Begelman was a member of the World Presidents’ Organization (WPO), a global professional group of business leaders who are current or former executives at major companies. Begelman learned of the pending merger negotiations at the WPO annual retreat from a fellow WPO member who was an insider of the target company and the acquiror. The SEC complaint alleges that Begelman violated the duty of trust and confidence he owed to that WPO member. The complaint noted that the WPO has a specific written policy that discussions of a confidential nature are to be kept confidential.
According to the complaint, Begelman illegally traded ahead of the merger announcement for nearly $15,000 in illicit profits. He bought 25,000 shares of the target company at $2.25 per share on November 3, 2011—a couple of days after learning of the pending merger negotiations. On November 14, the merger agreement was publicly announced and the target company’s share price increased to $2.98 per share. On that same day, Begelman sold all 25,000 shares for nearly $15,000 in profits. To settle the charges, Begelman has agreed to pay ore than $30,000 and to be prohibited from serving as an officer and director of a public company for at least five years.