OKLAHOMA CITY MAN CHARGED WITH INSIDER TRADING
William J. Edwards,
Acting United States Attorney for the Northern District of Ohio, today
announced that an Information was filed charging Robert G. Cole with one
count of Insider Trading (Securities Fraud).
Cole, age 66, resides
in Oklahoma City, Oklahoma.
According to the
information, Cole was a regional sales representative for Diebold, Inc.,
a manufacturer and seller of ATMs, bank security systems, and electronic
voting terminals, located in North Canton, Ohio.
As a publicly traded
company, Diebold adopted an insider-trading policy that prohibited trading
in company securities by corporate employees and insiders, such as Cole,
while in possession of material nonpublic information. This policy covered
the purchasing of "put option" contracts tied to Diebold stock.
A "put option"
contract is a security that gives the purchaser the right to sell 100
shares of the underlying stock for a specified price, which is called
the "strike price," until the expiration date of the option
contract. Generally, the value of a put option contract will increase
as the price of the underlying stock decreases, and will decrease as the
price of the underlying stock increases. Investing in put options can
be very risky. For example, if the option is held to expiration and the
price of the underlying security rises above the strike price, the option
will expire worthless.
The Information alleges
that Cole purchased 470 Diebold put option contracts while in possession
of material, nonpublic information regarding Diebold, including order
and revenue shortfalls which would cause the company to miss its previously
reported revenue forecasts. When this information became public, Diebold's
stock price fell sharply. Cole, having purchased the put option contracts,
profited substantially from the decline in Diebold stock price.
The Information specifically
alleges that between on or about September 13, 2005, and on or about September
23, 2005, on the basis of material nonpublic information regarding an
anticipated earnings shortfall at Diebold, Cole purchased 470 put option
contracts for a total cost of $70,110; when the information became public,
Cole sold the put option contracts for a total of $579,190, obtaining
illicit profits of approximately $509,080, in breach of his duty not to
trade in Diebold stock while in possession of material, nonpublic information
regarding Diebold. The Information seeks the criminal forfeiture of the
full $509,080.
If convicted, the
defendant's sentence will be determined by the Court after review of factors
unique to this case, including the defendant's prior criminal record,
if any, the defendant's role in the offense and the characteristics of
the violation. In all cases the sentence will not exceed the statutory
maximum and in most cases it will be less than the maximum.
This case is being
prosecuted by Assistant U.S. Attorney Justin J. Roberts, following investigation
by the Cleveland office of the Federal Bureau of Investigation and the
United States Securities and Exchange Commission, Division of Enforcement
in Washington, D.C.
An Information is
only a charge and is not evidence of guilt. A defendant is entitled to
a fair trial in which it will be the government's burden to prove guilt
beyond a reasonable doubt.
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