A former Capital One Financial Corp. chief financial officer was charged on Monday with insider trading, the U.S. Securities and Exchange Commission said.
David Willey made more than $3 million in proceeds from a series of transactions involving the sale of Capital One stock and cashless exercises of options in his and his wife's accounts in May 2002, the SEC said.
In a civil complaint, the SEC said Willey made securities transactions after learning from a bank examiner that the Federal Reserve Board would downgrade the company's supervisory assessment, which would likely result in a supervisory action.
He failed to inform the company's senior management or the board of directors of "material" information prior to trading securities, Cheryl Scarboro, an SEC assistant director of enforcement, said.
Capital One's stock plummeted 40 percent after the company's disclosure of the Federal Reserve's move in July 2002.
Scarboro said the SEC is seeking to have the proceeds returned, to impose a civil penalty in an amount totaling up to three times the proceeds and to bar Willey from holding a position as an officer or a director of a publicly traded company.
Willey resigned from the McLean, Virginia-based credit card issuer in March 2003 after being notified by the agency of its intention to file a civil action surrounding the securities transactions.
Willey's wife, Joy, then a vice president whose account was used to carry out some of the trading, was also named as a defendant but not accused of insider trading, Scarboro said. Joy Willey stepped down in December 2002.
The SEC said Joy Willey, who as a result was named as a so-called "relief" defendant in the SEC civil complaint, was "unjustly enriched" because she received some of the proceeds resulting from the use of her account.
"The Willeys are disappointed that the SEC chose to initiate this action after an extended and constructive dialogue about their motivations and actions," Willey's attorney, Richard Morvillo, said in a statement.
"After these many months in limbo, the Willeys look forward to an early trial date and a favorable resolution," Morvillo said.
The SEC said Willey also filed an insider trading disclosure document with the agency that failed to include two of his May 2002 options exercises totaling 46,800 shares.
Capital One Financial shares closed 28 cents higher at $68.25 on the New York Stock Exchange.
