| SANTA ANA, California
SANTA ANA, California May 21 A lawyer for the
U.S. Securities and Exchange Commission urged jurors Wednesday
to hold a former technology chief executive liable for trading
on inside information that the regulator says enabled him and
his brother to reap roughly $260 million.
John Berry, the SEC lawyer, said during opening statements
in Santa Ana, California, federal court, that former sTec Inc
CEO Manouchehr Moshayedi traded in a secondary offering of the
company's stock in 2009 while knowing a major customer's demand
for a flagship flash memory product was less than expected.
"This case is about a CEO of a tech company and what he was
willing to do to make millions of dollars," Berry told jurors in
the civil trial.
But Patrick Gibbs, Moshayedi's lawyer, countered that the
SEC's claims were "completely misleading."
"The SEC's story is just that, a story," he said. "It's not
The case is the latest test of the regulator's power amid a
push by SEC Chair Mary Jo White to strengthen enforcement and
take more cases to trial.
The trial comes roughly a week after a federal jury in New
York sided with the SEC, finding Texas businessman Samuel Wyly
and the estate of his brother, Charles, liable for fraud in
connection with undisclosed stock trading in offshore
In 2009, Moshayedi, 55, had been planning to sell a large
portion of his sTec stock holdings and those of his brother,
Mark Moshayedi, who co-founded the company, the SEC said.
The offering would coincide with sTec's second-quarter
results and next quarter guidance in August 2009.
Berry said before the offering, Moshayedi learned that
demand from sTec's largest customer, EMC Corp, for its
flash memory drive would be less than expected. EMC also told
Moshayedi it would not renew a $120 million supply contract,
These details weren't disclosed to investors until November
Rather than "take his lumps" and cancel the August stock
sale, Berry said Moshayedi entered into a secret side deal with
EMC to meet quarterly analyst estimates.
The offering allowed Moshayedi and his brother to earn $134
million each, the SEC said.
"He buried the bad news and by the time he told the truth,
his $130 million was safely in his bank account," Berry said.
Gibbs, though, said Moshayedi didn't know EMC would have
excess inventory, reducing demand. Moshayedi continued to
believe EMC would order more drives, and retained millions of
shares even after the offering.
"He still had enormous skin in the game," Gibbs said.
The SEC in an October court filing said if successful, it
would seek to have Moshayedi disgorge $167.6 million, plus
The SEC also investigated sTec and Mark Moshayedi, but
notified both in 2012 it would not bring a case against them.
Western Digital Corp acquired sTec last year for $340
The case is Securities and Exchange Commission v.
Moshayedi, U.S. District Court, Central District of California,
(Additional reporting by Nate Raymond in New York; Editing by
Noeleen Walder and Eric Walsh)