U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17424 / March 20, 2002
SEC v. John Harbottle, Case No. CIV 02-0491 PHX PGR (D. Ariz.).
SEC FILES INSIDER TRADING CHARGES RELATED TO ACQUISITION OF INTERACT COMMERCE CORP.
On March 20, 2002, the Securities and Exchange Commission ("Commission") filed a complaint in federal court in Phoenix, Arizona, alleging illegal insider trading by John Harbottle, age 47, of Scottsdale, Arizona, former Chief Financial Officer of Interact Commerce Corp. The complaint alleges that Harbottle learned that Sage Group plc intended to acquire Interact in early 2001, and that he used this material, nonpublic information to trade in Interact common stock. Interact is located in Scottsdale, Arizona, and is now a subsidiary of Sage.
The Commission's complaint alleges that, in his role as an officer of Interact, Harbottle directly participated in discussions between Interact and Sage in February 2001 concerning a potential corporate transaction. Harbottle also attended a meeting of Interact's Board of Directors on February 13, 2001, during which the Board and senior management discussed Sage's potential interest in acquiring Interact. The Board specifically instructed Harbottle to hire investment bankers to evaluate the potential Sage proposal and to investigate other acquisition possibilities on behalf of Interact. On March 28, 2001, Interact announced that Sage had offered to acquire the company for $12 per share. Interact stock rose 48%, or $3.87 per share, on the news.
The Commission's complaint alleges that Harbottle purchased 5,000 shares of Interact stock in his personal brokerage account on February 14, 2001, the day after the Board meeting, and made an illegal profit of $16,969 when he later sold the stock. The Commission's complaint charges Harbottle with insider trading in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder based on his unlawful trades in Interact stock. Without admitting or denying the allegations in the complaint, Harbottle has consented to the entry of a permanent injunction prohibiting him from committing future violations of the antifraud provisions of the federal securities laws. Harbottle has also agreed to disgorge his illegal trading profits with prejudgment interest, and will pay a civil money penalty of $25,000.