Insurance Executive Indicted for Insider Trading

   DENVER – 11/2/2012 - Insurance executive Michael Van Gilder, age 45, of Denver, was indicted by a federal grand jury in Denver on five counts of insider trading, U.S. Attorney for the District of Colorado John Walsh and FBI Denver Special Agent in Charge James Yacone announced.
   The case is being prosecuted in conjunction with the U.S. Attorney’s Office for the Southern District of New York. The U.S. Securities and Exchange Commission (SEC), which has filed a complaint charging Van Gilder with civil insider trading violations, conducted a parallel civil investigation and substantially contributed to the criminal investigation of the case as well. The defendant allegedly traded based on inside information regarding a Denver oil and natural gas company called Delta Petroleum Corp. Van Gilder surrendered to the FBI this morning at the U.S. Marshals’ Office, and will appear in U.S. District Court in Denver this afternoon for an initial appearance.
   According to the indictment, Van Gilder was the CEO and a member of the board of directors of Van Gilder Insurance Company, an insurance business owned by the defendant’s family. Van Gilder was a close personal friend of an executive at Delta Petroleum. Delta Petroleum was a Denver-based oil and gas exploration and development company whose core area of operations was in the Gulf Coast and Rocky Mountain regions. The company’s stock was traded on NASDAQ under the ticker symbol “DPTR.” Van Gilder at times arranged for and provided insurance policies covering certain of Delta’s business operations.
   From Nov. 5, 2007, and continuing until at least Jan. 9, 2008, Van Gilder allegedly committed securities fraud by trading in securities based on material, non-public information.
   Specifically, on Nov. 8, 2007, Delta publicly announced and filed with the SEC a quarterly report disclosing its operational performance, revenues, earnings and other financial performance for its quarterly period which ended Sept. 30, 2007. Three days prior to the disclosure, the financial publication Barron’s disseminated an article entitled “Day of Reckoning” focusing on Delta, expressing pessimism about the company and its stock. Following the publication of the article, the price of Delta’s common stock dropped $1.49 per share. Van Gilder was, at the time, a shareholder of Delta and held shares of its common stock and long-term call options to purchase Delta common stock in a brokerage account with Merrill Lynch and Company.
   The Barron’s article was brought to Van Gilder’s attention. Based on the article, Van Gilder called his stockbroker and asked whether he should sell his shares of Delta. Later that day, Van Gilder spoke with a Delta executive. According to the indictment’s allegations, the executive conveyed to Van Gilder that Delta planned on announcing figures in its third quarter financial report that would not miss its third quarter forecasts and projections for its financial and operational performance, a first in a number of quarters that Delta would meet its projected numbers. At the time Van Gilder received this information, the financial and operational performance had not yet been publicly released and was not generally known to the investing public.
   Based on this confidential material, Van Gilder decided not to sell his Delta investment but instead instructed his stockbroker to buy more Delta common stock on his behalf. As a result, the stockbroker purchased an additional 1,250 shares of Delta common stock at $15.55 per share. Several hours after he purchased the additional stock, Van Gilder emailed two friends and told them that the Barron’s article was “bogus” and that they should buy Delta stock because Delta “will hit their numbers.” In the Nov. 8, 2007, third quarter results Delta disclosed earnings and other financial figures that were in line with or exceeding previous forecasts and predictions of its performance for the quarter.
   In late November 2007, discussions also began for Delta to get a large cash infusion from a privately held investment company called Tracinda, owned by California resident Kirk Kerkorian, through a large equity investment by Tracinda in the oil and gas company. The indictment alleges that the Delta executive shared confidential information about the possible investment with Van Gilder, and that, on Nov. 26, 2007, following a series of calls and other communications, Van Gilder contacted his stockbroker and purchased an additional 1,750 shares of Delta common stock at $13.87 and $13.88 per share.
   As the indictment further relates, the Delta executive continued to share information about the confidential discussions about the contemplated Tracinda equity investment in Delta with defendant Van Gilder, as the confidential discussions progressed over the course of early December 2007. As result, according to the indictment, on Dec. 8, 2007, Van Gilder, in turn, emailed his stockbroker to advise him that he “wanted to purchase as much Delta stock as possible” and two days later arranged through the stockbroker to purchase an additional 4,000 shares of Delta common stock at $17.64 per share. Within minutes of execution of these purchases, Van Gilder spoke by phone with a family member, who, several minutes later, instructed his own stockbroker to purchase Delta common stock.
