SEC investigating alleged insider trading of Massachusetts corp. by golfers

The Securities and Exchange Commission has  announced that a group of golfers may have pocketed illegal profits on nonpublic information resulting in alleged illegal insider trading. There are also criminal charges pending. The allegations involve  trading of shares of American Superconductor Corporation(AMSC), a technology company based in Massachusetts, based on insider information.

A federal grand jury on Friday indicted Eric J. McPhail of Waltham and Douglas A. Parigian of Lowell on criminal charges of conspiracy and securities fraud. The US Securities and Exchange Commission filed civil charges against Parigian, McPhail, and five friends on Friday.

At various times, the complaint says, the AMSC executive petitioned to keep McPhail as a member of the club and paid off a $6,000 gambling debt.

The SEC also says McPhail confided with the executive about his divorce and the terminal illness of a family member.

“The AMSC executive shared confidential information with McPhail because he believed McPhail would maintain its secrecy. When McPhail elicited information about quarterly earnings or other significant corporate news, the AMSC executive perceived his interest in AMSC’s business as interest in the executive’s life,” says the SEC report.

The complaint says, “In breach of the duty of trust and confidence he owed the AMSC executive, McPhail repeatedly misappropriated quarterly earnings information and other sensitive information about AMSC he learned from the executive prior to the release of the information to the public.”

The SEC relied on a long series of emails between McPhail and the other members of the “Golf Club” to use the inside information to make more than $554,000 in illegal profits.

Members of the group allegedly bought and sold shares of the company stock depending on the nature of the news. To leverage their returns, the group also used options, a security giving the purchaser the right, but not the obligation, to buy or sell 100 shares of a company’s stock at a certain predetermined price before a certain deadline.

Jeffrey Newman represents whistleblowers