US: Zomax ex-CEO convicted
The former chief executive of Zomax Inc. was convicted Wednesday by a federal jury in St. Paul of insider trading involving more than $6 million in company stock.
Jim Anderson, who was chairman and CEO of Zomax when it was one of Minnesota's technology high-fliers in the late 1990s, was convicted of six counts of insider trading and five counts of engaging in illegal monetary transactions.
The conviction brought a dramatic turnaround to the fortunes of the prosecution, which, during the course of proceedings, was forced to drop all charges against two other defendants.
Prosecutors originally brought insider trading charges against Anderson's wife, Michelle Bedard-Anderson -- also a former Zomax executive -- and Neil Dolinsky, a former Twin Cities securities analyst who was a financial adviser to the couple.
But Anderson eventually was left as the sole defendant. U.S. District Judge Paul Magnuson also threw out 18 of the 29 counts against Anderson; the jury convicted him on all the remaining counts.
"This prosecution was important in preserving the integrity of the securities market, upon which American business depends and in which millions of ordinary investors place their hopes for their children's education and their own retirement," Assistant U.S. Attorney John Docherty said in a prepared statement after the announcement of the verdict.
A sentencing date has not been set.
William Michael, an attorney for Anderson, said he will file a motion either this week or early next week asking the judge to set aside the verdict.
"We were very surprised and disappointed," Michael said. "The verdict is not consistent with the evidence."
The verdict came after the jury deliberated 11 hours to consider the evidence presented during the 11-day trial.
The case centered on then-CEO Anderson's sale of 356,000 shares of Zomax stock in August 2000. Prosecutors argued that the sale came after Anderson learned that Zomax earnings for that quarter would fall short of Wall Street expectations. The company disclosed its earnings shortfall Sept. 21, 2000, and Zomax stock lost two-thirds of its value as investors reacted to the news.
Prosecutors also accused Anderson of money laundering by using money from the stock sale to buy a $150,000 boat, to remodel a house, and to pay off a $50,000 credit card bill.
At the trial, prosecutors argued that Anderson sold his Zomax shares after receiving a July 17, 2000, internal sales forecast that predicted the company would fall short of its third-quarter sales targets.
The defense countered that all of the government's witnesses testified that the sales forecasts were not reliable and therefore not "material," meaning information that a reasonable investor would need to know in order to decide whether to buy, sell or hold the stock.
To convict Anderson of insider trading, prosecutors had to prove that he possessed material, non-public information in making the stock sale.
Joe Friedberg, an attorney for Bedard-Anderson, said he was "shocked" by the verdict, especially because Magnuson acquitted his client of all charges earlier this week.
"I thought there was a good chance of acquittal" for Anderson, Friedberg said. "There was no evidence that [Anderson] had any material inside information."
Plymouth-based Zomax, which duplicates and distributes software on compact discs, digital video discs and other media, was a darling of the dot-com era; its sales peaked at $239 million in 2000, when it earned almost $25 million. By 2005, sales slipped to $167 million and Zomax had a net loss of $36 million.
In 1999, Anderson was the third-highest-paid CEO in Minnesota, with $15.3 million in total compensation, including $12.2 million in stock-option gains. Bedard-Anderson was the highest-paid female executive in the Star Tribune's annual executive compensation survey for that year. Her total 1999 compensation was $5.3 million.
- 185 Corruption