Insider trading is one of those activities that you should avoid. If you’re a lawyer, it’s an activity you should definitely avoid. It’s not really all that hard to steer clear of insider trading either. Obviously there are some murky cases, but it’s wise to err on the side of caution.
On the other hand, there are also cases where the SEC says a close friend of a company’s executive is emailing you and telling you which days to buy because “[e]arnings are being released on the 30th along with some good news,” and “[l]ooking forward to getting paid back. Good luck…. SHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!” Those are the cases where you probably should walk away.
Put aside the insider trading: what lawyer is using email to have these conversations?
On July 11, the Securities and Exchange Commission filed a complaint in the District of Massachusetts charging seven men, dubbed the “Golfing Group,” with insider trading. At least it’s the SEC taking on this matter. The men were all very talented amateur golfers and regularly chatted about the sport over email. According to the SEC, they also used this email chain to talk about insider stock tips that one golfer learned from one of his personal friends, a senior executive at American Superconductor Corp.
Kind of a “country club meets country club prison” story.
Among the “Golfing Group” was Massachusetts Golf Association reigning player of the year Doug Clapp, who also happens to be a partner at Holland & Knight.
Per his firm profile, Clapp is “the immediate past Practice Group Leader of the Tax Credit Transactions Group in the Business Law Department.” He’s also “twice an Academic All-American golfer while at Amherst College and he recently has competed in the United States Golf Association’s Amateur and Mid-Amateur Championships and the British Amateur Golf Championship.” Just in case you didn’t know that he really likes golf.
Someone specializing in real estate and tax may not be as attuned to the discoverability of email as a litigator would be, but still…
39. On July 8, 2009, Clapp emailed the Golfing Group about a different company, stating: “Watch what this penny stock WGRL does tomorrow. You’ll be amazed.”
40. The next day, July 9, 2009, McPhail responded to the Group: “WOW…… very nice! Gotta get that out a little earlier. Try this one…. AMSC… watch it July 30th.”
41. On the morning of July 10, 2009, Clapp replied to McPhail only, stating: “Really? I’m interested. What’s the magic of July 31?” McPhail responded to Clapp later that morning: “Earnings are being released on the 30th along with some good news. I dont [sic] know when that day they are being released, so I would own them prior to that day. Now is a good time to buy from what I am told. Depending on how the market does that day, maybe a 20% jump that day?”
Again, not advising that anyone undertake this alleged behavior, but doing so over email would exhibit exceptionally poor judgment. In fairness, as of the July 9 email, there was no indication that McPhail’s prediction was based on inside information. But after divulging that he was aware of good news coming out with the earnings release, it would seem that he had some inside source. At that point, it’d be worth dropping an email to the group explaining that it sounds like this proposed transaction may be improper and that — without representing this as legal advice — no one should act on this. And by no means should the lawyer act on it.
The SEC alleges that after the announcement, the group cashed out, with Clapp specifically pocketing $5,059.
57. After further email banter among the Golfing Group about AMSC during the course of the day, McPhail wrote that evening: “Nice profitable day for the boys. So when should I report in on which restaurant and massage parlor I want to be treated to?”
So we’re just adding to the list of potentially criminal activity discussed on email? Sure, why not? It’s not like they had even heard of the NSA back in 2009, so maybe they had no idea how easy it is to acquire emails.
Looking forward to getting paid back. Good luck…. SHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!
Unless the email is “We’re meeting in the break room at 3 for Cheryl’s birthday,” no email ending in “SHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!” is a good thing. Clapp did not receive this email, according to the SEC, but one of the people who allegedly did was another lawyer, Donald Parigian, a criminal defense lawyer from Lowell. Well, there’s just no excuse for a criminal defense lawyer.
In total, the SEC alleges the group of friends made $550,000 in profit. Not a bad haul for chatting around the golf course.
Clapp has agreed to settle with the commission without admitting or denying the charges, according to authorities. Meanwhile, Parigian is not only facing the SEC, but a federal indictment.
I’m sure he’s up to the challenge. In federal criminal sentencing, as in golf, the lowest score wins.
Golf buddies charged with insider trading [Boston Globe]
Facing SEC charges, golfer/lawyer Parigian now facing federal indictment [Lowell Sun]
Doug Clapp [Holland & Knight]