On August 15, 2022, the SEC charged Ann Dishinger, Lawrence Palmer and his brother Jerrold Palmer with insider trading for illegally tipping and trading in securities of Equifax, Inc. before the company announced its massive data breach on September 7, 2017. The SEC reports that this is the third time that the SEC has filed insider trading charges in connection with Equifax’s data breach announcement. In 2018, two former Equifax employees were also charged by the SEC for illegal trades made before the breach was publicly disclosed.
According to the SEC’s complaint, Equifax’s outside counsel retained a Chicago public relations firm shortly after the breach was discovered in order to assist Equifax with the numerous government and media inquiries that it was expected to receive after the breach was publicly disclosed. The SEC alleges that Dishinger was a finance manager with the public relations firm, at the time, who learned of Equifax’s data breach during the course of her employment. Dishinger allegedly shared this material nonpublic information (MNPI) with her significant other L. Palmer who had a recent mortgage business client purchase out-of-the-money short-term Equifax put options using his own brokerage account. The SEC alleges that L. Palmer reimbursed the business client for a majority of the costs for the put options and, according to the SEC, wrote the words “Blue Horseshoe” in the memo section of the reimbursement check as an apparent reference to the code words used to convey inside information in the 1987 movie Wall Street.
The complaint further alleges that L. Palmer shared the MNPI regarding the Equifax breach with his brother and office mate J. Palmer, and J. Palmer shared the tip with a high school friend who purchased the same out-of-the-money short-term Equifax put options that L. Palmer’s business client had purchased. When the data breach was announced on September 7, 2017, the stock price dropped by nearly 14 percent, allegedly enabling L. Palmer and J. Palmer’s friend to generate unlawful profits of approximately $34,000 and $73,000, respectively. The SEC alleges that J. Palmer’s friend gave approximately $28,000 of his profits to J. Palmer.
In its complaint, the SEC charged all three defendants with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the allegations in the complaint, L. Palmer and J. Palmer consented to the entry of judgment against them and agreed to be permanently enjoined from further violations of the federal securities laws. L. Palmer also agreed to pay more than $11,000 in disgorgement and prejudgment interest and a civil penalty of more than $88,000, while J. Palmer agreed to pay approximately $34,000 is disgorgement and prejudgment interest and a civil penalty of approximately $73,000. The consent judgments are subject to the court’s approval. The SEC’s case against Dishinger continues.
SEC Press Release | SEC Order | Consent of L. Palmer | Consent of J. Palmer