James F. Turner II, Clay Capital Management, LLC hedge fund’s chief investment officer has received a one-year prison sentence and a $25,000 fine for insider trading. Turner’s conduct netted over $2.5 million. According to the Bloomberg news service, the sentence is based on Turner’s own admission that he used insider information to illegally trade shares of Salesforce.com Inc. (CRM), Moldflow Corp (MFLO), and Autodesk Inc. (ADSK). Although Mr. Turner may not be feeling lucky, the securities fraud claim against him could have resulted in up to 20 years prison time.
Mr. Turner admitted to receiving tips from his brother-in-law, Scott Vollmar, a director of business development for Autodesk, and from a college friend, Scott Robarge, a manager for Salesforce.com. Mr. Vollmar and Mr. Robarge have also pleaded guilty to charges of conspiracy to commit securities fraud, but they will not be sentenced until next month.
The SEC has filed civil lawsuits against Mr. Turner, Mr. Vollmar, and Mr. Robarge. According the the SEC complaint, Clay Capital’s Clay Fund was operated from 2007 until 2010. Mr. Turner had been a portfolio manager and securities analyst for two different financial services companies prior to founding Clay Capital’s hedge with three partners in 2006.
Based on confidential information that Mr. Vollmar provided to his brother in law in 2008, Mr. Turner purchased $2.3 million in Moldflow shares on behalf of Clay Capital and an additional $3.5 million for Mr. Turner himself and for other members of his family.
The illicit profits resulted from Mr. Turner receiving insider information on three separate occasions. After software company Autodesk announced its purchase of Moldflow, Turner sold the shares, illegally making $650,000 for himself and over $1 million for his family. Turner made an additional $590,000 in illegal profits when Autodesk shares fell after its earnings announcement based on information that Mr. Vollmar passed to him in advance of the announcement. Turner also made $224,000 in illegal profits because Mr. Robarge provided him information that Salesforce.com expected to exceed its earnings estimates in early 2008.
Aside from the money that remains in the Clay Fund, the assets of Mr. Turner and his partners have been liquidated and distributed.
Waters & Kraus is a national firm with highly skilled lawyers practicing qui tam litigation in four offices, including Dallas, Los Angeles, San Francisco, and Baltimore. Our attorneys have decades of experience successfully representing whistleblowers in a variety of fraud cases. Contact us or call our attorneys at 800.226.9880 to learn more about our practice and how we can assist.