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ATI under security trading probe
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Monday, January 20, 2003
Graphics chipmaker ATI Technologies Inc.’s troubles with Canadian securities regulators continue to grow.
The Ontario Securities Commission (OSC) alleged this week that the company's CEO and five others gained approximately $5.3 million ($7.9 million Canadian dollars) or avoided losses through insider trading in the spring of 2000.
The story first came to light late last year in the Canadian press, as the OSC launched an investigation of a number of trades in Markham, Ontario-based ATI stock made just prior to a May 2000 profit warning. That announcement of a profit shortfall caused the company stock to drop 24 percent. ATI acknowleged the investigation just prior to their fiscal Q1 earnings report last month.
Among the accused is Kwok Yuen Ho, ATI chairman and CEO, and his wife, Betty Ho. Of those accused, the couple by far reaped the most benefit, according to the OSC allegations, published Thursday.
According to the OSC, between April 24, 2000 and May 2, 2000, Ho and his wife traded 494,900 ATI shares, knowing that ATI would fall short of its forecasted revenue and earnings for Q3 2000. Of these shares, 240,900 ATI shares were sold from an account in the name of Betty Ho for approximately $4.7 million ($7 million CD), the commission alleges.
By selling the shares prior to profit shortfall announced in a press release May 24, 2000, the couple avoided a loss of approximately $2.3 million ($3.4 million CD), the OSC said. The remaining 254,000 shares were donated to charities from an account Ho’s name, according to Canadian securities regulators. By donating the shares prior to the news release, Ho was able to maximize his tax benefit and avoid a loss worth $2.4 million ($3.6 million CD), the OSC claims.
The OSC allegations also implicate ATI's former director of investor relations, Jo-Anne Chang, her husband, former manager of marketing administration, Mary de la Torre, and her husband in insider trading.
The commission also accused ATI of misleading securities regulators prior to the May 24, 2000 announcement, and cites former ATI lawyer Sally Daub in particular. Daub told OSC staff that ATI management didn't meet until just a week before the May 24, 2000 announcement to discuss the profit warning, the commission said.
"On May 11, 2000 Chang e-mailed Daub and others regarding a meeting on May 12. One of the topics to be discussed at the meeting was the timing of the [profit shortfall] press release. Daub was invited to attend this meeting," the OSC stated in its allegations.
"[ATI] takes these allegations seriously," the company said in a press release Thursday. "As previously announced, a special committee consisting of Paul Russo, who joined the board in January 2002, is conducting an independent review of the matters contained in [the OSC's] allegations. Mr. Peter Dey of Osler, Hoskin & Harcourt LLP is acting as a special advisor to the committee."
The OSC has scheduled the initial hearing in its proceedings against those involved for Feb. 14.
Investors hammered ATI's stock over the past two days; on Friday it was down 48 cents per share on the Nasdaq, sinking to $4.40 per share. On the Toronto Stock Exchange it closed at $6.76 CD after hitting a 22-month low of $6.20 CD.
By: DocMemory
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