(Reuters) - Five doctors have agreed to pay $1.9 million to settle U.S. Securities and Exchange Commission civil charges that they conducted insider trading in shares of a medical professional liability insurer that was preparing to be sold.
The SEC said Apparao Mukkamala routinely tipped the other doctors in 2010 about confidential details of the sale process for American Physicians Capital Inc ("APCapital"), where he had been chairman at the time.
It said the other doctors bought nearly $2.2 million of the East Lansing, Michigan-based company's stock between April 30 and July 7, 2010, based on the tips, and that Mukkamala himself bought shares through a charitable organization where he was president.
On July 8, 2010, The Doctors Co, a Napa, California-based medical malpractice insurer, agreed to buy APCapital at $41.50 per share, a 31 percent premium, in a transaction valued at about $386 million.
The SEC said the five doctors made more than $623,000 of illegal profit on APCapital shares following the announcement.
"Board chairmen and other insiders should never choose greed over duty when possessing confidential information about the companies they serve," Robert Burson, senior associate regional director in the SEC's Chicago office, said in a statement.
None of the defendants, whose ages range from the mid-50s to early-70s, admitted wrongdoing in agreeing to settle.
Mukkamala, a resident of Grand Blanc, Michigan, agreed to pay $631,000. Suresh Anne, also of Grand Blanc, will pay $697,000; Rao Yalamanchili, who lives in Staten Island, New York, $298,000; Mallikarjunarao Anne, a Chicago resident and Mukkamala's brother-in-law, $253,000; and Jitendra Prasad Katneni of Fenton, Michigan, $22,000.
Lawyers for Mukkamala and Yalamanchili declined to comment. Lawyers for the other defendants did not immediately respond to requests for comment.
The case is SEC v. Mukkamala et al, U.S. District Court, Eastern District of Michigan, No. 12-13020. (Reporting by Jonathan Stempel in New York; Editing by Doina Chiacu)