The civil complaint charges the defendants with securities fraud and asks for financial penalties as well as reimbursement of profits made from the illegal trade off.
The SEC has charged four executives of Steel Technologies, the makers of flat-rolled products, with insider trading of company stock prior to the company’s acquisition, the federal watchdog recently announced.
The Louisville-based company was founded in 1971 and became a public company from 1985-2007 when Mitsui, a Japanese trading firm, acquired it.
The SEC alleges that, prior to Steel’s acquisition, three of the four executives illegally tipped off family members or friends. The high rollers – Patrick Carroll, William ‘Tad’ Carroll, David Mark Calcutt and David Stitt – all vice presidents of sales at Steel, knowingly traded stocks based on confidential information about the company’s acquisition by Mitsui.
The commission says that before gaining inside information about the forthcoming acquisition, Calcutt liquidated nearly all of his company’s stock. However, after he went on a hunting trip with Michael Carroll, Patrick Carroll’s brother, Calcutt started aggressively purchasing Steel stock at higher prices. He then provided information to his brother, Christopher Calcutt, who sold all of his shares in another company for a loss and used that money to buy Steel stock on margin to increase his illicit gains.
All together, the string of eight traders purchased $578,000 worth of Steel stock in the month before the acquisition was publicly announced and they made $320,000 in illegal profits.
‘Our complaint alleges that these high-level salespeople exploited their insider status for monetary gain, and their friends and family knowingly used confidential information to gain an illegal advantage over other traders in the market,’ says Merri Jo Gillette, director of the SEC’s Chicago Regional Office.
