Litigation Release No. 24613 / September 24, 2019
Securities and Exchange Commission v. James Wallace Nall, III, et al., Civil Action No. 2:19-cv-00702 (S.D. Ala. filed September 23, 2019)
On September 23, 2019, the Securities and Exchange Commission charged a Birmingham, Alabama-based real estate developer with securities fraud based on confidential information he provided to a close friend and business associate, who traded on the information. The SEC also charged the friend, as well as his father, his brother, and his boss, all of whom traded on the same information.
The SEC alleges that James Wallace Nall, III misappropriated material nonpublic information concerning the merger of potato chip manufacturer Golden Enterprises, Inc. with privately-held Utz Quality Foods, LLC. According to the SEC’s complaint, Nall received the information for a legitimate purpose from a member of Golden Enterprises’ board of directors. Nall did not trade on the information, but he tipped his close friend and business partner, Michael Hale Smith, who did trade on it. Smith’s father, Michael Dwaine Smith; his brother, Robert Walter Smith; and his boss, Walter Vice Tutt, also traded on the information. As alleged, Tutt and the three Smiths all knew Nall and understood his relationship with a director of Golden Enterprises when they traded Golden Enterprises’ stock in advance of the merger announcement, collectively realizing profits of approximately $437,000.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of Alabama, charges all of the defendants with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the SEC’s allegations, each of the trading defendants consented to entry of a final judgment enjoining him from future violations of Section 10(b) and Rule 10b-5 and ordering him to pay disgorgement of his trading profits, prejudgment interest, and a civil penalty equal to disgorgement, in the following amounts:
- Michael Smith: disgorgement of $139,774.17, with prejudgment interest of $19,920.55 and a civil penalty of $139,774.17;
- Hale Smith: disgorgement of $220,625.84 with prejudgment interest of $31,443.51 and a civil penalty of $220,625.84;
- Robert Smith: disgorgement of $32,733.98 with prejudgment interest of $4,665.25 and a civil penalty of $32,733.98; and
- Walter Tutt: disgorgement of $43,995.32 with prejudgment interest of $6,264.50 and a civil penalty of $43,995.32.
These settlements are subject to court approval. SEC Senior Trial Counsel Edward G. Sullivan will lead the litigation. The SEC appreciates the assistance of the Financial Industry Regulatory Authority in this matter.