Agreeing to the settlement, which was filed in the US District Court for the District of Columbia, were former CCA controller W. Blake Brock, his wife Kathy O. Brock, and Kenneth L. Unker, a friend and business associate of Kathy Brock. CCA, which merged with the REIT Prison Realty Trust last October, is the nation's largest provider of corrections services to governmental agencies, and is involved in the design, construction, ownership, renovation and management of prisons and long-distance inmate transportation services.
According to the SEC, in October 1997 when W. Blake Brock was CCA's controller, he discovered the company's quarterly earnings wouldn't meet expectations. The SEC alleges he tipped off his wife about the earnings shortfall, telling her to buy CCA put options in anticipation of the company's negative earnings release.
The SEC further alleges the Brocks tipped off Blake Brock's father, who as a result sold his CCA call options and bought CCA put options. Kathy Brock is alleged to have warned Unker, who then sold all of his CCA stock, bought CCA put options, and tipped off two of his friends, both of whom bought CCA put options and one of whom sold short CCA stock.
According to the SEC, after CCA announced its earnings shortfall on Oct. 23, 1997, its stock price fell by some 25%, and the Brocks and Unker allegedly realized trading profits and avoided trading losses totaling more than $110,000. Blake and Kathy Brock must give back $34,450 in trading profits and avoided losses--including prejudgment interest--plus a $57,712 civil penalty, while Unker must relinquish $127,008 in trading profits and avoided losses--also including prejudgment interest--plus a $31,343 civil penalty.
CCA spokeswoman Karin Demler said the company wasn't involved in the case. "It was a private issue between the SEC and Mr. Brock," she said. Brock left CCA in 1998, she said.
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