NORWALK, Conn. – A former vice president of a publicly-traded company based in Stamford was sentenced Thursday by U.S. District Judge Alvin W. Thompson in Hartford to eight months of imprisonment followed by one year of supervised release for insider trading, authorities said.
According to court documents and statements made in court, Dennis W. Hamilton, 46, of Norwalk, was employed as vice president of tax at Harman International Industries in Stamford, a publicly-held company whose shares trade on the New York Stock Exchange.
Beginning in 2009, Harman allowed directors, members of its executive committee and other insiders to buy or sell Harman securities in the public market during a declared trading window.
In August 2013, Hamilton was included on Harman’s trading list, and was subsequently notified when the window in which he could engage in open market purchases of Harman securities was open.
He was also notified that all trades must be cleared in advance with Harman’s general counsel.
On Sept. 27, 2013, Hamilton and other Harman employees were advised via email that the window within which they were permitted to engage in open market purchases or sales of Harman securities had closed.
In October 2013, Hamilton received material, non-public information about Harman’s financial results for the first quarter for the fiscal year ending 2014, including drafts of Harman’s Form 10-Q filing and an earnings press release.
He and other Harman executives also participated in a conference call with Harman’s audit committee, during which a draft resolution declaring a quarterly cash dividend on Harman’s common stock was discussed.
On Oct. 30, 2013, Hamilton, now an insider in possession of material, non-public information, purchased 17,000 shares of Harman stock for between $72.07 and $72.67 per share, through a Charles Schwab account in the name of Hamilton and his wife, according to officials.
On Oct. 30, 2013, the closing price of Harman’s stock was $72.02. On Oct. 31, Harman announced positive first quarter earnings for fiscal year 2014. On that date, the closing price of its stock was $81.02.
Between Oct. 31 and Nov. 5, 2013, through his Charles Schwab account, Hamilton wrote at least 200 covered calls on Harman stock at a strike price of $70, with an expiration date of Nov. 16, 2013 for a premium of $203,366.
Through the use of some of these covered calls, Hamilton realized a gain of $131,958 on the 17,000 shares of Harman shares he had purchased on Oct. 30, 2013.
Hamilton was arrested on a criminal complaint on Feb. 5, 2016. He waived his right to indictment and pleaded guilty to one count of securities fraud on March 28, prosecutors said.
The investigation was conducted by the FBI, with assistance from Harman International Industries.
The case was prosecuted by Assistant U.S. Attorney Heather Cherry.
In a parallel action, the Securities and Exchange Commission has filed related civil charges against Hamilton, according to officials.