SEC alleges insider trading related to Disney-Marvel deal
It accuses Toby G. Scammell of buying options in Marvel in the weeks before the August 2009 acquisition announcement, based on details gleaned from his girlfriend, a Disney intern.
By Dawn Chmielewski, Los Angeles Times
August 12, 2011
A California man was charged with insider trading by the Securities and Exchange Commission, which accused him of using confidential information about Walt Disney Co.'s planned acquisition of Marvel Entertainment to reap an illicit $192,500 stock windfall.
Toby G. Scammell allegedly purchased options in Marvel in the weeks leading up to the August 2009 announcement of the deal, based on details surreptitiously gleaned from his girlfriend of two years, who was working as an intern in Disney's corporate strategy department, according to the SEC filing.
When Disney made public its intentions to buy Marvel for $4 billion, the comic book publisher's stock price jumped more than 25% allowing Scammell to sell his Marvel options for a 3,000% return in less than a month, the SEC alleges.
"Scammell exploited his romantic relationship for a financial windfall," Rosalind R. Tyson, director of the SEC's Los Angeles regional office, said Thursday. "His misuse of confidential information gave him an unfair and illegal edge over other traders in the markets."
This is the second insider trading case related to Disney in recent years. A former assistant to a high-ranking Disney executive was sentenced in February to four months of home detention after admitting she had given her then-boyfriend information about the Burbank entertainment company's quarterly earnings results before their disclosure.
Such cases are typical of insider trading schemes pursued by federal authorities. "In the history of the SEC, there are many situations where people try to take advantage of their position and abuse the trust that their companies or that their friends and relations place in them," said Paul Huey-Burns, a former SEC lawyer and expert in insider trading.
Scammell's girlfriend, who is not identified in the SEC filing and was not charged, learned about the transaction at a Disney staff meeting June 30, 2009. She then sent her boyfriend an email discussing a career-building opportunity "to get placed on a really cool project" and gain experience that would look "great on my resume." The woman did not mention Marvel by name, only that the acquisition target was "something that people would recognize right away."
Upon returning from a vacation in Africa, Scammell, 26, moved into his girlfriend's Los Angeles apartment, where he had occasional access to her BlackBerry and her email.
By late July, the woman told her boyfriend she had been pulled into the "big project" and spent the next five weeks working on the Marvel transaction sometimes from home. She was privy to details of the deal, including the $50-a-share purchase price, according to the filing.
Scammell learned the timing of the announcement in early August 2009 when his girlfriend said the deal would be announced before Labor Day enabling them to attend her friend's wedding, according to the SEC. The agency alleges that Scammell identified Disney's acquisition target either by overhearing his girlfriend's conversations regarding the pending deal or by seeing email messages related to the transaction.
Scammell purchased $5,464 worth of options to acquire Marvel stock at prices ranging from $40 to $50 from Aug. 13 through Aug. 28, 2009. Call options afford the right to buy shares of a particular stock at a predetermined price by a particular deadline in this case, Sept. 19 of that year. These are generally risky bets that a stock price will rise dramatically, enabling the investor to reap a profit from a relatively small initial investment.
With limited resources, the SEC alleged, Scammell used $2,800 of his brother's money which he legal access to while his brother was deployed in Iraq with the U.S. Army. The brother did not learn of the Marvel trades until several months later, when contacted as part of the commission's investigation.
Scammell's attorney, Miles Ehrlich, could not immediately be reached for comment.
"This does not involve Disney, and the complaint speaks for itself," a Disney spokeswoman said.
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