Ex-bank exec in insider trading settlement
An executive of the former Granite Bank and his investment club partner reached a tentative settlement last week with the Securities and Exchange Commission over charges of insider trading, according to federal court documents.
A civil jury trial scheduled for December has been postponed until the SEC approves the settlement — a process that could take months. The terms of the settlement were not released, and attorneys from both sides could not be reached for comment.
Last November, the SEC accused Kevin J. Hobbs of Mont Vernon, former administrative vice president and director of Granite State Bankshares, of using his insider knowledge of a pending merger with Chittenden Corp. to make a quick profit and to tip off a friend, Bruce C. Mayhew of Manchester, so the friend could do the same.
According to the complaint, Hobbs got wind of the merger in October 2002 thanks to separate conversations with a bank compliance officer and loan review officer who were preparing documents for Chittenden, the Vermont-based bank that was conducting its due diligence of the former Keene-based bank as a prelude to the pending merger. The complaint also said that Hobbs talked to fellow employees about the closed-door meetings and unfamiliar cars with Vermont license plates.
In approximately 19 separate transactions in October and early November 2002, Hobbs purchased slightly more than 10,000 shares of stock – roughly worth $345,000 — for himself, his parents and the JLS Investment Club. He also allegedly tipped off Mayhew, a member of the investment club at the end of the October. Mayhew bought 4,700 shares – roughly worth $155,000 — for himself and his mother.
The defendants purchased the stock in the low- and mid-$30 range, but when the deal was announced Nov. 7, shareholders learned that they would receive Chittenden stock worth $46. Hobbs made some $95,000 and Mayhew made more than $51,000, according to the complaint.
In its complaint, the SEC sought for the two to pay back the profits and an unspecified fine. Both Hobbs and Mayhew refused to talk to SEC investigators, pleading the Fifth Amendment against self-incrimination, but in his initial response, Hobbs, while admitting the stock purchases, denied that he had inside information, and therefore could not impart such information to Mayhew.
“There were always conversation with other employees regarding the likelihood of an acquisitions,” and it was not uncommon to see Vermont license plates so close to the border, he wrote in a filing he submitted himself.
Mayhew also admitted the purchases but denied that he was tipped off by Hobbs.
Trial was set for Dec. 13, but on Nov. 15 – one day short of a full year after the charges were filed – lawyers told the court that they had come up with a settlement. – BOB SANDERS