Ohio State professor Roger Blackwell denies the Security Exchange Commission’s accusations that he is guilty of insider trading.
According to the SEC’s complaint filed in the United States District Court of the Southern District of Ohio, Blackwell disclosed non-public information about Kellogg Company’s proposed acquisition of Worthington Foods Inc. to several of his close family and friends, who are also named defendants in the SEC v. Blackwell case. His actions yielded a profit of $245,000 for him and the other defendants.
The day the merger of the two companies was announced, Worthington’s stock price soared from $14.37 to $23.06.
Insider trading refers to when individuals take unfair advantage of information they possess because of a special position they hold in a company, said Joseph Alutto, dean of the Fisher College of Business.
On July 20, 1999, the Worthington board of directors, of which Blackwell is a member, learned of ongoing discussions between Worthington and Kellogg, the SEC said. During the period between July 20 and Oct. 1, 1999, the date the press release was issued announcing the merger agreement, Blackwell allegedly leaked information about the private merger to his family and friends.
Previously, Worthington’s stock had fallen from $18 to $12 a share.
Those Blackwell informed took advantage of the cheap stock price, the SEC said. They bought the stock for $12 and later sold it when Kellogg acquired Worthington, after which the stock increased to almost double its original price.
If convicted, Blackwell may have to give up his profits with interest and he may have to pay a fine. The SEC wants to bar the professor from serving on any public company as an officer or director.
The Fisher College of Business is waiting for the legal process to play out. Blackwell is a person of high integrity, and he is maintaining his innocence, Alutto said.
Blackwell, who has been with OSU for 38 years, denies all of the SEC’s allegations.
“I have a policy as a director to never comment on whether people should buy a stock,” he said. “I follow that policy at all times.”
In addition to being a professor and the president of Roger Blackwell Associates, Blackwell is a heavily sought-after speaker and has served on many public and private corporate boards.
Blackwell donated $7 million to the university to acquire naming rights for the $30.4 million Blackwell Hotel.
According to his Web site, www.rogerbackwell.com, the professor was cited by The New York Times as one of the top speakers in the lecturer’s circuit.
The SEC finds it questionable that Blackwell’s office manager, Kelley Hughes, and her husband, Kevin Stacy, “liquidated positions in other securities, money market accounts and bank accounts” to help pay for their Worthington stock purchases. They also used an interest-free payment of $30,000, given to them by Blackwell, to make additional Worthington stock buys.
The SEC said Hughes and Stacy made more than $100,000 in profits.
In addition, Christian Blackwell, Blackwell’s son, wrote his broker a check to help purchase his stocks, which was returned for insufficient funds, the SEC said.
The SEC said Blackwell made money off of the merger.
Black-Jack Enterprise, an equal partnership between Blackwell and his business associate, Arnold Jack, purchased 2,500 shares of Worthington common stock in September 1999, the SEC said.
“Each order was placed shortly after defendant Jack’s seven-minute phone call to Roger Blackwell’s office on Sept. 7 phone call to Roger Blackwell’s office,” the SEC complaint reads.
However, Blackwell said he sees nothing suspicious about the purchases and the lengths taken to find the money.
“I’m shocked and angered by the fact that they made an inference that I did something wrong,” Blackwell said, referring to the SEC.
“It was quite natural that people who knew me well would buy the stock,” he said.
Those people bought the stocks because the company meant a lot to him, Blackwell said.
Blackwell said those who followed the stock would probably have bought it anyway because they knew it would increase.
Financial analysts had said the stocks should be worth $22 to $24 because of the dividends and profits, and because healthy food is a fast growing business. Worthington is a maker of meat substitutes.
Ten others besides Blackwell were also named in three cases filed in the U.S. District Court in Columbus. Eight of those 10 are from Central Ohio including William D. Parker, the former president of Kroger’s Columbus district.
