Steven M. Dombrowski, Defendant, and Lisa L. Fox, Relief Defendant
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22913 / January 29, 2014
Securities and Exchange Commission v. Steven M. Dombrowski, Defendant, and Lisa L. Fox, Relief Defendant, Civil Action No. 14-CV-622 (N.D. Ill., filed January 28, 2014)
SEC Charges Chicago-Based Accountant with Insider Trading in Wife's Account
The Securities and Exchange Commission announced that it filed a civil enforcement action against Steven M. Dombrowski, a C.P.A. and formerly Director of Corporate Audit at Allscripts Healthcare Solutions, Inc. ("Allscripts") for violating the federal securities laws against insider trading. The SEC's complaint, filed in federal court in Chicago, alleges that in April 2012, Dombrowski learned through his job that Allscripts' first quarter 2012 financial results were much worse than had been expected and that Allscripts would miss its earnings target for the quarter. Despite a company-imposed blackout period on trading its securities, Dombrowski determined to use this non-public information to his advantage by trading in Allscripts securities using his wife's account. Between April 10 and the close of the markets on April 26, Dombrowski, knowing of Allscripts' poor financial results, sold short 1000 shares of Allscripts stock and purchased more than 510 Allscripts put option contracts, trades that would be profitable only if Allscripts' stock price went down. On April 26, 2012, Allscripts announced first quarter financial results that were much worse than the market had expected. Allscripts also announced that its Chief Financial Officer would soon leave the company for another job, and that the Chairman of the Board and several other members of the Board had resigned. Immediately after the announcement Dombrowski purchased Allscripts stock to close his short position, and the next day, on April 27, Dombrowski sold all of his options positions as Allscripts' common stock fell $5.72, or approximately 35.7% from the previous day's close. The SEC's complaint alleges that Dombrowski's trading resulted in illegal profits of $286,211.55.
The SEC's complaint charges Dombrowski's with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and seeks a judgment that permanently enjoins Dombrowski from future violations of these provisions of the federal securities laws, orders him to disgorge all of his ill-gotten gains, plus prejudgment interest, and orders him to pay an appropriate civil penalty. The SEC also seeks an order requiring Dombrowski's wife, relief defendant Lisa Fox, to pay disgorgement, plus prejudgment interest, as Dombrowski's illegal trades were in her account.
In a parallel action, the U.S. Attorney's Office for the Northern District of Illinois announced criminal charges against Dombrowski.
The SEC's investigation was conducted by Kristopher S. Heston and Norman H. Jones of the Chicago Regional Office. The SEC's litigation will be led by Benjamin J. Hanauer and Mr. Heston.
The Commission acknowledges the assistance of the U.S. Attorney's Office for the Northern District of Illinois, the Federal Bureau of Investigation, Chicago Office, the Financial Industry Regulatory Authority, and the Options Regulatory Surveillance Authority in this matter.
