Dennis W. Hamilton, 45, of Norwalk, waived his right to indictment and pleaded guilty on Monday in New Haven federal court to one count of securities fraud.
The plea was announced by Deirdre M. Daly, United States Attorney for the District of Connecticut, and Patricia M. Ferrick, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation.
According to court documents and statements made in court, Hamilton was employed as Vice President of Tax at Harman International Industries, Incorporated (“Harman”) in Stamford.
Harman is a publicly-held company whose shares trade on the New York Stock Exchange under the ticker symbol “HAR.” Beginning in 2009, Harman allowed directors, members of its executive committee and certain other insiders to buy or sell Harman securities in the public market only during a declared trading window period. In August 2013, Hamilton was included on Harman’s insider trading list, and he was subsequently notified when the window in which he could engage in open market purchases of Harman securities was open, and that all trades must be cleared in advance with Harman’s general counsel.
On September 27, 2013, Hamilton and other Harman employees were advised via email that the “window period” within which they may 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 October 30, 2013, Hamilton, an insider in possession of material, non-public information, purchased 17,000 shares of HAR for between $72.07 and $72.67 per share, through a Charles Schwab account in the name of Hamilton and his wife.
On October 30, 2013, the closing price of HAR was $72.02. On October 31, 2013, Harman announced positive first quarter earnings for fiscal year 2014. On that date, the closing price of HAR was $81.02.
Between October 31, 2013 and November 5, 2013, through his Charles Schwab account, Hamilton wrote at least 200 covered calls on HAR at a strike price of $70.00 with an expiration date of November 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 HAR he had purchased on October 30, 2013.
Hamilton was arrested on a criminal complaint on February 5, 2016. He is scheduled to be sentenced by U.S. District Judge Alvin W. Thompson on June 10, 2016, at which time he faces a maximum term of imprisonment of 20 years and a fine of up to $5 million. He is released on bond pending sentencing.
In a parallel action, the Securities and Exchange Commission has filed related civil charges against Hamilton. (Securities and Exchange Commission v. Dennis Wayne Hamilton, 3:16-cv-00192)
This investigation is being conducted by the Federal Bureau of Investigation with valuable assistance from Harman International Industries. The case is being prosecuted by Assistant U.S. Attorney Heather Cherry.