Inside scoop on Sun raises SEC red flag
The Securities and Exchange Commission fines a patent lawyer for allegedly profiting from inside knowledge about Sun Microsystems' acquisition of Forte Software.
A case has also been filed against the lawyer, Malcolm B. Wittenberg of Corte Madera, Calif., by the U.S. Attorney's Office for the Northern District of California. On Monday, he was indicted by a grand jury on two counts of insider trading, the U.S. Attorney's office said.
The government alleges that Wittenberg, a partner at the Oakland, Calif., firm of Crosby, Heafey Roach and May, learned of the impending merger from one of Forte's lawyers. Wittenberg was head of the patent department at the law firm, which handled some of Forte's legal work.
Wittenberg could not be reached for comment.
The complaints charge that a lawyer for Forte called Wittenberg on Aug. 16 to discuss the merger and go over some intellectual property issues, and that later that day he bought 1,000 shares of Forte at $13.50 each.
The next day, after discussing the merger with a lawyer for Sun, Wittenberg bought 1,000 more shares at $14.75 each, the government said.
Sun announced its acquisition of Forte Aug. 23, 1999, and Forte's shares jumped up to $21.13 that day. Wittenberg's stock was eventually exchanged for 600 shares of Sun, which he sold Oct. 21, 1999, earning a profit of $14,000, according to the government releases.
The SEC said Wittenberg agreed Thursday, without admitting or denying the allegations, to pay a total of $29,224.67 in fines, including $14,000 in disgorgement of trading profits, $1,224.67 in prejudgment interest and a civil penalty of $14,000.
The maximum penalty for the insider trading charges brought by the U.S. Attorney's office is 10 years in jail and a fine of $1 million plus forfeiture of the investment.