SEC settles insider-trading case with ex-chief of Waste Management

June 2, 2011

A federal enforcement case stemming from a long-ago accounting scandal has ended in a fizzle.

It began with a bang.

In 2003, the Securities and Exchange Commission charged that a former Waste Management executive engaged in insider trading by selling company stock before the company had disclosed financial weaknesses.

In the civil suit, the agency also accused former Waste Management chief accounting officer Bruce E. Snyder Jr. of signing a false or misleading financial report in 1999.

The SEC asked the court to fine Snyder, order him to give up allegedly ill-gotten gains and bar him from serving as an officer or director of a public company.

That didn’t happen.

In a settlement announced Thursday, Snyder was simply ordered not to aid or abet securities violations in the future.

He neither admitted nor denied wrongdoing.

SEC spokesman John Nester said the agency “pursued the matter vigorously and reached a settlement that was appropriate under the circumstances.”

A lawyer for Snyder declined to comment.

At a time when the SEC is under pressure to more aggressively go after executives and firms involved in the financial crisis, the Snyder case shows how cases the agency takes to court can become a struggle.

The SEC alleged that Waste Management overstated its income in the first quarter of 1999, using undisclosed accounting adjustments to narrow the gap between investor expectations and actual results, according to a court document.

In 2006, after a four-week trial in Houston, a jury ruled against Snyder.

But the judge, Keith P. Ellison, rejected almost all of the penalties the SEC sought.

He agreed only that Snyder should give up the profits from the alleged insider trading.

The judge gave a variety of reasons. Snyder’s conduct “was not egregious” and was “isolated rather than recurrent,” the judge wrote. Snyder’s assurances that he wouldn’t do it again were “sincere,” and there was little chance of him committing further violations because the verdict “had made him all but unemployable in the accounting field,” the judge added.

The “devastation” the case had caused Snyder “counseled against . . . additional monetary damages,” the judge wrote.

The judge expressed sympathy for Snyder, writing that he “never, for a moment, entertained any doubt as to the anguish that Defendant and his family have endured through this long-running ordeal.”

Synder appealed the verdict. In 2008, a federal appeals court issued its opinion.

“The SEC offered abundant evidence that Snyder acted with severe recklessness,” the court said.

What’s more, the fact that the Arthur Andersen audit firm approved Waste Management’s financial disclosure should not let Snyder off the hook, the appeals court said.

But the appeals court reversed the verdict and sent the case back for a new trial, saying the jury was given faulty instructions.

Instead of trying the case again, the government last week filed the settlement.

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