(Reuters) - Three Lawson Software Inc founders agreed to pay about $5.8 million to settle U.S. insider trading charges that they took advantage of incorrect media and analyst reports to trade stock ahead of the company’s 2011 merger.
Monday’s accord resolves Securities and Exchange Commission charges that former Co-Chairman Richard Lawson, 70, tipped his brother William Lawson, 72, and friend John Cerullo, 71, that the company was not the object of a bidding war, and that a lone bidder was offering less than the market price.
The defendants did not admit wrongdoing in agreeing to settle.
Lawson Software on March 14, 2011 announced it had received an unsolicited offer, which it later accepted, to be acquired by Infor Global Solutions and an affiliate of private equity firm Golden Gate Capital for about $1.8 billion, or $11.25 per share.
According to the SEC, media and analyst reports, including from Reuters, were speculating at the time that suitors including Hewlett-Packard Co, International Business Machines Corp, Oracle Corp and SAP AG might offer higher bids, but that Richard Lawson told his brother and Cerullo this was not the case.
The SEC said William Lawson, a third party tipped by him and Cerullo together made over $2 million by selling more than 1.8 million shares at prices inflated by the speculation.
It said that when a definitive $11.25 per share merger for Lawson Software was announced on April 26, 2011, the St. Paul, Minnesota-based company’s stock price fell 8.8 percent.
“When news surfaces about the possibility of a merger and details of the media reports are incorrect, it is illegal for insiders who know the true facts to trade and profit,” Stephen Cohen, an associate director in the SEC enforcement division, said in a statement.
In settling with the SEC, Richard Lawson agreed to pay a $1.56 million fine; William Lawson, who was once Lawson Software’s chief executive, agreed to pay $3.87 million, including a $1.85 million fine; and Cerullo agreed to pay about $373,000, including a roughly $178,000 fine.
Charles Gall, a lawyer for Richard Lawson, declined to comment. Terrence Fleming, a lawyer for William Lawson, did not immediately respond to a request for comment. James Langdon, a lawyer for Cerullo, declined to comment.
Reporting by Jonathan Stempel in New York; Editing by Tom Brown