SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16357 / November 17, 1999
SEC Files Complaint Against Six Nashville-Area Residents for Insider
Trading in Stock and Options of Mid Ocean Ltd.; Four Defendants
Simultaneously Settle SEC Lawsuit
Securities And Exchange Commission v. Cristan K. Blackman, Mark C.
Chesnut, Jay T. Deragon, Giles R. Krebs, Robert G. Poole and Charles
R. Roberts, Case No. 3 99-1072 (Echols, J.) (M.D. Tenn.)
On November 16, 1999, the Securities and Exchange Commission (SEC)
filed a civil complaint in the United States District Court for the
Middle District of Tennessee against six Nashville-area residents
alleging insider trading in the securities of Mid Ocean Ltd. (Mid
Ocean) prior to the March 16, 1998 announcement that Mid Ocean would
merge with Exel Ltd. (Exel), a Bermuda-based reinsurance company.
The SEC's complaint alleges that prior to the March 16, 1998
announcement, Jay T. Deragon, an Exel consultant who owns an insurance
consulting business in Hendersonville, Tennessee, became aware of the
proposed merger between Mid Ocean and Exel. The complaint further
alleges that Deragon, in violation of his fiduciary or similar duty of
trust and confidence to Exel, tipped Robert G. Poole of
Hendersonville, Tennessee, about the proposed acquisition of Mid
Ocean. According to the complaint, shortly after Deragon's illegal
tip, Poole told Mark C. Chesnut of Goodlettsville, Tennessee, the
information about Mid Ocean. On or before March 13, 1998, Poole
provided Chesnut with $20,000 to invest in Mid Ocean call options that
would appreciate in value when the proposed acquisition of Mid Ocean
was announced to the public. Using Poole's $20,000, Chesnut purchased
out-of-the-money Mid Ocean call options on March 13, 1998 valued at
$65 per share. Those options would have expired worthless in just six
days if Mid Ocean's stock price (which was $62 per share at the time
of Chesnut's purchase) did not rise above $65. Immediately after the
March 16, 1998 announcement, Mid Ocean's stock price rose as high as
$74 per share, and Chesnut sold the options and, the SEC alleges,
divided the profit with Poole.
The complaint also alleges that prior to the March 16, 1998
announcement, Poole tipped his father-in-law, Giles R. Krebs of
Hendersonville, Tennessee, about the proposed merger. According to the
SEC's complaint, on March 13, 1998, Krebs purchased Mid Ocean stock
which he sold for a profit immediately after the March 16, 1998
announcement.
The SEC's complaint further alleges that prior to the March 16, 1998
SNIPPETS:
SECURITIES AND EXCHANGE COMMISSION
SEC Files Complaint Against Six Nashville-Area Residents for Insider Trading in Stock and
On November 16, 1999, the Securities and Exchange Commission filed a civil complaint in the
The SEC's complaint alleges that prior to the March 16, 1998 announcement, Jay T. Deragon, an
The complaint further alleges that Deragon, in violation of his fiduciary or similar duty of
According to the complaint, shortly after Deragon's illegal tip, Poole told Mark C. Chesnut
Those options would have expired worthless in just six days if Mid Ocean's stock price (which
Immediately after the March 16, 1998 announcement, Mid Ocean's stock price rose as high as
The complaint also alleges that prior to the March 16, 1998 announcement, Poole tipped his
According to the SEC's complaint, on March 13, 1998, Krebs purchased Mid Ocean stock which he
The SEC's complaint further alleges that prior to the March 16, 1998 announcement, Poole
According to the SEC's complaint, Blackman, who is a stockbroker in the Nashville office of
In addition, the complaint alleges that Blackman tipped his brother and three of his clients,
The SEC also announced that simultaneously with the filing of its action, and without
In addition, Deragon consented to pay a civil penalty of $84,678.26, representing the profit
Poole consented to pay disgorgement of $41,000, representing the profit he received from
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