Two former vice presidents at Countrywide Financial Corp. settled an
insider-trading lawsuit with the Securities and Exchange Commission that claimed they profited from trades using
yet-to-be-released company earnings reports. They agreed to pay back their earnings plus interest and paying a fine
equal to their profit.
Prior to earnings reports during the third quarter of 2004, Cao used inside information to turn a profit, by borrowing 15,000 shares of the Calabasas, Calif.-based lender’s stock then selling it prior to the earnings report. To cover the short-sale, he repurchased shares shortly after the earnings announcement precipitated a decline in share price. He shared the information with Shi, who made a similar move to cash in on the company’s declining profit announcement.
1. Cao also shared the nonpublic information with Shi, the suit said. Shi converted the news to a double benefit. He sold his holdings of 2,300 Countrywide shares Oct. 14, avoiding losses of $11,567, the agency said, and subsequently engaged in a short-selling transaction that netted him $8,461.
Posted at 5:00AM on Mar 4th 2006 by LaW