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Show ak e Tribune E6 BUSINESS Sunday April 7, 2002 Investors Angryat Secret ust doesn't seem to be a Path’s Stock Sell-Offs @ Continuedfrom E-1 2000, it staff that's not 1 ust three such offe four. In 1 really, for ities, so in some are 1999, only cases, punishm agreeme was i i to m those insiders to comply with the law in the fut: late,” y ybody Romeo ances of late disclosure dropped significantlyir recentyears. But over the past two years, roughly2 percent of all Forms4, on which insiders report most company stock ons, were filed with on the ¢ ing who t tics that come in entity owning 10 percent or »s to mrn y fa firm's shares k before the 10th month following the trades themselves are the informa: supposed to ensure that ordinary investors learn about insider activity promptly Many of Wall Street’s savviest investors use information about insider behavior as a tip toa company’s future he great majority of insid ers comply with the law, and on-time disclosure has im: proved dramatically since1991, EC began requiring rate transactions with a total value of $25.9 million. The com: pany’s then-president David Thatcher, also was more than eight monthslate in disclosing a $4.7 million stock sale in August2000. The stock sales coincided with a period during which the San Francisco e-mail services firm overstated its revenue and understated its losses, triggering an investigation by the SEC. The agency settled the matter based on the company’s prompt moves to fire the management team led by Thatcher, many other insiders sults. Thatcher pleade Most as well as any person or filed in April 2001 up to 11 months late covered 19 sepa hire new managers, improve internal controls and restate and revise its 2000 finance! continue r disclosures,often y in February to criminal con- spiracy to conimit securities hs of these transactions majority of late filings were for sales of stock. Insiders areoften reluctant to admit when they are selling off their own shares, but experts generally regard insider buys as more useful indicators of future stock performance. A review of insider trade paperworkfiled late with the y since the end of 1999 2 numberof transactions that investors had an interest in knowing. For example: During 1995 and 2000, seven insiders at Houstonbased software firm Bindview Corp. were late 15 times ininforming the SEC of their stock purchases and sales. In one such transaction, David Pulas ki, who wasthenthefirm’s vice president of sales and is the fraud. The¢ SEC does go after some insiders for particularly egre- gious examples of failure to disclose theirtrading activity. Last February, for example, the agency went after William Channell, the president and chiefoperating officer of Channell Commercial Corp., a tele- communications equipment maker based in Temecula. Calif., for numerous late disclo- sures of trades worth $43 million. The SEC secured an agreement from Channell that he wouldnotviolatethe lawin thefuture. The SEC recently announcedplans to begin requiring quicker, more thorough disclosureof insider trades,including eliminating the loophole for reporting stock sellbacks and requiring companies to post disclosure forms ontheir Websites. TheSEC, withits limited rejust how late insiders must be But data compiled by Thom brother of chairman Eric Pulaski, sold stock worth $2.3 million in November didnotdisclose the transaction until Aug. 10, 2000, eight monthslate. Inthe interim, the SOF zeroing in on forms that aren't merely delayed by a few effective price of the stock fell from about $15to less than $9. threshold filing insiders in their annual proxy statements. Until as many as 40 percent of all filings wereat least a day late days, but are notably delin quent shows late disclosure » remains a small but stubborn problem. Many of the Jate fil ings appear to come from in siders at relatively small companies, often those with stock at quite volatilegge A spokeswoman for Ned es) Gle (oe 2000. Thereports, which were While the SEC goesafter a handful of egregious violators, are relatively small. The great and direc is comment it uses in decid. after, or the ex- ulatory concern accordingly,” SEC spokesman John Heine said. to del, tion can't go who is tent ofits efforts. “Investor confidence in the fairness of the market system is an important goal of our program and wetarget our re- for n he will not sourcesat variousareasofreg. ymson Finar tors, enough, ponsibil as all they said The SEC have forcement lly do is send a message 1 enforcement actions through Hayden losing insider stock sales five times during he proble SEC WELLS FARGO the firm, Paula Berman, said she did not know why insiders had filed their forms late but said a change of management at Bindview since then might have resulted in improvements. sources, will say little about before they will be subject to scrutiny “I don’t think there is a and we probably wouldn't tell youif therewere,” SEC spokesman We want to Heine said keep them guessing.” Investigative Researcher RandyHerschaft contributed to this story Feeldine au enjoy. 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