   On Dec. 17, 2007, the Delta executive advised its board of directors of his discussions with Tracinda. The board authorized the executive to proceed with negotiations with Tracinda. That evening, the executive exchanged a series of text messages with the defendant regarding the board’s decision. Several hours later, Van Gilder directed that $40,000 be wire transferred from a bank account to his Merrill Lynch brokerage account.
   On Dec. 19, 2007, a representative of Tracinda contacted the Delta executive and made an offer for Tracinda to purchase a one-third interest in Delta through a purchase of Delta’s common stock at $17 per share. At the time, Delta’s stock was trading at approximately $14.65 per share. Tracinda’s overture remained confidential. Van Gilder, knowing about the overture, purchased 200 call options, entitling him to purchase up to 20,000 shares of Delta common stock at $20 per share. Delta continued negotiations with Tracinda, and on Dec. 22, 2007, Tracinda agreed to increase its stock purchase to $19 per share. The indictment alleges that in a series of calls Van Gilder was informed of the progress of the confidential negotiations. Immediately following one of these conversations between Van Gilder and the Delta executive, Van Gilder sent an email to two of his family members, with the subject line entitled “Xmas present.” In the email, he advised the family members to purchase Delta stock because “something significant will happen in the next 2-4 weeks.”
   On Dec. 24, 2007, Van Gilder, through his stockbroker, purchased 3,000 more shares of Delta common stock at prices ranging between $15.63 and $15.65 per share, and 90 more call options to purchase up to 9,000 additional shares at $20 per share. On Dec. 28, 2007, during the course of working to finalize the Tracinda stock purchase, the Delta executive exchanged a series of cell phone text messages with Van Gilder. As a result, Van Gilder caused $272,212 from a bank account to be wire transferred into his Merrill Lynch brokerage account. The following day Van Gilder emailed his stockbroker, requesting the broker to “get it on Delta asap.”
   On Dec. 29, 2007, Delta’s board of directors approved a finalized stock purchase agreement for Tracinda to purchase approximately 35 percent of Delta’s common stock for $19 per share. On Monday, Dec. 31, 2007, before the commencement of NASDAQ’s regular trading hours, Delta and Tracinda issued a press release announcing the stock purchase agreement. Within an hour of the commencement of regular trading hours that day, Van Gilder’s stockbroker purchased an additional 4,000 shares of Delta common stock at prices ranging from $19.28 to $19.33 per share, and 114 additional call options. By the close of regular hours trading that day, Delta’s common stock price had risen $3.34 from its previous close of $15.51. Over the course of the next three trading days, Delta’s stock price continued to rise, closing at $22.82 per share by Jan. 4, 2008. On Jan. 9, 2008, Van Gilder sold the 290 call options that he had purchased between Dec. 19 and Dec. 24, 2007, realizing a profit of approximately $86,100 on the transaction.
   The indictment charges Van Gilder with five counts of securities fraud, reflecting five transactions between Nov. 6, 2007 and Dec. 24, 2007 where Van Gilder purchased Delta common stock based on confidential insider information. If convicted on all counts, the defendant faces up to 100 years in federal prison, and up to $25 million in fines.
   “Trading on inside information undercuts the fairness and transparency of our financial markets,” said U.S. Attorney Walsh. “This case demonstrates that in the highly networked world we now live in, insider trading knows no geographic boundaries. This office, and U.S. Attorney’s Offices around the country, will continue to target insider trading wherever it may occur. Thanks to the hard work of this office, the U.S. Attorney’s Office in the Southern District of New York, the SEC and the FBI, a Denver insurance executive has been charged for profiting using confidential information.”
   Thr case was investigated by the FBI, New York and Denver Divisions, with the assistance of and working with the SEC.
   Van Gilder is being prosecuted by Assistant U.S. Attorney Ken Harmon and Special Assistant U.S. Attorney Michael Levy from the Southern District of New York.
   The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.