Last week, the SEC announced a settlement in its insider trading case against Timothy J. McGee, the final resolution of a multi-defendant case that flowed from the most unusual of betrayals. The SEC alleged that McGee, a former registered representative at Ameriprise Financial Services, Inc., learned of and profited from inside information about an upcoming merger "from a senior executive who was confiding in him through their relationship at Alcoholics Anonymous about pressures he was confronting at work."

 

According to the SEC, McGee learned about an upcoming merger of Philadelphia Consolidated Holding Corp. with Tokio Marine Holdings, Inc. from an insider at Philadelphia Consolidated who 

made the disclosure to McGee in confidential discussions he had with him, including after an AA meeting, about the pressures the Insider was confronting. McGee used the material. nonpublic information to make hundreds of thousands of dollars in ill-gotten profits for himself, and to tip his friend and business associate, Michael Zirinsky. 

McGee agreed to disgorge a total of $362,704 in profits and prejudgment interest from his insider trading. In May 2015, the SEC settled its case against Zirinsky, who was also a former registered representative. Zirinsky agreed to pay disgorgement, prejudgment interest and a civil penalty totaling $249,372. The SEC noted that it had previously entered into settlements with two other defendants and five relief defendants with recoveries totaling over $1.8 million, all flowing from the information the SEC says was initially obtained by McGee and shared with Zirinsky (who then allegedly shared it with others). 

 

Notably, the SEC alleged in its complaint that McGee and the corporate insider had a "Relationship of Trust and Confidence" because of, among other things, the "Twelfth Tradition" of AA -- its policy of anonymity. The SEC alleged that 

The confidentiality of information shared between members of the AA program is underscored at each meeting, where participants are reminded that "what is discussed here stays here." Confidentiality is integral to the operation of AA, and those who attend meetings and participate in AA, including the Insider and McGee, understand the importance of confidentiality. 

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