SEC Accuses Executive in Irvine of Insider Trading
The Securities and Exchange Commission on Wednesday accused an Orange County executive of insider trading, alleging that he used confidential information about a pending merger to make an overnight profit of $11,000 in the stock market for himself, his mother-in-law and a friend.
Dennis W. Evans of Mission Viejo allegedly carried out a scheme to profit from inside information about the acquisition of Irvine-based Ultrasystems Inc. by Hadson Corp. of Oklahoma City, according to a civil complaint filed by regulators in U.S. District Court in Los Angeles.
Evans, currently the controller of a Hadson subsidiary in Irvine, could not be reached for comment. Ultrasystems, now a unit of Hadson and Evans’ former employer, issued a statement Wednesday saying Evans denies the charges.
The SEC has alleged that Evans, 37, overheard a conversation sometime around Oct. 28, 1987, between Ultrasystems Chief Executive John Dean and another executive concerning a merger with Hadson Corp., a diversified concern in the energy and defense contracting industries. At the time Evans was the controller of Ultrasystems Defense & Space Inc., a subsidiary in Irvine.
Stock Price Soared
On Oct. 29, Evans asked a friend to open a brokerage account and buy 2,000 shares of Ultrasystems stock, according to the SEC lawsuit. The friend allegedly did as Evans asked and then bought 1,000 shares for himself. Evans’ mother-in-law allegedly purchased 800 shares for her own account based on his recommendation.
On Oct. 30, 1987, Ultrasystems announced its intent to merge with Hadson, and the company’s stock soared to $8.75, up $2.875 a share.
Evans made a profit of $6,000 and his friend and mother-in-law made $5,000, according to regulators. Evans’ friend and mother-in-law were not named or charged in the lawsuit.
The SEC is suing Evans for $11,000 plus penalties of up to $18,000 and is asking that the court issue an injunction preventing him from engaging in insider trading. If the injunction is violated, Evans could be held in contempt of court.
“There is no allegation here that those individuals knew that the recommendation they received was based on insider information,” said Harry Weiss, assistant director of the SEC’s enforcement division in Washington.
Ultrasystems said Evans would remain controller of Hadson Defense Systems pending the outcome of the suit.
But the SEC said it was concerned about Evans’ role in the company. “This is a case against an individual who was a corporate officer and continues to be a corporate officer and on that basis, continues to have access to confidential corporate information,” said Weiss.
