Once again, an example of why you shouldn't mix business with pleasure.

[ by Melanie Gretchen and Howard Haykin ]

A "wine and dine" weekend, a no-show guest, a breach of Attorney-Client Privilege, a sinister mind, illegal trading, and soon thereafter, a lost weekend.  The highly anticipated social events presented a wonderful opportunity to meet new interesting and intelligent friends - including the General Counsel of National Semiconductor.  But just before the weekend kicked off, the general counsel told his host he would have to work on an imminent acquisition and could not attend the weekend festivities. 

It didn't take the SEC very long to figure out the case - thanks, in part, to a well-documented guest list.  And before you could say "illicit profits," the SEC arrested their man. 

SEC Findings and Allegations.   James Balchan and his wife lived and worked in Houston,  The wife was a litigation partner in the Houston office of a large law firm, and its was one of her law partners who invited Mr. and Mrs. Balchan to an informal client "wine and dine" weekend.  The guest of honor was the National Semiconductor's general counsel.  Unfortunately, a few days before the weekend, the general counsel told his host he could not attend because of the following business commitments:  (i) the general counsel had to work on the company's impending acquisition, for which he needed the law firm's advice;  and, (ii) the general counsel would have to work throughout the weekend and could not attend.  be unable to attend the events.  The deal in question was the acquisition of National Semiconductor by Texas Instruments. 

Over the weekend the law partner informed Balchan's wife that the general counsel was unable to attend because he needed to work on the acquisition.  The wife violated attorney-client privilege by passing along that information to her husband.  James Balcan immediately made plans guy securities bases on the information he was privy to. 

James Balcan used his newly acquired insider information to purchase shares National Semiconductor - first 2,000 shares, then another 1,000 shares a few days later.  After Texas Instruments announcements its planned acquisition of National Semiconductor, Balchan sold his positions for a tidy profit of $30.,00.

Violations and Disciplinary Action.   Without confirming or denying SEC charges, Balchan agreed to pay nearly $60,000 to settle SEC's charges that he violated Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder.   Balchan further agreed to the entry of a judgment enjoining him from future violations of relevant provisions of the Exchange Act.  The monetary fine included:  $31K in disgorgement and prejudgment interest, plus $29K in additional penalties.

The case: Securities and Exchange Commission v. James Balchan, Civil Action No. 4:13-cv-00298 (U.S. District Court for the Southern District of Texas).

For further details, go to [SEC Litigation Release No. 22612, 2/6/13] and the [SEC Complaint].