STEC Inc.’s Chairman and Chief Executive Manouchehr Moshayedi spoke up in his defense last week in response to the Securities and Exchange Commission civil complaint filed last month.
Moshayedi has been charged with insider trading, which he denied in a filing in U.S. District Court for the Central District of California.
“The answer …is the first step in my defense, and my quick and thorough response to the SEC’s complaint shows my intent to contest it vigorously,” Moshayedi said in a statement.
SEC Allegations
The SEC contends he profited by selling shares of the Santa Ana-based company in a scheduled public offering in August 2009, withholding “critical nonpublic information” that had the potential to negatively affect the company’s stock price and stock sale.
Moshayedi could be barred from serving as an officer and director of any public company, among other penalties, if found guilty in the case.
Moshayedi’s filing said he was “unaware of any material information that had not been publicly disclosed at the time of the public offering.”
STEC manufactures and sells flash memory for data networks including flagship product ZeusIOPS.
A deal with STEC’s largest customer EMC Corp. in Hopkinton, Mass., announced in July 2009 helped boost STEC’s stock price prior to the public offering. EMC agreed to buy $120 million worth of ZeusIOPS drives from STEC in subsequent quarters.
EMC
The SEC has alleged that Moshayedi learned—but failed to disclose—that EMC decided to lower its purchase order and that the deal would be the last supply agreement between the companies. The commission said Moshayedi proceeded with the stock sale despite knowledge of such material information.
Moshayedi responded in the filing that he had “no reason to assume” a substantial decrease in EMC’s demand.
He said that “EMC did not know its own future demand” at the time of the public offering, and he “did not know—and could not have known—whether the parties would reach an agreement for 2010.”
Moshayedi also denied the SEC’s contention that he engaged in secret negotiations with EMC to help STEC meet quarterly analyst estimates, saying STEC engaged in no improper or unusual dealings with its customer in providing a discount for future order commitments.
Brother-Cleared
Moshayedi co-founded the company in 1990. The SEC said in July it wouldn’t pursue any charges against his brother and company co-founder Mehrdad Mark Moshayedi—STEC’s president, chief operating officer and chief technology officer—nor against the company itself.
Manouchehr Moshayedi and Mehrdad Mark Moshayedi together sold 9 million shares of the company’s common stock through the 2009 public offering, receiving pre-expenses proceeds of $267 million.
STEC’s board is in unanimous support of its chief executive, according to Kevin Daly, the company’s independent director.
