A California chap is accused of illegally using inside information to pocket more than $68,000 when Apple took over mobile security biz AuthenTec.
Andrew Kerr, 41, of Livermore, allegedly got a tip-off from his mom about the upcoming acquisition and immediately bought a bunch of shares in AuthenTec. She learned of the deal from her other son, who was vice president of software for the Florid-based biz, it is claimed.
According to a complaint filed today [PDF] in a northern California court by US financial watchdog the SEC, Kerr's older brother was part of the AuthenTec team that flew to Apple headquarters in Cupertino to discuss the coming $356m buyout. He asked his mother to babysit his kids and she agreed. The SEC claims that in the course of that conversation, her son let slip that an acquisition was in the offing.
Two days later, Andrew Kerr had a phone call with his mother. It's not known what was discussed, but less than an hour later he logged onto his brokerage account and purchased 6,140 shares of AuthenTec for $22,469 on margin – meaning he borrowed money from the brokerage to cover the cost of the shares.
He also opened a trading account in his mother-in-law's name and cashed in savings bonds and maxed out a credit card to obtain funds for it, which he also used to buy AuthenTec shares. He continued to liquidate assets to buy more shares from both brokerage accounts until he had just $350 left in his checking account.
The SEC noted that by the time Apple announced that it was buying AuthenTec, Kerr was nearly $50,000 in debt to his brokers – the most in the hole he had ever been by a country mile.
Apple paid 60 per cent above the market price for AuthenTec shares, and as a result, Kerr cleared $57,812 in profits on his own account and $10,627 for his mother-in-law, giving a total of $68,439 in illicit profits, the SEC claims.
The agency has charged Kerr with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder: it wants him to pay back the money with interest, cough up a fine, and do whatever else a judge hits him if – if he's found guilty. ®