SEC charges Mangan with alleged insider trading on CompuDyne PIPE placement

By Angela McDaniels

Seattle, Dec. 28 - The Securities and Exchange Commission filed a complaint against John F. Mangan, Jr. for allegedly committing insider trading by short selling securities of CompuDyne Corp. prior to the public announcement of a private placement and engaging in unregistered sale of securities, according to the SEC's news digest for Thursday.

At the time of the alleged short selling, Mangan was a registered representative of Friedman, Billings, Ramsey & Co., Inc., which was the placement agent for the October 2001 PIPE offering.

In the complaint, which was filed in the U.S. District Court for the Western District of North Carolina, the SEC alleged that Mangan:

• Traded in CompuDyne stock before the public announcement of the PIPE offering and continued short selling the stock following the public announcement;

• Executed his alleged illegal trades through the account of HLM Securities, LLC, which was an account of his business partner Hugh L. McColl, III;

• Used the shares that HLM Securities obtained in the PIPE offering to cover the short shares after the resale registration statement became effective, thereby effectively selling HLM Securities' shares prior to their registration;

• Obtained $178,870 in "ill-gotten gains" and split half of the profits with McColl.

The complaint also names McColl as a relief defendant in connection with his receipt of trading profits from Mangan. Without admitting or denying the allegations, McColl consented to pay $115,643, according to the digest.

In November, Friedman, Billings, Ramsey Group Inc. agreed to pay $4.5 million to settle short-selling charges brought by CompuDyne and William Blair Mezzanine Capital Fund II LP related to the 2001 PIPE.

Friedman, Billings, Ramsey did not admit any liability or wrongdoing pursuant to the settlement.

In May 2005, the National Association of Securities Dealers banned and fined Hilary Shane, an investor who allegedly sold short the shares in the CompuDyne placement.

Shane allegedly bought 475,000 shares in the offering and, according to allegations, illegally distributed the unregistered shares with the intention of covering the short sales with securities that hadn't been registered yet.

CompuDyne, based in Annapolis, Md., produces security products, integration and technology for public security markets.

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