CHICAGO (CN) – The SEC says a suburban ophthalmologist reaped more than $1.4 million from inside trading in options on his company. It claims that Gerald Horn, 57, managing director for LCA Vision’s Schaumburg facility, “never lost money on any of his multiple trades in LCA options,” despite his lack of experience in options trading.
LCA is a laser surgery center whose “vision correction services” are its sole source of revenue, according to the complaint.
The SEC says LCA posts the number of surgeries it does and its revenue on its “Eyes by Laser Reports,” which is available to employees through company intranet.
LCA employees that have seen the internal reports are prohibited from trading LCA securities, though Horn did trade in them, beginning in December 2005, the SEC says.
The SEC says Horn told it that he was not aware of the policy and that he never saw the reports, but the agency says Horn needed the information to determine his employees’ compensation, as well as targets for his facility.
It claims that Horn confessed “to reviewing ‘lots of analysts’ reports’ listed on Yahoo Finance regarding LCA” and said that he checked the company’s stock prices on a daily basis. Agency claims that with internal and analysts’ reports, Horn was able to predict whether LCA would hit its publicly stated earnings targets, and therefore whether LCA’s stock would drop.
“Horn was able, with great precision and agility, to switch his trades between calls and puts, predicting that LCA’s earnings would either beat or miss its targets, and thus that the price of LCA stock would either rise or fall, and made the correct decision every time,” the SEC says.
Horn’s unusually large trades were also suspicious, “considering his strained finances,” the SEC says. It says that “(a)bsent a sure thing, such as inside information, it would have been risky for Horn to pay such large premiums in connection with these trades.”
Horn made more than $869,629 from trading LCA options, and avoided losses of more than $533,603 by immediately selling LCA stock after exercising his stock option grants, the SEC says.
It says that when it began investigating, Horn stopped trading options in LCA and traded options of “other securities” instead.
“Unlike the perfect results in his LCA trading, his results in these non-LCA options trades were, at best, mixed,” the SEC says.
The SEC demands disgorgement and an injunction.