The US Securities and Exchange Commission has settled with two of three former Dell accountants accused of insider trading.
The SEC filed civil charges in September 2006 against former Dell employees Salvador Chavarria, John Nieto and Glen Leftwich in US District Court in Texas.
The Commission alleges that the three accountants engaged in unlawful insider trading ahead of a public announcement on August 11, 2005, that Dell's Q2 06 revenues would fall short of previous guidance and analyst forecasts. The men allegedly purchased put options before the news while in possession of nonpublic information about Dell's performance.
The bad news made Dell's stock price decline by more than seven per cent. By selling their options, the SEC said Chavarria made profits of $153,240, Leftwich, $81,658; and Nieto, $16,677.
According to the complaint, Leftwich further dabbled in insider trading by purchasing Dell securities in advance of an earnings release on October 31, 2005, announcing Dell's failure to hit its earning target for the third quarter 2006. That bit of news caused a 8.3 per cent decline in Dell's stock price. The following day Leftwich sold the puts and bagged a profit of $24,769.
This was also around a time that their accounting skulduggery was more widespread, Dell has admitted.
Without admitting or denying the allegations, Chavarria and Nieto agreed to settle with the SEC by returning their profits and paying civil penalties. Chavarria was ordered to pay $16,673 in prejudgment interest and a $153,240 civil penalty. Nieto paid $2,059 in prejudgment interest and a $16,677 fine.
The case against Leftwich remains pending. ®