The Securities and Exchange Commission (SEC), concerned about its recent bad press, continues to prosecute insider trading through the Christmas season. Last week, the regulatory body charged seven individuals and two companies involved in an insider trading ring.

The SEC alleged that Matthew Devlin, formerly of Lehman Brothers, traded on and tipped his clients and friends with confidential and non-public information about 13 impending corporate transactions. Some of these friends, who worked in the financial or legal professions, also tipped off other clients.

Devlin obtained the privileged information from his wife, a partner in the NYC office of an international public relations firm working on the deals. The illicit trading occurred from at least March 2004 through July 2008, yielding more than $4.8 million in profits. Devlin was also rewarded with cash and luxury items in exchange for the information, including a widescreen TV, leather jacket, and Porsche driving lessons.

The traders attempted to avoid detection by trading in the securities of the target companies in numerous accounts that were not associated with Lehman or Devlin. To further conceal their illicit trading, at least two of the defendants sold off some of the shares they had purchased based on inside information prior to public announcements of the deals. In addition, Devlin and one of his tippees arranged to buy shares on Devlin's behalf so Devlin could profit from the nonpublic information but evade scrutiny.

The companies targeted from this scam included: InVision Technologies, Inc.; Eon Labs, Inc.; Mylan, Inc.; Abgenix, Inc.; Aztar Corporation; Veritas, DGC, Inc.; Mercantile Bankshares Corporation; Alcan, Inc.; Ventana Medical Systems, Inc.; Pharmion Corporation; Take-Two Interactive Software, Inc.; Anheuser-Busch, Inc.; and Rohm and Haas Company.

"The Commission is unwavering in its determination to pursue illegal insider trading by securities professionals, lawyers, and others," said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. "Today's enforcement action is another example of the exemplary working relationships among the SEC, criminal authorities, FINRA and other self-regulatory organizations."

Trico Marine Services Inc. (NDAQ: TRMA) directors may be forced to fight for their job after an activist shareholder opposition to the company’s current plans. Kistefos AS, which owns a 22% stake, wrote a letter to the board expressing its disappointment about the extraordinary loss in value since the company emerged from bankruptcy in 2005.

“I write today to express our deep concern about the extraordinary loss in value of the company’s shares and about the current operations, direction, management and governance of the company,” said the hedge fund in a letter. “Nevertheless, we believe that there is significant inherent value in the company and we wish to work with management and the Board of Directors to help restore it.”

Kistefos believes that the first step in unlocking this value is to replace the board of directors with its own slate of directors. The hedge fund noted that it is an experienced long-term investor with a strong track record of value creation through successful investment in turnaround companies. The nominees to the board promise to bring significant and relevant operating experience, a track record of generating attractive returns and delivering value to shareholders.

Kistefos outlined several ways in which it could act to improve the company:

1. The company failed to capitalize on high spot rates for shipping because of its bias towards long-term charters. The board would terminate this line of thinking and act in any way that generates the highest returns for shareholders.
2. Management has failed to oversee construction of new vessels and contracts, which has resulted in substantial unnecessary losses. The board would act to make sure that the company does not make any more mistakes of this nature.
3. The company took on substantial debt to make an acquisition in the subsea segment, which has consistently lost money so far. The board would reduce the amount of debt on the books and instead invest in the company’s own stock through share buybacks.
   

According to the fund, “in summary, while we remain confident that, over the very long-term, the industry will offer the Company opportunities for organic and external growth and increased profitability, the Company faces significant challenges in the near future, including: completing the integration of its two recent major acquisitions and reduction of related indebtedness; initiating the internationalization of the subsea operations; enhancing the quality and reach of its supply vessels operations; and returning to satisfactory profitability, all within the context of a global recession.”

Related Companies
Tidewater Inc. (TDW)
GulfMark Offshore Inc. (GLF)
American Commercial Lines Inc. (ACLI)

Wilshire Enterprises, Inc. (AMEX: WOC) may have plans for the future but at least one shareholder is seeking to liquidate the real estate company. The firm has been hit hard by the sharp decline in housing combined with reduced access to debt and equity financing in a troubled market. As a result, many investors are questioning the best course of action going forward.

Management announced last week that it would move the firm in a new direction aimed at acquiring new properties and existing loans on attractive terms, employing an extensive network of contacts in the management and finance industries. Essentially, management is proposing that the firm take advantage of the low priced environment and attractive financing to profit in the long-run.

Full Value Advisors, which owns a 21% stake, doesn’t share management’s confidence. The activist hedge fund proposed that the company hold its annual shareholder meeting and explore a liquidity strategy instead of a growth strategy. The fund believes that pursuing a bird in hand liquidity event is a superior risk adjusted alternative to growing the company, particularly given its structure.

Full Value Advisors plans to institute this liquidity plan by nominating its own slate of directors to the board. Two positions would have been vacated on the board had the company held its 2008 annual meeting while the fund also proposed three other candidates for other spots that may open up if its first proposal to revamp the board is passed.

Wilshire is engaged primarily in the ownership and management of real estate investments in Arizona, Texas and New Jersey. Wilshire's portfolio of properties includes five rental apartment properties with 950 units, 10 condominium units, two office buildings and a retail/office center with approximately 200,000 square feet of office and retail space, and slightly more than 19 acres of land.

Related Companies
Transcontinental Realty Investors (TCI)
American Realty Investors (ARL)
NTS Realty Holdings LP (NLP)