Defendant Traded Before Negative Earnings Announcements and
an Acquisition of the Company
SAN JOSE – The founder and former chief executive officer of
a Sunnyvale-based fiber optics equipment maker, Peter C. Chang, pleaded guilty
today to insider trading and tender offer fraud, announced Acting United States
Attorney Alex G. Tse and Federal Bureau of Investigation Special Agent in
Charge John F. Bennett. The Honorable
Lucy H. Koh, United States District Judge, accepted Chang’s guilty plea earlier
today.
Chang, 59, of Los Altos, Calif., was the President, Chief
Executive Officer (CEO), and Chair of the Board of Directors of Alliance Fiber
Optic Products, Inc. (AFOP), a manufacturer of fiber optic components based in
Sunnyvale, Calif. AFOP is publicly
traded on the NASDAQ. As part of his
guilty plea, Chang admitted he used two brokerage accounts, held in the names
of his brother and his wife, to purchase and sell AFOP stock. He further admitted that he had access to
material nonpublic information about the company, and that his duty of confidentiality
and company policies regarding insider trading prevented him from trading on
the information.
Further, as part of his plea agreement, Chang admitted that
on October 28, 2015, and February 18, 2016, he sold AFOP stock prior to two
public announcements of the company’s earnings.
The timing of these sales allowed Chang to avoid losses he would
otherwise have incurred when the stock price dropped after the
announcements. Chang further admitted
that in March 2016, he purchased AFOP stock while he knew material nonpublic
information about a potential acquisition of the company by a larger public
company. The acquisition of AFOP was
publicly announced on April 7, 2016.
Pursuant to today’s plea agreement, Chang pleaded guilty to
all counts in a superseding information filed today charging Chang with three
counts of securities fraud and insider trading, in violation of in violation of
15 U.S.C. §§ 78j(b) and 78ff and 17 C.F.R. §§ 240.10b-5 and 240.10b5-2, and one
count of fraud in connection with a tender offer, in violation of 15 U.S.C. §§
78n(e) and 78ff and 17 C.F.R. §§ 240.14e-3(a) and 240.14e-3(d).
Judge Koh scheduled Chang’s sentencing for May 30,
2018. Chang faces a maximum statutory
penalty for securities fraud and fraud in connection with a tender offer of 20
years in prison and a fine of $5 million, per count. Additional fines, periods of supervised
release, and restitution also may be ordered, however, any sentence will be
imposed by the court only after consideration of the U.S. Sentencing Guidelines
and the federal statute governing the imposition of a sentence, 18 U.S.C. §
3553.
Assistant U.S. Attorney Lloyd Farnham is prosecuting the
case with the assistance of Jeremy Acala and Claudia Hyslop. The prosecution is
the result of an investigation by the FBI.
Additional assistance was provided by the San Francisco Regional Office
of the Securities and Exchange Commission.
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