UPDATE: Former ValueAct CFO Charged In $8 Million Insider Case

George Hamel, a partner, co-founder and chief operating officer at ValueAct, told Dow Jones Newswires the SEC notified ValueAct in early 2008 that they were investigating some transactions involving Yee and Acxiom's stock. A few weeks later, Yee was placed on administrative leave. He voluntarily left the firm in June 2008.

ValueAct received a no-action letter from the SEC, meaning it wasn't the target of an investigation.

"If in fact Ronald did anything, he did it as an individual," Hamel said.

One of ValueAct's founders is Jeff Ubben, who used to run the Fidelity Value Fund and served on Acxiom's board of directors from August 2006 to October 2008. Ubben is not a target of the investigation.

In a civil lawsuit filed in a California federal court, the SEC said that 39- year-old Chen Tang of Fremont, Calif., learned about non-public information while working as the chief financial officer of a private-equity fund and from receiving illegal tips from Yee, his brother-in-law. The SEC doesn't name their firms in the complaint.

The SEC said that Tang and his trading partners, which included his brother and friends, traded on the information through their personal brokerage accounts and retirement accounts, the accounts of various relatives and also through the accounts of privately offered investment funds that Tang and his friends managed.

"As the CFO of a private-equity firm, Tang was entrusted with highly confidential and material information, and he violated that trust by misusing the information to generate enormous illegal profits," said Rose Romero, the director of the SEC's Fort Worth Regional Office.

After a buyout of Acxiom was announced in the spring of 2007, the SEC said that Yee learned the deal was facing trouble and passed the information to Tang. Tang then tipped off his friends, his brother James Tang and Yee's brother Eddie Yu. ValueAct and private equity firm Silver Lake Partners in 2007 agreed to buy Acxiom, but the deal fell through in October 2007.

The SEC complaint says that on May 2, Chen Tang speculated on a Yahoo! Inc. ( YHOO) message board that an Acxiom sale might be in the works, reasoning that the Acxiom CEO had stopped selling shares. "In reality, however, his statement was based on the inside information he had previously received from his brother- in-law Ronald Yee," the complaint says.

Yahoo! declined to comment.

A search Friday of the word "Acxiom" on the Yahoo message boards shows a five- year gap in messages between July 2002 and October 2007.

An Acxiom spokesman said, "There is no allegation that Acxiom or any current or former employees did anything improper, and the indictments have no implications for Acxiom's business or its people. Apart from one individual in the employ of a venture capital fund that made a failed attempt to buy Acxiom, the defendants had nothing to do with our company."

Tang also allegedly profited on private information regarding Tempur-Pedic International Inc. (TPM) after he learned of plans by his firm to make a large purchase of Tempur-Pedic securities a few days after the pre-announcement. On the same day of the purchase, Tang and his partners sold their Tempur-Pedic stock holdings and subsequently reaped $800,000. Tempur-Pedic didn't return a call seeking comment.

Tang also traded on confidential information after learning in 2008 about a pending surprise pre-announcement that Tempur-Pedic wouldn't meet its earnings forecast, the SEC said.

He then tipped off his friends Joseph Seto of San Francisco, Ming Siu of Hayward, Calif., and Zisen Yu of Fremont. All three traders also were charged in the SEC's complaint along with Yee, Tang's brother James Tang of San Gabriel, Calif., and Yee's brother Eddie Yu of Fremont.

The SEC said that when Tempur-Pedic made its pre-announcement, the traders made $1.2 million in illegal profits.

A spokesman for private equity firm Friedman Fleischer & Lowe said that Chen Tang worked there, but that the firm immediately suspended and later fired him after it was notified of the SEC investigation, in April 2008. The spokesman said Tang didn't work for the firm at the time the alleged trading occurred.

A call to Tang's lawyer wasn't immediately returned. Michael Celio, at Keker & Van Nest LLP, a lawyer for Yee, said, "Mr. Yee denies he did anything wrong and intends to contest the charges vigorously."

A lawyer for co-defendant Seto said he will review the complaint when he receives it and decide what action to take. The lawyer said he was retained by Seto in April 2008 when he received a subpoena.

Lawyers for the other co-defendants didn't immediately return calls seeking comment.

-By Joseph Checkler; Dow Jones Newswires; 212-416-2152; joseph.checkler@ dowjones.com

(Sarah N. Lynch, Jennifer Rossa, Jessica Papini, and Joe Bel Bruno and Ben Charny contributed to this article.)

  (END) Dow Jones Newswires
  10-30-091909ET
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