The former director of a North Carolina bank company has been ordered to pay a $45,000 penalty after he allegedly told friends about a confidential merger proposal involving his bank, and his friends used the information to make $115,000 in illegal insider-trading profits, the Securities and Exchange Commission said yesterday.
The SEC released a complaint charging that four residents of Virginia made the profits based on inside information about a merger between Northwestern Financial Corp. of Greensboro, N.C., and First Union Corp. of Charlotte, N.C.
The alleged source of the information was Carlyle W. Higgins of Galax, Va., who was then a director and member of the executive committee of Northwestern Financial, the SEC said.
According to the SEC, the president of Northwestern Financial telephoned Higgins to tell him about the proposed merger while Higgins was vacationing in Florida. Higgins and the other four cited by the SEC, while neither admitting nor denying the SEC's charges, agreed to pay penalties totaling $145,000 to the U.S. Treasury.
The four, John B. Vaughan and T. George Vaughan of Galax, and John W. Parsons and J. Colin Campbell of Independence, also must repay the $115,000, which the SEC said represents their profits from trading in Northwestern Financial stock.
Higgins did not purchase stock, but was liable for a penalty for allegedly disclosing significant non-public information, the SEC said.
The SEC complaint said that Higgins was told of the proposed merger on Feb. 26 of last year. The next morning, John Vaughan, Parsons and Campbell, who were vacationing with Higgins at Hobe Sound, Fla., learned of the merger from him and bought the Northwestern Financial stock for $42.50 and $43 a share, according to the SEC. T. George Vaughan paid $42.50 for his stock after a phone call from his brother John, the SEC said.
On March 4, the acquisition of Northwestern by First Union was announced, and the next day, Northwestern's stock closed at $52 a share, up more than 25 percent.