November 8, 2022

SEC settles with Texas resident to resolve insider trading allegations

On November 4, 2022,  the Securities and Exchange Commission announced that it reached a settlement with Michael E. Mueller, a resident of Texas, to resolve insider trading charges in connection with the unlawful purchase of Layne Christensen Company securities before its acquisition by Granite Construction Inc. was publicly announced in 2018.  The SEC reports that this action is related to a matter that the SEC recently settled on September 20, 2022 with Mueller’s childhood friend and broker John P. Mendes and mutual friend Andre Dabbaghian who worked for Granite and played an integral role in its acquisition of Layne.

According to the SEC order, in November 2017, Mendes recommended that Mueller purchase Layne securities and shared material nonpublic information (“MNPI”) regarding the impending Layne acquisition that Mendes had received from their mutual friend Dabbaghian – information that Dabbaghian had shared in breach of the duty he owed to Granite. Based on this MPNI, between November 2017 and February 2018, Mueller authorized Mendes to make purchases of Layne securities using Mueller’s brokerage account.  The SEC further alleges in its order that, in December 2017, Mueller recommended that a relative purchase Layne securities based on this MNPI, and the relative purchased 8,500 shares of Layne stock before the acquisition was announced publicly.  When Granite announced its plans to acquire Layne in February 2018, Mueller and the relative sold their Layne securities and realized profits of more than $38,000 and $14,000, respectively.  

In the order, the SEC accuses Mueller of violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  Mueller consented to the SEC’s entry of the order against him and, without admitting or denying the allegations, agreed to cease and desist from future securities violations.  Mueller also agreed to pay approximately $38,000 in disgorgement, just over $8,000 in prejudgment interest, and a civil penalty of more than $52,000.

SEC Press Release | SEC Order