A former employee of Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) was charged with insider trading complaint by the Securities and Exchange Commission (SEC) on Friday.
The SEC alleged that Chad McGinnis, who previously worked as systems administrator at Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) used his position to obtain the earnings data of the coffee company before its release to the public. Based on the information, McGinnis and Pugach purchased shares of GMCR (usually out-of-the-money options), and then sold their stake after the company’s earnings announcement.
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SEC estimates $7 million was gained
The commission estimated that McGinnes and Pugach collectively gained $7 million as they correctly predicted the movement of the stock price of Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) in 12 out of the 13 quarterly earnings announcements of the company from 2010 to 2013.
Donald Hoerl, director of the regional office of SEC in Denver said, “McGinnis and Pugach exploited confidential company financial data to conduct their insider trading scheme to the detriment of Green Mountain Coffee and its shareholders. The timing of their trades was consistently and exceptionally successful, but their scheme ultimately was not.”
Insider trading committed using online brokerage accounts
Based on the complaint of the SEC, McGinnis and Pugach committed their insider trading activities using their online brokerage accounts. Despite the fact that they live in different states, the two communicated frequently during the earnings announcements of Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR), and most of the trades were completed through the home internet service of McGinnes.
On Friday, Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) issued a statement in connection with the complaint filed by the SEC against McGinnis. The company said it was cooperating with the government’s investigation regarding the issue, and McGinnes was fired for violating its insider trading policy.
Brian P. Kelley, president and CEO o fGreen Mountain Coffee Roasters Inc. (NASDAQ:GMCR) issued said they were appalled by the alleged actions of McGinnes. He added, “All indications are that this case involves an irresponsible individual acting alone and we have no reason to believe anyone else associated with the company was involved. GMCR requires all employees and directors to adhere to our code of ethics and our insider trading policy. The alleged conduct of this individual is in violation of these policies, and goes against our culture, our values and everything the employees of Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) stand for.”