The former chairman, president and CEO of Home Diagnostics Inc. is facing insider trading charges from federal prosecutors and the Securities &Exchange Commission, accusing him of tipping off friends and family to Nipro Corp.’s (TYO:8086) $215 million acquisition of the diabetes monitoring equipment maker last year.
Federal prosecutors indicted George Holley, 70, last week, (the same day the SEC filed its complaint containing similar charges) accusing the Norwalk, Conn., resident of helping friends and family realize some $290,000 in illegal profits reaped from their insider trades of HDIX stock timed to capitalize on the buyout.
Osaka, Japan-based Nipro agreed to pay $11.50 per share for Home Diagnostics (PDF) early in 2010, sending its stock up nearly 90 percent. The companies began negotiating the deal in June 2009, according to court documents, and Holley was privy to the talks. Between Dec. 22, 2009, and Jan. 19, 2010, he allegedly tipped off his friends and relatives that a deal was in the works, including his accountant Scott Dudas of New Jersey, according to the documents (PDF).
Holley allegedly seeded a Merrill Lynch trading account with $120,000 that was used to buy up Home Diagnostics stock ahead of the merger. Along with Phairot Iamnaita, a personal assistant from Thailand with whom he maintained a "close personal relationship," according to the documents, Holley and Dudas bought $40,000 blocks of HDIX stock over three days in January 2010. They allegedly sold the stock in March of that year, after news of the Nipro deal broke, for about $90,120 in profits.
Holley is also accused of tipping off a friend and former neighbor who allegedly bought 2,000 shares before the merger and sold them for $10,450 in profits after the deal went public. He’s also charged with tipping a former employee and longtime friend, who later allegedly realized about $26,700 from selling HDIX stock after the deal; a relative who allegedly reaped $66,100 from stock sales made after the acquisition was announced; and an employee of one of his companies who allegedly brought in $67,910.
Agents from the Federal Bureau of Investigation began questioning Holley’s acquaintances about the trades in December 2010, according to the documents. He then allegedly sent analysts’ reports dated before the merger to some of them, apparently seeking to provide some cover from the feds’ probe.