph.checkler@dowjones.com
(Sarah N. Lynch, Jennifer Rossa, Jessica Papini, and Joe Bel
Bruno and Ben Charny contributed to this article.)
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