June 13, 2014 — Three founders of Lawson Software have been charged with insider trading by the Securities and Exchange Commission (SEC). Board members and executives often come into possession of nonpublic insider information that could be used to make a personal profit. But tipping or trading on confidential information is a crime. Under the whistleblower program established in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010, informants who notify the SEC about insider tipping or trading may be rewarded for their courage in collaborating with the government.
Co-Chairman of Board Allegedly Tipped Brother And Friend With Nonpublic Information In Advance of Lawson Software’s Impending Merger
In 1975, Herbert Richard Lawson, William Lawson and John Cerullo founded Lawson Software in Minnesota. William Lawson and Cerullo both retired from the company in 2001, but Richard Lawson stayed on as co-chairman of Lawson Software’s board of directors.
In 2011, the company was engaged in merger talks with Infor Global Solutions, a privately-held software maker. Lawson Software’s share price was on the rise after the media reported that the company might be sold to the highest of multiple bidders.
Richard Lawson, however, knew what the analysts did not — that there was just one bidder and that the offered merger share price was quite a bit lower than the amount bandied about in the press.
At that point, Richard Lawson allegedly tipped off both William Lawson and Cerullo with nonpublic information about the merger negotiations. William Lawson acted promptly to sell over one million shares of his holdings and suggested that a trader he knew should also sell Lawson Software shares. Cerullo, too, acted on the tip, selling 175,000 of his Lawson Software shares.
When the merger agreement was announced and the lower-than-anticipated stock price became public, Lawson Software’s stock value fell 8.7 percent. By dumping their shares in advance of the announcement, Lawson and Cerullo profited by more than $2 million.
To resolve the SEC’s charges, the three men have consented to pay a total of almost $5.8 million, including disgorgement, prejudgment interest and penalties.
Whistleblowers Notify SEC of Insider Trading
Company employees who discover insider trading schemes should work to understand the Dodd-Frank whistleblower process before notifying the government. The SEC fraud lawyers at Waters & Kraus have the experience necessary to safeguard tipsters’ rights in insider trading cases. Contact us by email or call our qui tam lawyers at 855.784.0268 to learn how we can work together to do the right thing.
