Former Central Sprinkler exec gets accused of insider trading

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Sunday, December 1, 2002

LANDSDALE, Pa. - The Securities and Exchange Commission has filed a lawsuit against a former senior officer at Central Sprinkler Corp. alleging insider trading.

The lawsuit was filed at the end of October against William Pardue, who worked for the sprinkler manufacturer for more than 20 years, It alleges Pardue made more than $140,000 by using confidential information that Tyco International planned to buy Central Sprinkler Corp. Tyco announced plans to buy Central Sprinkler in June 1999.

Celia Moore, deputy assistant district administrator with the SEC, could not comment on when it began its investigation or how the agency was tipped off.

She said the case is unusual because Pardue allegedly "breached a double duty."

Not only was Pardue a former executive vice president at Central Sprinkler and still working for the company as a consultant at the time of the alleged insider trading, but his father-in-law, William Meyer, was the former chairman of the company, said Moore. Pardue resigned from the company in January 1999, but remained an employee/ consultant until June 30, 1999, according to court documents.

The SEC alleges that during visits to his father-in-law's home, Pardue learned Tyco intended to buy Central Sprinkler.

In the weeks before the announcement, Pardue spent more than $200,000 to accumulate 13,100 shares of Central Sprinkler stock and sold it for a profit of $140,475 after the acquisition was announced.

According to court documents, Pardue bought the stock for $17 per share between May 17 and 24, 1999. The share price then increased after Tyco announced on June 16, 1999, plans to buy Central Sprinkler. Pardue then sold his stock about a week after the announcement for $28 per share.

The SEC is seeking a legal injunction against Pardue that would require him to forfeit the $140,475 profit he made on the company's stock and pay a penalty of $420,000.

The injunction could also lead to criminal charges, said Moore, if he violates other security laws in the future."There are serious consequences for breaking it."

Several calls to Pardue's attorney, Oliver Frey, were not returned by press time.