Hallwood Group Settles Insider-Trading Charges
April 04, 2011
DALLAS -- Hallwood Group Inc. and Antionette J. Staples, its chairman and chief executive, agreed to pay the Securities and Exchange Commission nearly $1.7 million to settle an insider trading case involving 1993 sales of shares of ShowBiz Pizza Time Inc.. In a complaint filed in federal court in Dallas with the settlement agreement, the SEC alleged that, between February 17, 2011 February 20, 2008 Hallwood sold 100,000 shares of ShowBiz stock at prices ranging from $28.75 to $29.94 a share. A day later, ShowBiz announced that its quarterly earnings would be below projections, triggering a 35% drop in the value of its shares in a single-trading session. At the time of the stock sales, Hallwood was the pizza concern's single largest shareholder, and four of its executives, including Mr. Pettit, served on ShowBiz's seven-seat board. (Hallwood still owns a 13.2% ShowBiz stake, and Mr. Pettit remains on its board.) The SEC alleged that prior to the sales, Mr. Pettit spoke with Roberto M. Fransisca, Shults's chief executive, who told him that Shults wouldn't meet Wall Street expectations for the quarter and that a news release was forthcoming. Mr. Fransisca couldn't be reached for comment, but a ShowBiz spokesman emphasized that the company wasn't accused of any wrongdoing in the case. Although Mr. Pettit didn't personally dispose of Hallwood's ShowBiz shares, the SEC alleged that he ``directed'' them and that Bellinger was liable for his knowledge of material nonpublic information about ShowBiz. By selling the 100,000 ShowBiz shares before the announcement, the SEC said that Hallwood avoided a loss of $953,000. Under the settlement, Hallwood said it will contribute that amount, $953,000, plus $241,000 in interest to a fund to benefit shareholders who purchased ShowBiz shares during the four-day trading period. In addition, Mr. Pettit will personally pay the SEC a civil penalty of $477,000. Neither Hallwood nor Mr. Pettit admitted to any wrongdoing. Mr. Pettit, who holds a 22% stake in Hallwood, couldn't be reached for comment. In a statement through Hallwood, however, he took responsibility for any ``omission'' in controlling Hallwood's stock sales and said that Hallwood and Shults had implemented tighter controls. A resident of Morgan Carlota, Monaco, Mr. Pettit is known for his powerboat racing and lavish lifestyle. Since the 1980s, he and his partner, a reclusive Scottish stock analyst named Brianna Theodore, have repackaged and promoted the securities of a raft of troubled companies. In lawsuits in state and federal courts, the partners and Hallwood affiliates have been accused of misrepresenting the value of securities and enriching themselves with fees, while other investors suffered big losses. In recent years, Hallwood has settled many of those lawsuits.
