The U.S. Securities and Exchange Commission has charged a former SeaWorld lawyer with fraud for alleged insider trading. The Complain says that former SeaWorld Parks & Entertainment Inc. associate general counsel Paul Powers used confidential information that the company was set to exceed analysts’ financial performance to make $65,000 in alleged “illicit profits.” The U.S. Department of Justice announced parallel criminal charges against Powers on Tuesday. Powers received a draft of SeaWorld’s earnings release Aug. 1, 2018. The following day, he allegedly purchased 18,000 shares of company stock. When SeaWorld publicly released its earnings , the company’s stock rose 17 percent”îand Powers sold all his shares.
The Orlando-based marine animal amusement park terminated Powers in October over the alleged insider trading, according to the SEC’s complaint.
“At the time of his trading, defendant knew his trading was in breach of SeaWorld’s trading policy, knew his trading was in breach of duty of trust and confidence that he owed to SeaWorld and its shareholders, and knowingly and willfully breached the trading policy and his duty by trading in securities issued by SeaWorld while in possession of material and confidential information,” the SEC alleged in its complaint.
Powers joined SeaWorld’s legal department in October 2010. At the time of his termination, his LinkedIn profile states he was corporate counsel, assistant secretary and a member of the company’s business ethics committee, whose practice areas included “corporate finance, real estate, environmental, bankruptcy, and contracts.”
He previously held in-house roles at GenAudio Inc. and Anheuser-Busch Companies.
The Department of Justice announced that Powers pleaded guilty on one count for his role in an “insider-trading scheme.”
The former associate general counsel and assistant secretary of SeaWorld Entertainment Inc. (SeaWorld), a publicly traded amusement park corporation headquartered in Orlando, Florida, pleaded guilty today for his role in an insider-trading scheme.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and Special Agent in Charge Angel M. Melendez of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI)’s New York Field Office made the announcement.
Paul B. Powers, 60, of Winter Park, Florida, pleaded guilty to one count of insider trading before U.S. Magistrate Judge Leslie R. Hoffman of the Middle District of Florida. Sentencing before U.S. District Judge Carlos E. Mendoza of the Middle District of Florida has not yet been set.
As part of his guilty plea, Powers admitted that he received material nonpublic information about SeaWorld’s financial performance through his position as assistant general counsel and assistant secretary in June, July and August 2018. Specifically, Powers admitted that beginning in June 2018, he received information that had been prepared for an upcoming meeting of SeaWorld’s Revenue Committee showing that SeaWorld anticipated both attendance and revenue to increase in the first half of 2018 by approximately eight percent as compared to the first half of 2017. Powers acknowledged that he later attended Revenue Committee meetings at which the increase in attendance and revenue was discussed, and took notes of the meetings in his capacity as SeaWorld’s assistant secretary. Powers further admitted that on Aug. 1, 2018, he received materials prepared for an upcoming Audit Committee meeting that included a draft earnings release reporting the increased revenue and attendance figures for the first half of 2018, and also reporting that one of SeaWorld’s key earnings metrics (earnings before interest, tax, depreciation and amortization, or EBITDA) had improved 59.1 percent in the first half of 2018 as compared to the first half of 2017. In addition, Powers received a draft U.S. Securities and Exchange Commission (SEC) Form 10-Q reflecting that SeaWorld had “reached an agreement in principle with the SEC Enforcement Staff to settle, without admitting or denying, charges against SeaWorld arising out of the previously disclosed SEC investigation and that SeaWorld recorded an estimated liability of $4.0 million related to this matter.” On Aug. 3, 2018, Powers attended a meeting of the Audit Committee at which the draft earnings release and SEC Form 10-Q were discussed, and took notes of the meeting in his capacity as assistant secretary, he admitted.
“Paul Powers admitted today that he used information gained through his position as a senior executive at SeaWorld to unlawfully profit from trades in hundreds of thousands of dollars’ worth of SeaWorld securities,” said Assistant Attorney General Benczkowski. “The Department of Justice and our law enforcement partners will hold executives accountable for their criminal conduct, particularly conduct that threatens the integrity of our capital markets.”
“While employed by SeaWorld, Powers benefited from revenue information not accessible to the public, to make a quick profit, contrary to law and SeaWorld’s trading policies,” said Special Agent in Charge Melendez. “HSI’s El Dorado Task Force remains fully committed to protect the U.S. financial markets from such egregious practices.”
After Powers obtained the foregoing material nonpublic information, he liquidated all of the equities in his personal TD Ameritrade account and purchased 18,000 shares of SeaWorld stock on Aug. 2, 2018 at a cost of approximately $385,592, he admitted. Powers further admitted that when he purchased the shares, he was prohibited from trading in SeaWorld stock pursuant to SeaWorld’s trading policies. After SeaWorld announced the better-than-expected attendance, revenue, and EBITDA results, the price of SeaWorld shares spiked approximately 17 percent from $21.13 per share at the close of trading on Friday, Aug. 3, 2018, to $25.40 per share when the market reopened on Monday, Aug. 6, 2018. Powers admitted that he then capitalized on the increase in share price by selling all 18,000 shares, realizing gross proceeds of approximately $450,237 and a net profit of approximately $64,645.
HSI New York investigated the case. Deputy Chief Henry Van Dyck and Trial Attorney Mark Cipolletti of the Criminal Division’s Fraud Section are prosecuting the case. The Securities and Exchange Commission also provided assistance in this matter.