Three founders of Lawson Software have agreed to pay about US$5.8 million to settle insider trading charges in connection with Infor's 2011 acquisition of the company.
Lawson co-chairman Richard Lawson provided his brother William Lawson and a family friend, John Cerullo, with insider information about the company's negotiations with Infor, according to an announcement from the U.S. Securities and Exchange Commission this week.
Lawson's stock price rose "following media and analyst reports that the company was considering a sale and multiple bidders were possible," the SEC said in a press release. "However, Richard Lawson knew reports about possible multiple bidders were incorrect, and the merger share price offered by [Infor] was significantly lower than what journalists and analysts were speculating."
William Lawson and Cerullo then collectively sold about 1.175 million shares of their Lawson stock, generating more than $2 million in profit, the SEC said.
After Infor began looking into Lawson's business in February 2011 in preparation for the acquisition, Lawson's financial adviser contacted five other software vendors in order to assess their interest in buying Lawson, according to the SEC. "The market check elicited little-to-no interest, and Richard Lawson and the board were kept informed throughout the process."
The SEC's complaint against the Lawsons and Cerullo names four of the five vendors as Oracle, SAP, IBM and Hewlett-Packard.
In March, Lawson confirmed publicly that Infor had offered $11.25 per share for the company. However, subsequent reports by media and analysts incorrectly suggested a bidding war was afoot, with possible offers of up to $16 per share, the SEC said.
"In reality, the same companies being speculated as potential purchasers already had informed Lawson Software that they weren't interested in an acquisition," the SEC added.
Richard Lawson knew that Infor was the only bidder and had made its final offer, according to the SEC.
"When news surfaces about the possibility of a merger and details of the media reports are incorrect, it is illegal for insiders who know the true facts to trade and profit," said Stephen L. Cohen, associate director in the SEC's Division of Enforcement, in a statement.
Richard Lawson will pay roughly $1.6 million in penalties, an amount equal to the "ill-gotten gains received by William Lawson and Cerullo," the SEC said. William Lawson must pay $3.9 million in penalties, an amount that also includes profits realized by an unnamed third party who sold company shares based on advice he received from Lawson. The third party wasn't told the advice was based on nonpublic information, according to the SEC's complaint.
Cerullo, in turn, will pay about $372,000 in penalties.
The Lawsons and Cerullo neither denied or admitted the SEC's allegations as part of the settlement.
Purchasing Lawson helped cement Infor's place as the industry's third-largest ERP vendor after SAP and Oracle, with close to $3 billion in revenue. An Infor spokesman declined comment Tuesday on the SEC's announcement.
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