WASHINGTON (Legal Newsline) - The Securities and Exchange Commission accused five physicians on Tuesday with insider trading.
They allegedly purchased securities of a medical professional liability insurer holding company after learning confidential information.
The SEC alleges that Dr. Apparao Mukkamala disclosed private information about an acquisition of American Physicians Capital Inc. by another insurance company. He then allegedly gave this information to family, colleagues and friends. Mukkamala served as a member of ACAP's board since its formation in July 2000. He became its chairman in May 2007.
The physicians - Suresh Anne, Jitendra Prasad Katneni and Rao A.K. Yalamanchili, as well as his brother-in-law Mallikarjunarao Anne - each purchased ACAP stock. Collectively, they made more than $623,000 in illegal profits on their ACAP stock following the announcement, the SEC says.
"These physicians made numerous purchases of ACAP shares that were detected as highly unusual when compared to their past trading patterns," said Robert J. Burson, Senior Associate Regional Director of the SEC's Chicago office.
"Board chairmen and other insiders should never choose greed over duty when possessing confidential information about the companies they serve."
According to the SEC's complaint, filed in U.S. District Court for the Eastern District of Michigan's Southern Division, during a March 12, 2010, meeting, ACAP's board considered a potential sale of ACAP and instructed company management to evaluate whether or not to continue as an independent, stand-alone company.
The SEC alleges that as ACAP moved toward a sale, Mukkamala routinely disclosed material nonpublic information to the other four physicians. They allegedly illegally purchased nearly $2.2 million of ACAP stock based on the confidential information that Mukkamala shared between April 30, 2010, and July 7, 2010.
Mukkamala himself made a trade in the trading account of Chinmaya Mission West, a charitable organization for which he was then serving as president, the SEC says. On July 8, 2010, the acquisition of ACAP by insurer The Doctors Company was publicly announced, and ACAP shares closed approximately 28 percent higher than the previous day's closing price.
While not admitting culpability, Mukkamala agreed to pay approximately $631,000. Mallikarjunarao Anne, a resident of Chicago, agreed to pay approximately $253,000. Suresh Anne, a resident of Grand Blanc, Mich., agreed to pay approximately $697,000. Katneni, a resident of Fenton, Mich., agreed to pay approximately $22,000. Yalamanchili, a resident of Staten Island, N.Y., agreed to pay approximately $298,000.