May 9, 2019

SEC enters consent judgment in insider trading case

On May 9, 2019, the Securities and Exchange Commission filed insider trading charges against Lloyd Schuman and Dane Janes in United States District Court for the Western District of Tennessee.  The complaint alleges that Schuman, an internal auditor at Verso Corp., a publicly-held Tennessee paper company, learned in the course of his work that Verso planned to acquire another company.  According to the SEC, Schuman acted on this material nonpublic information by accumulating a large concentration of Verso shares prior to the public announcement of the acquisition, and by tipping a relative – who also purchased Verso shares — about it.  Both Schuman and his relative profited from the 393% rise in the share price when the acquisition was made public.  According to the SEC, Schuman gained $107,000 from this transaction.

The complaint further alleges that Dane Janes, a close friend of Schuman who worked as an internal auditor for a different company, Ashford Hospitality Trust and Ashford Hospitality Prime, tipped Schuman about material nonpublic information he had learned in the course of his work; Schuman acted on the tip, gaining over $15,000 from the information.

The complaint charges Schuman and Janes with violations of the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934, 15 USC §§78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.  Without admitting or denying the allegations in the complaint, Schuman and Janes have consented to a judgment enjoining further violations, and requiring Schuman to pay a civil penalty of $125,134, disgorgement of $122,547, and $21,341 in prejudgment interest.  Janes will pay a civil penalty of $15,150.  

SEC litigation release | Complaint