A UnitedHealth Group Inc. executive’s husband faces SEC allegations of making insider trades using information obtained by overhearing his wife’s conference call and rifling through her notebook.
James E. Hengen made over $63,000 in illicit profits after trading on confidential information misappropriated from his wife about upcoming UnitedHealth mergers, according to a Nov. 8 Securities and Exchange Commission complaint. Hengen also allegedly tipped his brothers and coworkers, who made about $8,300 on their trades.
Hengen traded in advance of UnitedHealth’s August 2016 acquisition of USMD Holdings Inc. and its December 2016 purchase of Surgical Care Affiliates Inc., the complaint said. His USMD trades netted him $32,315 in illicit profits, while his Surgical Care trades garnered $31,489, according to the SEC.
The agency didn’t allege that Hengen’s wife, who served as vice president of human capital at a UnitedHealth subsidiary, participated in the illicit trades. She occasionally worked from home and often traveled to work on mergers, the SEC said. Hengen overheard one of his wife’s work conference calls about the USMD merger and used what he learned from the call and his knowledge of his wife’s travel plans to trade, according to the complaint.
Ongoing Information Gathering
Hengen allegedly tipped his brother and coworkers about the USMD merger. He then tried to surreptitiously get additional information about the purchase from his wife, the SEC said. “He paid attention to her work phone calls that he could overhear, and he asked how her work was going and whether her recent business trips to Texas had been successful,” the agency’s complaint said. He “concluded from her responses that work was going well and that the acquisition negotiations were progressing.”
As the merger announcement date approached, Hengen sent several texts to tipped coworkers, including “Big news [is] coming soon for usmd” and “Make sure u have usmd before market close,” both reproduced in the SEC complaint.
Hengen moved on to other methods of information gathering ahead of the Surgical Care merger, according to the SEC. While his wife was working from home but out of the room, he “opened his wife’s notebook that was on the table and saw references to Surgical Care Affiliates,” the complaint said. Hengen assumed UnitedHealth was about to purchase Surgical Care because he knew his wife worked on mergers and made insider trades on that assumption, the SEC said.
An attorney for Hengen wasn’t listed on the docket and couldn’t be identified for comment.
Skipped Holiday Meal
UnitedHealth’s merger with Surgical Care Affiliates Inc. spawned a second, unrelated insider trading case, the SEC said.
California software consultant Slobodan Dragojlovic made trades ahead of the merger, according to a Nov. 7 Securities and Exchange Commission complaint.
Dragojlovic allegedly learned of the merger when his brother, a Surgical Care Affiliates senior vice president, cited extensive pre-merger travel for his inability to prepare a traditional family holiday meal.
His brother told Dragojlovic “in confidence” that merger travel had kept him from preparing a “lavish meal” for the family’s traditional holiday party, according to the SEC.
Dragojlovic soon after traded on the merger information his brother had shared with him, the SEC said. He allegedly made $20,101 in illicit profits.
The agency hasn’t accused Dragojlovic’s brother of wrongdoing. An attorney for Dragojlovic wasn’t listed on the docket and couldn’t be identified for comment.
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(Updates with unrelated insider trading case spawned by same merger.)