On September 17, 2020, the US Securities and Exchange Commission filed a complaint charging Steven J. Sheinfeld with illegally trading on material nonpublic information about his then-employer, Rite Aid Corp. According to the complaint, Sheinfeld worked for 23 years at Rite Aid, and in 2017 was serving as Vice President of Internal Assurance Services and Chair of the company’s Policy Oversight Committee, when he learned that the closing deadline for a planned merger between Rite Aid and Walgreens Boots Alliance, Inc., would not take place before the scheduled closing deadline. As alleged in the complaint, despite his employer’s explicit prohibition on insider trading – and despite Sheinfeld’s own role in overseeing compliance with Rite Aid’s Code of Business Ethics & Conduct – he liquidated his own Rite Aid holdings and those of two family members, avoiding over $155,000 in losses when information about the stalled merger was publicly announced.
The SEC claims that Sheinfeld’s conduct violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks a civil penalty and injunctive relief.
In March 2020, the SEC entered into a consent judgment with another former Rite Aid vice president, David M. Mahan, who was charged with selling his own Rite Aid stock upon learning that the Rite Aid-Walgreens merger would not take place as scheduled. Mahan agreed to be permanently enjoined from further violations, and to the payment of a civil penalty of $87,277, and disgorgement of the same amount plus prejudgment interest.