Denver insurance Executive michael van gilder sentenced for insider trading
DENVER – Insurance executive Michael Van Gilder, age 45, of Denver, was sentenced today by Senior U.S. District Court Judge Wiley Y. Daniel to serve 5 years’ probation with the first 6 months in home detention with electronic monitoring, U.S. Attorney John Walsh and FBI Denver Special Agent in Charge Thomas Ravenelle announced. In the course of sentencing proceedings, Judge Daniel formally accepted Van Gilder’s guilty plea and adjudged him guilty of a count of securities fraud based on illegal insider trading. In addition, Judge Daniel ordered Van Gilder to pay a fine of $5,000.
The Van Gilder case was prosecuted in conjunction with the U.S. Attorney’s Office for the Southern District of New York. The U.S. Securities and Exchange Commission conducted a parallel civil investigation and substantially contributed to the criminal investigation of the case as well. Van Gilder was indicted by a federal grand jury on October 24, 2012. He pled guilty before Judge Daniel on May 1, 2013. He was sentenced today, August 14, 2013.
According to publicly available records, including the indictment and plea agreement, Van Gilder was the chief executive officer 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 a senior 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 November 5, 2007 and continuing until at least January 9, 2008, Van Gilder committed securities fraud by trading in securities based on material, non-public information.
Specifically, on November 8, 2007, Delta publicly announced and filed with the U.S. Securities and Exchange Commission (SEC) a quarterly report disclosing its operational performance, revenues, earnings and other financial performance for its quarterly period which ended September 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, the defendant called his stockbroker and asked whether he should sell his shares of Delta. Later that day, Van Gilder spoke with the senior Delta executive. According to court documents, the executive conveyed to the defendant 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 November 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 senior executive shared confidential information about the possible investment with defendant Van Gilder, and that, on November 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 court documents further relate, this Delta senior 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 a result, according to court documents, on December 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 December 17, 2007, the senior 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 December 19, 2007, a representative of Tracinda contacted the senior 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 December 22, 2007, Tracinda agreed to increase its stock purchase to $19 per share. The court documents state 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 senior 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 December 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 December 28, 2007, during the course of working to finalize the Tracinda stock purchase, the senior Delta executive exchanged a series of cell phone text messages with Van Gilder. As a result, the defendant 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 December 29, 2007, Delta’s board of directors approved a finalized stock purchase agreement for Tracinda to purchase approximately 35% of Delta’s common stock for $19 per share. On Monday, December 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 January 4, 2008. On January 9, 2008, Van Gilder sold the 290 call options that he had purchased between December 19 and December 24, 2007, realizing a profit of approximately $86,100 on the transaction.
Immediately before sentencing, pursuant to the plea agreement in this case, Van Gilder provided the United States a check for $86,100 to repay these illegally derived trading gains.
“Working closely with our partners in the U.S. Attorney’s Office in the Southern District of New York, the FBI and the SEC, we were able to obtain a conviction and sentence of a well-known Denver executive whose greed got the best of him,” said U.S. Attorney John Walsh.
“To ensure our financial markets operate fairly, the FBI is committed to aggressively pursuing those who commit investment fraud,” said FBI Denver Special Agent in Charge Thomas Ravenelle. “I am confident the results of this investigation will deter others who seek to gain illegally from insider information.”
This case was investigated by the Federal Bureau of Investigation, New York and Denver Divisions, with the assistance of and working with the U.S. Securities and Exchange Commission.
Van Gilder was prosecuted by Assistant U.S. Attorney Ken Harmon and Special Assistant U.S. Attorney Michael Levy from the Southern District of New York.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.