United States Securities and Exchange Commission v. Apparao Mukkamala, et al., Case No. 12-cv-13020 (E.D. Mich. July 10, 2012). On July 10, 2012, the SEC filed settled insider trading charges against five physicians. Between March and July 2010, Mukkamala served as chairman of the board of directors of American Physicians Capital, Inc. (“ACAP”), a Michigan holding company for a medical professional liability insurer. On March 12, 2010, ACAP’s board instructed ACAP’s management to evaluate various strategic alternatives, including whether it would be in the best interests of ACAP’s shareholders for the board to consider selling ACAP. Between March 12, 2010, and July 8, 2010, when ACAP publicly announced that it had agreed to be acquired, ACAP’s board and management engaged in activities in furtherance of a sale of the company. The fact that the company was undertaking definite steps towards a sale constituted material nonpublic information. Mukkamala illegally disclosed material nonpublic information concerning the anticipated sale of ACAP to Suresh and Katneni, both of whom are Mukkamala’s friends; Mallikarjunarao, who is Mukkamala’s brother-in-law; and Yalamanchili, who is Mukkamala’s friend.
Between April 30, 2010, and July 7, 2010, Mukkamala, Suresh, Katneni, Mallikarjunarao, and Yalamanchili illegally purchased almost $2.2 million of ACAP stock based on material nonpublic information concerning the anticipated sale of ACAP. Following the public announcement of the sale, the Defendants realized, collectively, more than $623,000 in profits from their illegal trading in ACAP.
In order to settle the SEC’s charges, the physicians agreed, without admitting or denying the allegations, to consent to entry of a court order requiring them to pay a combined total of $1.9 million in disgorgement plus prejudgment interest, and permanently enjoining them from violating Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Mukkamala further agreed to be barred from acting as an officer or director of a public company.