The Securities and Exchange Commission (SEC) has charged James F Turner II and his New Jersey-based hedge fund firm Clay Capital Management, LLC with engaging in an insider trading scheme that involved the securities of three companies – Moldflow Corporation, Autodesk, Inc. and Salesforce.com, Inc.
The SEC also charged Turner’s brother-in-law Scott A. Vollmar, Turner’s friend Scott A. Robarge and Vollmar’s neighbor Mark A. Durbin for their roles in the scheme. In total, the scheme generated illicit gains of nearly USD3.9 million.
Filed in the US District Court for the District of New Jersey, the SEC’s complaint alleges that Vollmar was a director of business development for Autodesk and tipped Turner and Durbin with inside information about Autodesk’s planned tender offer for Moldflow in advance of Autodesk’s public merger announcement on May 1, 2008. Turner traded on the information in his personal accounts, his family members’ accounts and the account of his hedge fund, Clay Capital Fund, LP. Turner also tipped Robarge about the tender offer and recommended that several other friends and family members purchase Moldflow stock. Robarge and Durbin traded on the inside information in their personal accounts. Robarge also recommended that one of his friends buy Moldflow stock. In total, the traders made illicit gains of USD2.3 million from their trading in Moldflow stock.
According to the SEC’s complaint, Vollmar also tipped Turner with inside information about Autodesk’s fourth quarter 2008 earnings in advance of Autodesk’s public earnings announcement on February 26, 2008. Turner traded on the information in his personal accounts, his family members’ accounts and the Clay Fund’s account. He again tipped Robarge and recommended that several other friends and family members sell short Autodesk stock and purchase Autodesk put options. In total, the traders made illicit gains of nearly USD1.1 million from their trading in Autodesk securities.
The SEC’s complaint further alleges that Robarge, a recruiting technology manager for Salesforce at the time, tipped Turner with confidential information about Salesforce’s performance in advance of the company’s public earnings announcement on February 27, 2008. Turner traded on the inside information in his personal accounts, his family members’ accounts and the Clay Fund’s account. Turner also recommended that several other friends and family members, including Vollmar, purchase Salesforce stock and call options. Robarge traded on the information in his personal account and recommended that one of his friends buy Salesforce securities. In total, the traders made illicit gains of nearly USD500,000 from their trading in Salesforce securities.
The SEC alleges that Clay Capital, Turner and Vollmar violated Section 17(a) of the Securities Act of 1933 and that Clay Capital, Turner, Vollmar, Robarge and Durbin violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties. Without admitting or denying the SEC’s allegations, Robarge and Durbin have consented to the entry of final judgments permanently enjoining them from violating Sections 10(b) and 14(e) of the Exchange Act and Rules 10b-5 and 14e-3 thereunder. Robarge also agreed to pay disgorgement of USD232,591.91, prejudgment interest of USD31,884.93, and a penalty of USD232,591.91. Durbin agreed to pay disgorgement of USD8,391.26, prejudgment interest of USD1,110.86, and a penalty of USD8,391.26.
