A DAUGHTER AND FATHER INSIDER TRADNG RING

Many insider trading cases turn out to be “all in the family,” involving various family members who have access to, and trade on, inside information. Sometimes spouses trade together. Other times one spouse betrays the trust of another by using information revealed in confidence to illegally trade. Some of the cases involve brothers, sisters and friends.

The Commission’s latest family insider trading ring is built on the close relationship between a daughter and her father. Daughter Angela Milliard was a paralegal in the three person law department of Kalispell, Montana based Semitool, Inc., a semiconductor corporation. Father Kenneth Milliard is a retired business executive in Columbia Falls, Montana. Daughter and father spoke on the telephone frequently. Those phone calls, and stock trading done at times during the calls and in other instances shortly after the call concluded are the predicate for the SEC’s insider trading action against them. SEC v. Milliard, Case No. CV 12-73 (D. Mon. Filed May 7, 2012).

The case centers on the announcement of a tender offer for the shares of Semitool by Applied Materials, Inc. prior to the opening of the market on November 17, 2009. In October 2009 Ms. Milliard became a key member of the deal team. She managed the due diligence process and reviewed draft merger documents, SEC filings and board minutes. The documents contained the terms of the deal including the announcement date and the fact that the tender offer would be at $11 per share, a premium to the then market price of $7.83.

From the end of October through Mid-November as Ms. Milliard worked on key aspects of the pending deal she repeatedly telephoned her father. The two purchased company shares as did other family members at the behest of Mr. Milliard. For example:

• October 27: Ms. Milliard was placed in charge of the due diligence. Over the course of 50 phone calls over a three day period beginning on October 27 between daughter and father, Mr. Milliard purchased 500 Semitool shares while his daughter purchased 400.

• November 9: Outside counsel e-mailed Ms. Milliard a draft merger agreement to review. She called her father two hours later and again the next morning. Father purchased 5,000 shares as the conversation continued.

• November 12: Outside counsel gave Ms. Milliard draft board minutes dated for November 16 which approved the deal with handwritten edits. At the same time the board was meeting to give preliminary approval. A phone call was placed by daughter to father. She also wired $38,000 to her boyfriend’s brokerage account. The same day an additional 5,000 shares was purchased in that account from a Semitool computer.

• November 12/13: Prior to the November 16 date for the approval of the merger, Ms. Milliard and her father spoke three more times. Within minutes of the calls Mr. Milliard purchased 5,000 shares while Ms. Milliard bought another 300 in her account.

When the market opened on November 17 following the announcement of the tender offer, the share price rose. By the end of the day Semitol’s shares closed up 30% at $11.05. The family sold its shares. Ms. Milliard had profits of $20,355. Her father had profits of $33,667.11. Other family members had profits of $14,138. Collectively, the family had illegal trading profits of $47,805.11. The complaint alleges violations of Exchange Act Sections 10(b) and 14(e).

Daughter and father settled with the SEC. Each consented to the entry of a permanent injunction prohibiting future violations of the Sections cited in the complaint. Ms. Milliard also agreed to pay disgorgement of $20,355 along with prejudgment interest and a civil penalty of $54,022.11. Mr. Milliard agreed to disgorge his trading profits and those of his sons, totaling $47,805 along with prejudgment interest and a penalty equal to the amount of the disgorgement.