3 to Pay $75,000 to Settle Insider-Trading Case

A Newport Beach businessman and two associates agreed Wednesday to pay more than $75,000 in penalties and profit forfeitures to settle federal charges of insider stock trading relating to the acquisition of San Diego-based Pancretec by Abbott Laboratories last year.

Former Pancretec director Richard W. Dutrisac, John E. McCullough Sr. of Arlington, Va., and his son, John E. McCullough Jr. of Washington, agreed to the settlement with the Securities and Exchange Commission without admitting or denying guilt.

Dutrisac, 50, who owns PFE Inc., a Newport Beach-based medical export company, received information regarding Abbott Lab’s possible bid for Pancretec, a manufacturer of ambulatory drug pumps, in January, 1989, during Pancretec board meetings, the SEC charged in federal court in Washington.

He allegedly passed the information to his friend and business associate, McCullough Sr., who then bought Pancretec stock through his son, a Washington stockbroker. Two months later, on March 17, Pancretec publicly announced it had signed a letter of intent to be acquired by Abbott Labs, the giant Chicago pharmaceuticals company, for about $54 million or $15 a share.

The SEC said McCullough Sr. purchased 4,000 Pancretec common shares through his son last Jan. 23 and March 7 in advance of the offer. McCullough Sr. also recommended to a friend that he buy Pancretec stock, and the friend bought 1,000 shares. In addition, McCullough Jr. passed on the information to clients, who bought Pancretec stock based on his recommendation.

In an interview Wednesday, Dutrisac said he agreed to pay a civil penalty of $13,500 but denied having illegally profited from stock trades, or from knowingly passing on privileged information. Dutrisac agreed to the fines because it was the “least painful of the options” open to him.

“I don’t think I did anything wrong at all, but the SEC has a way of doing these things that if you want to fight it, to litigate would cost $75,000 to $100,000,” said Dutrisac, a Santa Ana resident. “Frankly, I do not have that kind of cash or time, nor do I need those headaches.”

McCullough Sr. agreed to forfeit $17,500, and his son agreed to $13,884 in forfeitures. All but $822 of McCullough Jr.’s forfeiture was waived because of his inability to pay. Also, McCullough Sr. was fined $17,500 and his son $13,884, all but $4,177 of which was waived.

Dutrisac said that at the period in question last year, he was speaking to McCullough Sr. up to 20 times per month to discuss business matters not involving Pancretec and that it was a coincidence that the McCullough stock purchases took place during that time.

At the time Pancretec was purchased by Abbott, the company was growing rapidly with sales of its ambulatory drug pumps nearly doubling from the previous year to an annualized rate of about $12 million, a company source said.

Dutrisac was employed at Baxter International from 1961 to 1979 in several management positions. He then left to start PFE, which primarily exports raw materials used in the manufacture of pharmaceuticals. He left Pancretec’s board after the merger.