Ex-Ultrasystems Executive Is Accused of Insider Trading

The U.S. Securities and Exchange Commission on Wednesday accused an Orange County executive of insider trading, alleging that he used confidential information about a pending merger to make an overnight profit of $11,000 in the stock market for himself, his mother-in-law and a friend.

Dennis W. Evans of Mission Viejo allegedly carried out a scheme to profit from inside information about a merger between Ultrasystems Inc. in Irvine and Hadson Corp. of Oklahoma City, Okla., according to a civil complaint filed by regulators in U.S. District Court in Los Angeles.

Evans, now controller of a Hadson subsidiary in Irvine, could not be reached for comment. Ultrasystems, a defense contractor, issued a statement Wednesday saying Evans denies the charges.

The SEC has alleged that Evans, 37, overheard a conversation sometime around Oct. 28, 1987, between Ultrasystems Chief Executive Officer John Dean and another executive concerning a merger with Hadson Corp., a diversified concern in the energy and defense contracting industries. At the time Evans was the controller of Ultrasystems Defense and Space Inc., a subsidiary in Irvine.

On Oct. 29, Evans asked a friend to open a brokerage account and buy 2,000 shares of Ultrasystems stock, according to the SEC lawsuit. The friend allegedly did as Evans asked and then bought 1,000 shares for himself. Evans’ mother-in-law allegedly purchased 800 shares for her own account based on his recommendation.

On Oct. 30, 1987, Ultrasystems announced its intent to merge with Hadson, and the company’s stock soared to $8.75 a share, up $2.875.

Evans made a profit of $6,000, and his friend and mother-in-law made another $5,000, according to regulators.

The SEC is suing Evans for $11,000 plus penalties of up to $18,000 and is asking that the court issue an injunction preventing him from engaging in insider trading. If the injunction is violated, Evans could be held in contempt of court.

If the SEC wins its lawsuit against Evans, the agency said it would divvy up the alleged $11,000 profit among Ultrasystems’ shareholders who sold their stock on Oct. 29, 1987.

Evans’ friend and mother-in-law have not been named or charged in the lawsuit.

“There is no allegation here that those individuals knew that the recommendation they received was based on insider information,” said Harry Weiss, assistant director of the SEC’s enforcement division in Washington.

Ultrasystems said Evans would remain controller of Hadson Defense Systems pending the outcome of the suit.

But the SEC said it was concerned about Evans’ role in the company. “This is a case against an individual who was a corporate officer and continues to be a corporate officer, and, on that basis, continues to have access to confidential corporate information,” Weiss said.

The merger between Ultrasystems and Hadson was completed in April, 1988. The firm employs about 1,000 people in Orange County.