Corporate Audit Director Sentenced to One Year for Insider Trading
CHICAGO─A certified public accountant who was involved in the auditing process at a publicly-traded company based in Chicago was sentenced to one year and one day by U.S. District Court Judge Sara L. Ellis for engaging in insider trading of the company’s securities that made him an illegal profit of more than $286,000 in 2012. Dombrowski was also ordered to forfeit $286,211.55 and serve a term of two years of supervised release after his term of imprisonment. The defendant, Steven M. Dombrowski, 50, of Chicago, was the director of corporate audit for Allscripts Healthcare Solutions, Inc., and pled guilty to one count of securities fraud in December 2014. Dombrowski was ordered to surrender to the Bureau of Prisons on September 14, 2015.
According to the indictment, Dombrowski misused material nonpublic information he knew about Allscripts’ performance for the first quarter of 2012 and purchased put options and engaged in short sales of stock through a trading account in his wife’s maiden name that he controlled, which resulted in illegal profits of approximately $286,211.
Dombrowski and the employees he supervised were responsible for auditing and testing the processes and procedures Allscripts used to compute and report its financial performance. Allscripts provides information technology solutions to the healthcare industry and its common stock is traded on the NASDAQ stock market under the symbol MDRX.
Between April 10 and April 28, 2012, a quarterly blackout period was in effect at Allscripts. The blackout prohibited certain employees, including Dombrowski, who were given written notice and who had access to material nonpublic information, from engaging in trades of Allscripts securities 15 days before the end of a quarter, and ending after the second full business day following the company’s quarterly earnings announcement.
Dombrowski learned in April 2012 through his employment that Allscripts first quarter financial results were going to be less favorable than market expectations when they were publicly announced on April 26, 2012. Throughout April, Dombrowski conducted securities transactions that he designed to be profitable if the price of Allscripts stock declined, including purchasing put options and short selling stock, which he knew was prohibited and violated the company imposed blackout period. Allscripts stock, in fact, declined when its 2012 first quarter announcement revealed lower sales, less revenue, and lower earnings per share than the first quarter of 2011. After Allscripts stock declined on and after April 26, 2012, Dombrowski offset his Allscripts securities positions and profited approximately $286,211 from insider trading.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The Chicago office of the U.S. Securities and Exchange Commission assisted in the investigation.
“We will vigorously prosecute defendants who commit insider trading at publicly-traded companies located in our district,” said U.S. Attorney Fardon. “Mr. Dombrowski betrayed the trust placed in him by his employer, Allscripts, and used his access to confidential company information for his own personal gain.”
The government was represented by Assistant United States Attorney Sunil Harjani in this case.