Insider Trading Filed Against Intuit Exec’s Family, Colleagues
WASHINGTON (AP) _ In the summer of 1994, Intuit Inc.’s chief financial officer, William H. Lane III, shared some exciting news with his wife: The company was going to be bought by Microsoft Corp. in a $2 billion deal.
Kathleen Lane shared the secret with her son and daughter. Her children, together with three others, used the merger news to buy Intuit stock and options before the Microsoft announcement, and bailed out a year later when Mrs. Lane warned them of the merger’s imminent collapse, federal regulators said Thursday.
Thus evolved one of the more unusual insider trading cases, in which a top executive’s wife, a school teacher and four graphic artists paid $472,343 to settle federal securities fraud charges.
Named in the Securities and Exchange Commission case were Mrs. Lane, of Los Altos, Calif.; her children, James Propp and Julie Propp, both of San Francisco; and three friends, Robert Guerin and Luther Knox, both of San Francisco, and Paul Tsang, of San Leandro, Calif. The six neither admitted nor denied charges in the SEC’s 12-page complaint.
William Lane and the Menlo Park, Calif.-based Intuit were not charged. The SEC’s case said William Lane didn’t know his wife had leaked word of the merger, or that she lent money to her daughter and a friend for purchase of Intuit shares.
The case dates to Aug. 3, 1994, when Microsoft, the world’s biggest software maker for personal computers, and Intuit Inc., maker of the popular Quicken financial software program, began secret merger talks. William Lane, who was part of the discussions, confided in his wife, expecting her to keep the secret.
According to the SEC, Mrs. Lane tipped off her son, who passed on the tip to two business partners, Tsang and Guerin, and suggested they buy Intuit stock through their graphic design company.
Two days before the Microsoft announcement, Tsang called Mrs. Lane and received confirmation of the impending takeover deal, the SEC said.
Mrs. Lane also told her daughter, a school teacher, of a major announcement at Intuit, the SEC said. Julie Propp shared this with a friend, Luther Knox. Later, Mrs. Lane wrote checks worth $56,000 so her daughter and Knox could buy Intuit stock before the announcement, the SEC said.
Intuit’s stock soared by $17.12 1/2 to $67.37 1/2 a share the day after the Oct. 13, 1994, announcement.
The merger began to unravel on April 27, 1995, when the Justice Department sued to block it, arguing it would reduce competition in the personal financial software market.
Mrs. Lane was charged with tipping her son and Tsang to the impending adverse news before Microsoft abandoned its takeover plans on May 20, 1995.
For her role, Mrs. Lane paid a civil penalty of $202,803, and the other five repaid their illegal profits and fines.
While the SEC’s case is continuing, Intuit spokeswoman Sheryl Ross said neither the company nor its officers are targets. Attorneys for the defendants either didn’t immediately return telephone calls or declined comment.