First Indiana deals stemmed from broader probe

August 25, 2009

The insider-trading settlements announced by the Securities and Exchange Commission this week were an outgrowth of a broader inquiry into trading in First Indiana Corp. by dozens of people before its sale two years ago, according to a former director of the bank.

“They had an SEC inquiry into, I’ll use the term ‘excessive trading,’ in the stock by a whole bunch of people — it might be 100,” said Bill Mays, a First Indiana director from 2003 until the bank’s $529 million sale to Milwaukee-based Marshall & Ilsley Corp.

“You would be shocked by the number of people,” according to Mays, who said he was asked by investigators to identify people he knew on the list. “It reads like a who’s who of Indianapolis.”

Mays, owner of Mays Chemical Co., said the investigation seemed like a questionable use of SEC resources. He said the total dollar value of the trading by those on the list was less than $1 million. Those who executed trades pocketed a handsome return. The per-share price paid by M&I was 42 percent higher than the price at which First Indiana shares closed the prior trading day.

It’s not clear whether the $51,852 in settlements announced yesterday with three local residents — all of whom are close to Mays — wraps up the the inquiry. Officials with M&I and the SEC could not be reached this morning.

According to the SEC, all three individuals bought First Indiana shares the same day that a First Indiana board member complained to them about having to attend a special Sunday board meeting. The M&I deal was announced the following Monday morning.

SEC records do not accuse the director of impropriety, and he is not identified by name in court records. However, the description in court papers matches only one director —Mays — and he acknowledged to IBJ that he did complain.

Furthermore, one of the settling parties is Mays’ daughter, Kristen, 33, who serves as assistant to the president of Mays Chemical, and another is Matthew B. Murphy III, 51, the company’s director of finance and administration. The other person settling is Nancy Jewell, 52, CEO of Indiana Minority Health Coalition.

Without admitting or denying allegations of wrongdoing, all three agreed to return the amount of their profits, plus pay an equal amount as a penalty. That totaled $15,920 for Mays, $18,156 for Murphy and $17,776 for Jewell.

According to the SEC, the director complained to all three that the special meeting was “ruining his scheduled plans for the day.”

Kristen Mays, Murphy and Jewell “then each misappropriated that information,” the SEC alleges.


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