Washington, D.C., Nov. 28, 2012 - The Securities and Exchange Commission today announced charges against the former CEO of a Denver-based oil-and-gas company at the center of an insider trading scheme that the SEC began prosecuting last month.
According to the SEC's complaint, the insider trading occurred in advance of Delta Petroleum Corporation's public announcement that Beverly Hills-based private investment firm Tracinda had agreed to purchase a 35 percent stake in the company, which shot its stock value up by nearly 20 percent. The SEC initially charged insurance executive Michael Van Gilder for his illegal trading in the case, and is now additionally charging his source: Delta's then-CEO Roger Parker.
*SEC Amended Complaint
The SEC's amended complaint alleges that Parker, who lives in Englewood, Colo., illegally tipped his close friend Van Gilder and at least one other friend with confidential information about Tracinda's impending investment. Despite his duty as CEO to protect nonpublic information, Parker repeatedly communicated with Van Gilder following meetings and other developments as the deal progressed. Parker also illegally tipped information about Delta's quarterly earnings. The insider trading in this case generated more than $890,000 in illicit profits.
"Parker was entrusted with highly confidential information, and he betrayed that trust to help line the pockets of his close friends," said Sanjay Wadhwa, Deputy Chief of the SEC Enforcement Division's Market Abuse Unit and Associate Director of the New York Regional Office. "Company officials who exploit their insider status must realize that they do so at the risk of inviting SEC scrutiny."
According to the SEC's amended complaint filed late yesterday in federal court in Denver, Parker tipped Van Gilder and another friend on several occasions in late November and December 2007 as the Tracinda investment was developing. Based on the inside information, Van Gilder and the other friend loaded up on Delta stock and highly speculative options contracts, and Van Gilder advised his relatives, his broker, and a co-worker to do the same.
The SEC alleges that the Tracinda announcement was not the only nonpublic information that Parker tipped to Van Gilder. In November 2007, Van Gilder received an e-mail from a mutual friend of Parker's that included a news article expressing a negative view of Delta's future prospects. After sending an e-mail to his broker indicating he might want to sell the Delta securities that he owned, Van Gilder called Parker three times that evening. Parker conveyed to Van Gilder confidential details about Delta's third quarter 2007 earnings results that were to be announced later that week. Rather than sell his Delta stock, Van Gilder purchased an additional 1,250 shares and responded to the e-mail from the mutual friend by writing, "I had a dialogue with a friend, of whom you know. Do not sell this stock, rather buy more ... Delta will hit their numbers at this Thursday's announcement." When Delta announced its earnings, it reported production and revenue numbers above the company's previously stated guidance.
The SEC's amended complaint charges Parker and Van Gilder with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The amended complaint seeks a final judgment ordering them to disgorge their and their tippees' ill-gotten gains plus prejudgment interest, ordering them to pay financial penalties, and permanently enjoining them from future violations of the above provisions of the federal securities laws. The SEC also seeks to prohibit Parker from acting as an officer or director of a public company.
The SEC's investigation, which is continuing, has been conducted by members of the SEC's Market Abuse Unit -- Michael Holland and Joseph Sansone in New York and Jeffrey Oraker and Jay Scoggins in Denver -- with substantial assistance from Neil Hendelman of the New York Regional Office. The SEC's litigation is being handled by Thomas Krysa, who is Regional Trial Counsel in the Denver office, as well as Mr. Oraker and Mr. Holland.
The SEC thanks the U.S. Attorney offices in the Southern District of New York and the District of Colorado as well as the Federal Bureau of Investigation for their assistance in this matter.