Inside trades case is settled

Martek's Champe to pay $54,825 in SEC probe

December 24, 2005|By JUNE ARNEY | JUNE ARNEY,SUN REPORTER

An employee of Columbia-based Martek Biosciences Corp. has agreed to pay $54,825 to settle charges that he traded company stock on inside information this year.

Gregory N. Champe, vice president of manufacturing for Martek's Winchester, Ky., plant at the time, was accused by the Securities and Exchange Commission of using knowledge of a sales shortfall to avoid a $71,552 loss by selling 2,600 shares of Martek common stock on April 26 - a day before the negative revenue forecast was made public and the stock price plunged.

The charges and settlement were filed simultaneously on Thursday in federal court in Washington.

Champe did not admit or deny the allegations. Neither Champe nor his attorney returned telephone calls for comment yesterday.

Martek officials acknowledged yesterday that Champe is still an employee, but they declined to specify his job title.

"The company is aware of the matter and has taken it very seriously," said Beth Parker, a spokeswoman for Martek.

"As an internal personnel matter, appropriate action has been taken," she said.

Champe, 45, who lives in Lexington, Ky., has worked at Martek since 1997, according to the complaint.

The insider-trading probe came during a turbulent year for Martek.

The maker of algae-based nutritional supplements announced a groundbreaking deal with Kellogg Co. to someday add Martek's omega fatty acids to popular foods and was named the nation's sixth-fastest-growing public technology company by Forbes magazine. But it also missed sales forecasts, misjudged customer demand, saw its stock lose half its value and announced the retirement of chief executive Henry "Pete" Linsert Jr.

Linsert has led Martek since 1989, turning it into one of the few profitable biotechnology businesses with products and customers.

"Mr. Champe was an insider, not someone who was tipped," said Cheryl Scarboro, an attorney for the SEC. "While he was working at the company, he was given this information. The conduct took place in early April and reached resolution quickly. We are capable of moving very quickly."

According to the SEC's complaint, Champe learned April 19 that the revenue forecast would be lowered during a supply team meeting at the Columbia headquarters. The document alleges that Champe sold his shares several days later, just before the public announcement, "on the basis of material, nonpublic information concerning the company's revenue forecast, thereby avoiding a loss of $71,552."

Martek announced publicly April 27 that its revenue would be significantly lower than previously forecast. The closing price of the stock dropped from $60 a share to $32.50 the following day - a one-day drop of 46 percent. It closed yesterday at $26.

In December 2004, Martek had forecast fiscal year 2005 revenue of $290 million to $310 million. But the April announcement lowered that revenue estimate to between $220 million and $240 million.

Scarboro declined to say how the SEC came to investigate Champe's trading activities, but said there are a variety of avenues for such information. Tips come from the public, employees of a stock exchange, surveillance activity, even reports from the involved companies, she said.

june.arney@baltsun.com

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