Insider Trading: Stocks at Home Diagnostics Illegally Purchased by Friends of Its Former Board Chair

Jack Humphrey, Regulatory journalist
January 14, 2011 /

The acquisition of Home Diagnostics Inc. by Nipro Corporation has been marked with violations against federal securities regulations after the Securities and Exchange Commission (SEC) found that an insider trading took place between its former chair of the board and his friends, relatives, and business associate.

In a complaint filed by the SEC at the district court of New Jersey, George Holley, co-founder of the Florida-based diabetes management solutions trader Home Diagnostics, allegedly tipped his personal accountant Steven Dudas and friend and business associate Phairot Iamnaita between December 2009 and January 13, 2010 with inside information about the planned acquisition of the company by Nipro Corporation, a global manufacturer and distributor of medical devices, pharmaceutical products and medical and glass products headquartered in Osaka, Japan.

Dudas and Iamnaita then purchased Home Diagnostics stock in a brokerage account using the $121,500 provided for by Holley as part of the insider trading scheme, the lawsuit said. The insider trading has earned for Dudas and Iamnaita total illicit profits of nearly $90,120 which they tendered after public disclosure of Home Diagnostics takeover.

The commission further claimed that Holley has also provided two individuals close to him with “a cover story giving them copies of analyst reports and telling them that they should use the reports to justify their illicit trading.” The insider trading has earned for the four a combined total of more than $170,000.

SEC’s claim said Holley, Dudas, and Iamnaita violated the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, the general antifraud provisions of the federal securities laws, and Exchange Act and Rule 14e-3 thereunder for tendering the fraudulent offer.

Home Diagnostics agreed to be acquired by Nipro Corporation on February 3, 2010.

 

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