Thursday, June 16, 2016

Software Executive and Three Friends Charged With Insider Trading

The Securities and Exchange Commission today announced insider trading charges against a former software company executive and three close friends who made more than a half-million dollars based on his illegal tip about an upcoming merger.
 
The SEC alleges that Christopher Salis, then a global vice president at SAP America, received thousands of dollars in kickbacks for tipping Douglas Miller in advance of SAP’s impending acquisition of Concur Technologies.  Miller tipped his brother Edward Miller and mutual friend Barrett Biehl as they rushed to open online brokerage accounts and make risky, short-term trades in Concur call options so they could profit substantially when the deal was publicly announced.
 
“When corporate insiders exploit confidential information to enrich themselves and their friends, they undermine the level playing field that is fundamental to our capital markets,” said Scott W. Friestad, Associate Director in the SEC’s Division of Enforcement.  “As this and recent cases demonstrate, we are working aggressively to root out and identify insider trading by connecting patterns of trading to sources of material nonpublic information.”
 
According to the SEC’s complaint filed in federal court in Indiana:
  • Salis tipped Douglas Miller in the summer of 2014 when he became aware of plans for the SAP-Concur merger.
  • At the time, the Millers were strapped for cash as co-owners of a car wash with mounting debts.  After being tipped by Salis, Douglas Miller referred to the Concur options trades as “our possible savior” and added, “This is what we all need to weather any storm and put us on top bro!  Just make sure your [sic] a squirrel and sock it away … I hope were [sic] dancing in the streets in the next 4-5 Weeks!” 
  • When a brokerage firm would not accept cash and an electronic transfer would take days to clear, the Millers obtained cashier’s checks and drove a half-hour to the nearest branch office to deposit the money and trade as quickly as possible.
  • Douglas Miller also placed trades in his parents’ account and another friend’s account, and Salis repeatedly accessed the Millers’ online brokerage accounts to monitor the trades.
  • Hours before the public announcement, Douglas Miller began making plans to sell the options, telling a brokerage representative that he was “just trying to prepare [himself] if something happened.”
  • Kickbacks to Salis included at least $10,400 in cash he received only weeks after the merger announcement when he visited Douglas Miller.  Concerned about detection, Salis deposited some of the money before heading to the airport with the rest.  He later texted Miller: “I am through security . . . Ps. Half in my bag, half in my pockets…no problem.”
  • Salis’s startup company later received approximately $80,000 from Miller and his family.
 
The SEC also has linked Salis and Douglas Miller to suspicious trades in 2007 that were made in advance of a tender offer for a company called Business Objects, where Salis worked at the time.  Salis and Miller are charged with this additional count of insider trading in the SEC’s complaint, which alleges illicit profits of more than $42,000.
 
The SEC’s complaint charges Salis, Douglas Miller, Edward Miller, and Biehl with violating Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.  Salis and Douglas Miller also allegedly violated Section 14(e) and Rule 14e-3 of the Exchange Act.
 
The SEC’s investigation was conducted by Brianna Ripa, Amy Friedman, Adam Gottlieb, and Carolyn Welshhans with assistance from John Rymas in the Market Abuse Unit’s Analysis & Detection Center.  The case has been supervised by Mr. Friestad and Robert A. Cohen, co-chief of the Market Abuse Unit.  The SEC’s litigation will be led by Kevin C. Lombardi and Cheryl Crumpton.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority.
 


SEC Press Release

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