HARTFORD, Conn. (WTNH) — On Thursday in Hartford, U.S. District Judge Alvin W. Thompson sentenced Harman International’s former Vice President of Tax Dennis W. Hamilton to eight months in prison for insider trading. Hamilton, a 46 year-old resident of Norwalk, also received one year of supervised release after the prison sentence is completed, the first four months of which are in home confinement. In addition to these sentences, he also must pay a $131,958 fine.
Harman Industrial Industries is a publicly held company on the New York stock exchange under the ticker “HAR.” Starting in 2009, Harman allowed directors, members of its executives, and other insiders to buy or sell securities in the public market only during a declared trading window.
In August 2013, Hamilton was included on this insider trading list and was notified of the trading period where the insiders could engage in market purchases. However, these trades had to be approved in advance by Harman’s general counsel. On September 27, 2013 Hamilton and other Harman employees were advised through email that the trading window had closed.
In October of that same year, Hamilton received non-public information about the company’s financial results for the first quarter for the fiscal year ending in 2014. These drafts included the company’s Form 10-Q and earnings press release.
On October 30, 2013 Hamilton, using this insider information, purchased 17,000 shares of HAR through a Charles Schwab account registered to Hamilton and his wife. On Halloween Harmon announced their positive first quarter and the stock price rose nearly ten dollars.
Deirdre Daly, the United States Attorney for the District of Connecticut, explained how Hamilton profited from the insider trading.
“Between October 31, 2013 and November 5, 2013, through the Charles Schwab account, Hamilton wrote at least 200 covered calls on HAR at a strike price of $70.00 with an expiration date of November 16, 2013 for a premium of $203,366. Through the use of some of these covered calls, he realized a gain of $131,958 on the 17,000 shares of HAR he had purchased on October 30, 2013.”
Hamilton was arrested on February 5, 2016 on a criminal complaint. On March 28, he waived his right to indictment and pleaded guilty to once count securities fraud.
The Securities and Exchange Commission has also filed civil charges. The investigation was conducted by the F.B.I. with assistance from Harman International.