The U.S. Securities and Exchange Commission accused a Los Angeles-based consultant with insider trading late Wednesday, in relation to the 2012 sale of P.F. Chang’s.
Richard Condon was a “life coach” working with Panda Restaurant Group Inc. executives in late 2011 and 2012 when, according to court filings, he heard the company was considering a bid for Chang’s, which was publicly traded and up for sale.
Panda Restaurant Group apparently referred to the effort at the time as “Project Potsticker,” according to the charges. The company didn’t make an offer for Chang’s, which was sold to the private-equity group Centerbridge Partners for $1.1 billion.
Yet, as the Panda Restaurant Group prepared its bid for Chang’s, according to the charges, Condon allegedly told two friends, Jonathan Ross and television producer Howard Schultz about the company’s plan. And Ross allegedly told a friend of his, Ali Sagheb.
Ross allegedly purchased what the SEC called “risky” out-of-the-money call options for P.F. Chang’s, with a $45 share price. At the time, Chang’s was trading at about $40.
In May 2012, Chang’s announced its deal with Centerbridge for $51.50 per share, its stock priced jumped 25 percent.
Ross and Schultz sold their options, and realized $58,281 and $231,447 in profits, according to the charges. Sagheb apparently realized profits of $17,994 on the deal, according to the SEC’s lawsuit against Condon and Ross.
Attorneys for Condon and Ross were not immediately available. But Matthew Umhofer, Condon’s lawyer, told CNBC that his client did not make any money and that analysts and the media had publicly predicted the deal.
A Panda Restaurant Group spokesperson said the company does not comment on pending litigation.
According to the charges, Condon was prohibited from disclosing Panda Restaurant Group’s confidential information according to his employment agreement with the company. He also had individual coaching sessions with Panda’s co-CEOs and attended senior management meetings.
The lawsuit claims that Ross and Schultz bought Chang’s stock in the fall of 2011 after discussions with Condon, at a time in which the Panda Restaurant Group was considering an acquisition. The suit also claims that Ross told Sagheb, who then bought stock.
That deal stalled in October that year after Chang’s decided not to put itself up for sale. Condon allegedly called Ross, who sold his stock three days before Chang’s publicly announced the company was not up for sale. The announcement led its stock to fall 5 percent.
Chang’s changed its mind the following spring, however. The SEC says that an adviser told Panda Restaurant Group executives that Chang’s restarted its sale process after receiving an offer from some bidder.
In April 2012, Ross, Schultz and Sagheb allegedly made their trades, then profits after the deal was announced. The SEC said Condon would later lie when the Panda Restaurant Group, at the request of securities regulators, asked whether he knew someone named “H. Schultz.”
Condon, Ross and Schultz all invoked their Fifth Amendment rights when questioned by regulators.
Sagheb, meanwhile, agreed to pay $19,829, an amount representing his profits plus interest. The SEC has filed a lawsuit against Condon and Ross, but not Schultz.
Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze
