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By: Michael Maloof
Local investor and DU Trustee Scott Reiman has been fined nearly a million dollars by the Securities and Exchange Commission who allege that he participated in insider trading back in 2007. In a report published on April 15th the SEC accuses the financier of taking advantage of confidential information about a deal between Tracinda Corporation and Delta Petroleum worth $684 million. The report implies that Reiman, Delta Petroleum CEO Roger Parker, and insurance executive Michael Van Gilder were all involved in insider trading fraud. It also cites that on one occasion, Reiman may have made immediate purchases of Delta stock after getting off the phone with Parker. Shares in that stock jumped over 20% when the news of the deal was made public.
Reiman avoided becoming entangled in the SEC’s case against the more egregious actions of Parker and Van Gilder. His lawyer, Cliff Stricklin of Brian Cave HRO, noted that the SEC has various ways of enforcing their rules but that it “never filed formal charges against him [Reiman].” Stricklin affirmed that Reiman and the SEC had entered into negotiations months previously and eventually “resolved the matter through administrative proceedings… mostly monetary.” Stricklin said that the settlement was meant to “avoid other expenses and distracting [Reiman] from his other goals” citing the millions Reiman has donated to charity and education in the past years.
But those “administrative proceedings” did not come cheap. In fact, they resulted in a $889,576 fine for the investor. It’s a just price according to Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit, who said that “Reiman took advantage of highly confidential information that he obtained through his friendship with Parker and traded on it for significant and entirely illegal profits.”
The fine comes with a provision that bans Reiman from holding a position in a publicly traded company or financial advising position for 5 years. Luckily for Reiman, of the multiple boards of schools and non-profits he sits on, he is not currently serving on the boards of any public entities. However, Reiman does serve on the University of Denver Investment Committee as an advisor and Trustee. Stricklin confirmed that that advisory position does not fall under the strict definition of “Financial Advisor” as defined by the SEC.
Among his other community involvements, Reiman’s noteworthy personal generosity to the Daniels College of Business led to the renaming in 1999 of our Finance School, now the Reiman School of Finance. In the past years, DU and DCB has accepted over $9 million dollars and countless amounts of financial advising from Reiman. However, as this article went to press neither the University of Denver nor the Daniels College of Business had issued statements on the matter. Kim DeVigil, Senior Director of Communications for DU, affirmed that Reiman was still affiliated with the University and emphasized that the “negotiated settlement” was an matter “not involving the University [of Denver].”
The entire affair harkens to another public relations crisis at University of Ohio back in 2005 when professor and benefactor Roger Blackwell was convicted of insider trading and sentenced to 5 years in prison. The University of Ohio admitted that many of the funds donated to it by Blackwell were possibly fraudulently acquired but respected his enormous generosity and retained him as namesake of a hotel opened in his name. The difference between these two cases is that Blackwell was formally tried in criminal court and found guilty where as Reiman reached an out-of-court settlement. However, OU acknowledged that it was facing a branding and identity crisis. OU assessed the crisis, made a statement, and then moved on with its reputation for ethical business leadership intact. Its actions showed its students and faculty that it took violations of its ethics code seriously and wanted to set a positive example for the future business leaders it teaches. The University of Denver’s should do the same to protect its image and the brand its business school has worked so hard to build.
We are all human and the mistakes we make should be forgiven—especially those that are already legally settled. But any management professor will be the first to tell you that when crises arise they must be dealt with and swiftly to retain the public’s trust.
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