The former CEO of Houston investor relations firm who authored his firm's policies against illicit trading has been charged with insider trading in the shares of multiple clients.
Stephen Gray, co-founder and former CEO of Dennard Rupp Gray & Easterly, was fired in October after the firm learned of a Securities and Exchange Commission investigation. The firm has been renamed Dennard Lascar Associates.
"In each of our 20+ careers as investor relations professionals, we never imagined this situation could or would ever arise with someone we thought we knew well," DLA managing partners Ken Dennard and Jack Lascar said in a statement.
The SEC filed a complaint July 26 in federal court in Houston, alleging that Gray traded on info gleamed from helping clients like Men's Wearhouse and Powell Industries draft and publish press releases about earnings, mergers and acquisitions and other key events, the Securities and Exchange Commission said.
Gray earned profits of $278K and avoided losses of at least $35K over a 13-month period from 2011-12, the SEC said, adding that he traded in shares of at least six clients.
"Gray not only knew the firm’s policies that prohibited employees from trading on confidential information gleaned from clients – he authored them," said David Peavler, associate director of the SEC's Fort Worth office. "While Gray was personally requiring firm employees to sign copies of the policies he wrote, he was insider trading himself."
The SEC complaint noted that in one incidence Gray made an electronic calendar appointment on April 29 with the subject, "Buy MW stock ahead of early June earnings release," a reference to Men's Wearhouse. He bought more than 4,000 shares a few days later on May 4 and sold them on May 5 for a $17,397 profit, the SEC said.
Gray also traded on info from clients Powell Industries (earnings restatement), Superior Energy Services (merger), Mitcham Industries (strong earnings), C&J Energy Services (earnings), MRC Global (earnings), Hyperdynamics (Guinea drilling project).
Dennard and Lascar said the firm was "shocked and extremely disappointed" when it heard about the inquiry last September. An internal probe resulted in Gray's termination a month later and the partners said the firm cooperated fully with the SEC investigation. "We have been assured that the SEC’s inquiry and actions concern only this one previous administrative member of our former firm, who has no association with or involvement in [DLA]," they added.
The SEC is seeking civil penalties, disgorgement of profits and losses, as well as a ban on Gray serving as an officer or director of a public company and an injunction against further securities violations.
Fifty-six-year-old Gray is the former CEO of publicly traded ION Networks before former DPG&E and serving as managing partner and CEO.
Have a comment? Send it to 
No comments have been submitted for this story yet.