On December 12, 2019, the US Securities and Exchange Commission settled insider trading charges with three individuals. As alleged in the complaint, John Kenneth Davidson learned from his friend and neighbor material, nonpublic information about merger discussions between Covidien PLC and Medtronic PLC; he shared the information with his friend and fellow oil and gas executive, John Special, with the expectation that Special would keep it confidential and not use it to trade. Instead, Special then purchased Covidien stock and options ahead of the merger being announced to the public, both in accounts that he controlled and in the account of a close friend. According to the SEC, Special liquidated all of his and his friend’s Covidien holdings the morning following the merger announcement, realizing $1.182 million in illicit profits in the accounts he controlled and more than $359,000 in his friend’s account. Davidson’s insider trading generated $19,212 in illicit gains.
Without admitting or denying the allegations in the complaints, Special and Davidson consented to final judgments permanently enjoining each of them from violating the antifraud provisions of the securities laws. Special agreed to pay $1,182,472 in disgorgement, $231,782 in prejudgment interest, and a $1,542,242 civil penalty. Davidson agreed to pay $19,212 in disgorgement, $3,822 in prejudgment interest, and a $19,212 civil penalty. The SEC also named as a relief defendant Special’s friend, Michael Murphy, who consented to a final judgment ordering him to disgorge $359,770, representing profits gained as a result of the trading Special conducted in Murphy’s account.
SEC Litigation Release | Complaint (Special) | Complaint (Davidson)