Earlier this month, the SEC charged a group of golfing buddies with trading on inside information about American Superconductor Corporation, an energy technology company out of Massachusetts. The group allegedly received more than $554,000 in illicit profits.
The SEC alleges in its complaint that Eric McPhail on numerous occasions gave his golfing friends non-public information regarding American Superconductor. McPhail received the information himself from a close friend at the country club who was an executive at American Superconductor. McPhail’s source informed him of American Superconductor’s expected earnings, contracts, and other major tentative corporate developments from July 2009 to April 2011.
Instead of keeping the information to himself, as McPhail’s source expected, McPhail often emailed the information to his friends. This group included five golfing buddies and one lifelong friend. All six allegedly traded on the inside information and received illegal profits.
The SEC specifically alleges that McPhail tipped two members of the group just a couple of days prior to American Superconductor’s announcement that it expected its fourth-quarter and fiscal year-end results to be down because of its fractured relationship with Sinovel Wind Group Co., Ltd., American Superconductor’s primary customer. The two members of the group took the information, placed bets through option contracts predicting that American Superconductor’s stock would fall, which it did by 42% after the announcement. From this one tip, one member received $278,289 and the other $191,521.
On other occasions, McPhail told his friends about American Superconductor’s quarterly earnings, contracts, and potential drops in stock prices.
The SEC’s complaint charges the group with violating federal antifraud laws and the SEC’s antifraud rule, seeking to have them be enjoined, return their allegedly ill-gotten gains with interest, and pay financial penalties of up to three times their gains. Three members of the group have agreed to settle the SEC’s charges by consenting to the entry of judgments without admitting or denying the allegations.
If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.