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SEC Charges Former Accel-KKR Consultant With Insider Trading: UPDATED

The SEC on Thursday charged Mark Duffell, a former consultant of Accel-KKR, with insider trading. The regulator claims Duffell was involved in discussions involving Accel-KKR’s pending buy of SumTotal Systems in March 2009 when he allegedly began amassing shares in the company in his personal trading account, according to a release. Duffell has agreed to settle the charges against him and pay disgorgement and penalties of over $300,000, the SEC said.

UPDATE: PeHUB received the following statement from Accel-KKR: “The SEC’s complaint makes it clear that Accel-KKR committed no wrong doing whatsoever, was unaware of Mr. Duffell’s personal trading activity, and did not profit from it in any way.”

PRESS RELEASE

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21899 / March 24, 2011
Securities and Exchange Commission v. Mark A. Duffell, Civil Action No. CV-11-1404 EDL (N.D. Cal. March 24, 2011)
SEC Charges Former Consultant at Silicon Valley Private Investment Firm with Insider Trading

The Securities and Exchange Commission today charged a former consultant for Menlo Park, Calif.-based private investment firm Accel-KKR with insider trading. The SEC alleges that Mark Duffell bought shares of Silicon Valley software company SumTotal Systems while he was involved in discussions on AKKR’s behalf regarding a potential acquisition of SumTotal. Without admitting or denying the allegations, Duffell has agreed to settle the charges against him and pay disgorgement and penalties of over $300,000.

According to the SEC’s complaint, filed in U.S. District Court for the Northern District of California, Duffell met with the CEO of SumTotal on March 2, 2009, to discuss a potential acquisition of the company by AKKR. Two days later, while in possession of confidential information about the potential deal, Duffell began amassing shares of SumTotal stock in his personal trading account. Between March 4 and March 5, Duffell paid nearly $90,000 to purchase 65,000 shares of SumTotal stock at a price of $1.33 per share.

According to the SEC’s complaint, AKKR and SumTotal announced publicly on April 24 that they had signed a preliminary merger agreement under which AKKR would acquire the company at a substantial premium to its trading price. SumTotal’s share price jumped to $3.83 per share on the news, giving Duffell a profit of $162,500 on the shares he had purchased during the confidential discussions.

The Commission’s complaint charges Duffell with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Duffell has agreed to settle the SEC’s charges without admitting or denying the allegations. Duffell has consented to the entry of a final judgment permanently enjoining him from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and requiring him to pay $162,500 in disgorgement, $7,163 in prejudgment interest and a $162,500 civil penalty.

See the SEC complaint here