Ex-broker improperly traded Md. firm stock, SEC says

December 29, 2006|By Bloomberg News

The Securities and Exchange Commission accused yesterday a former Friedman Billings Ramsey Group Inc. broker and hedge fund manager of improperly trading shares of CompuDyne Inc., an Annapolis-based manufacturer of security systems for prisons, courthouses and commercial buildings.

John F. Mangan Jr. engaged in insider trading and broke other rules when he arranged to sell short CompuDyne stock through the account of business partner Hugh McColl, the SEC said in a statement yesterday. McColl is the son of Hugh McColl Jr., former chief executive officer of Bank of America Corp.

"We're happy that the SEC is fully investigating this," Martin Roenigk, CompuDyne's chairman and chief executive officer, said yesterday in an interview. "We do think there was egregious action."

Mangan reaped $56,937 from inside trades and another $121,933 by short-selling the shares before they were offered to the public in 2001, the regulator said in a lawsuit in U.S. District Court in North Carolina.

The suit comes a week after Arlington, Va.-based Friedman and co-founder Emanuel J. Friedman agreed to pay more than $9 million to settle related claims by the SEC and the NASD brokerage regulator.

The firm and executives failed to keep workers from passing confidential information to traders who made bets on securities, the regulators said.

In an e-mail statement yesterday, Mangan, 46, of Charlotte, N.C., called the SEC's allegations "completely unwarranted by the facts" and vowed to fight them in court.

"I fully cooperated with this investigation from its inception in 2002," he wrote. "By taking this to court, I will finally have the opportunity to get the facts of my case out of the SEC's bureaucracy and into a court of law."

Mangan received multiple internal documents about the CompuDyne placement before it was publicly announced in October 2001, according to the complaint.

Friedman prevented him from investing in the offering through a hedge fund because it was associated with the firm, the SEC said. Mangan arranged instead to buy shares through McColl's account, the SEC said.

Mangan's statement said that he had been led to believe he could still trade in the stock, and that shortly after ordering the investment, he boarded a flight to Boston and couldn't be reached.

"Unbeknownst to Mr. Mangan and contrary to standard procedure in the securities industry, the public announcement had, in fact, not yet been made and was unexpectedly delayed," the statement said.

As a result, his trade was executed before the announcement, "without any intent to benefit from undisclosed information," the statement said.

McColl, 46, also of Charlotte, has agreed to forfeit about $116,000 after Mangan shared some profits with him, the SEC said yesterday.

Last December, Mangan reached an agreement with NASD to pay a $125,000 fine for improperly selling restricted shares of CompuDyne. The settlement didn't accuse him of insider trading. He neither admitted nor denied wrongdoing under that accord.

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