Opinion ID: 1384382
Heading Depth: 2
Heading Rank: 5

Heading: Hughes and Stacy's stock purchases

Text: From April 1997 through August 1999, Stacy was a fairly conservative investor in his IRA accounts. His transactions involved the purchase of 200 shares in Checkpoint Systems, Inc. in April 1997, the purchase of 100 shares in Karrington Health, Inc. in September 1997, the sale and repurchase of those same stocks in December 1998, the sale of the Karrington stock in January 1999, and the purchase of 155 shares of Worthington Industries, Inc. in January 1999. In September 1999, Stacy's purchases dramatically increased. Stacy purchased 180 shares of WF on September 7, 172 shares of WF on September 23, and 100, 500, and 1,500 shares of WF on September 29. The announcement of the Kellogg buyout occurred on October 1, 1999. From October 4-7, 1999, Stacy sold all the WF stock he had purchased in the previous month, making a substantial profit. Hughes considered herself to be a knowledgeable investor based on her research and her attempt to educate herself on the equities markets in general. She handled the family finances and investments. Hughes was also a conservative investor prior to September 1999. From January 1997 through August 1999, Hughes bought and sold only four stocks: Checkpoint Systems  purchasing 100 shares in January 1997, 250 shares in April 1997, and selling 250 shares in December 1998; Karrington Health  purchasing 100 shares in August 1997 and selling 100 shares and then buying them back in December 1998 and reselling in January 1999; Wild Oats  purchasing 80 shares in July 1998; and Airnet Systems  making separate purchases of 100 shares and 185 shares in January 1999. In activity that was inconsistent with her prior behavior in the stock market, in September 1999, Hughes began to sell shares of other stock in order to obtain WF Stock. On September 23, 1999, Hughes sold 136 shares of Airnet Systems and 80 shares of Wild Oats, and purchased 354 shares of WF. The next day she sold 285 shares of Airnet and 250 shares of Checkpoint Systems and purchased 382 shares of WF. On October 7, 1999, Hughes sold all of her WF stock, making a substantial profit. In the couple's joint account, Hughes appeared to be moderately aggressive in her stock purchases. [6] From August through September 1998, the couple bought 320 shares of Airnet Systems, 100 shares of Huntington Bancshares, 200 shares of Worthington Industries and 200 shares of Banc Stk Group. In January and February 1999, they sold off their 247 shares of previously purchased Max & Ermas' stock, and purchased 100 shares of Consolidated Stores, 300 shares of Airnet Systems and 250 shares of WF. In July 1999, they purchased 10 more shares of Huntingon. In September 1999, purchases in the joint account also drastically changed. On September 27, 1999, the couple purchased 6,250 shares of WF stock and an additional 100 shares two days later. By October 7, 1999, the couple had sold all of their WF stock for a substantial profit. The profits received by Hughes and Stacy for the sale of the WF stock were as follows: $78,502.45 for the couple's joint account; $23,908.88 for Stacy's accounts; and $7,598.89 for Hughes's accounts. The couple's shared profits totaled $110,010.22. The Pension Plan, managed by Hughes, also profited by $57,000. Between the two of them, Stacy and Hughes used seven different brokerage accounts to buy WF stock. Hughes had two personal accounts, one with Advest and one with Eisner. Stacy had three accounts, one with Advest, one with Eisner, and one with Charles Schwab. The two also had two joint accounts, one with Eisner and one with UBS. Additionally, the Charles Schwab account and the UBS account were both opened on September 29, 1999, and were used solely to purchase WF stock. One of the Government's witnesses, Jody Stewart, testified about Hughes's and Stacy's checking account. Stewart stated that on September 23, 1999, there was a deposit of $45,000.00 and on September 27, 1999, there was a deposit of $30,000.00. The later deposit was solely comprised of a check issued to Hughes by RBA that contained the notation loan and was signed by Blackwell. On September 27, 1999, Hughes made out a check to National Financial for $74,939.88. Two days later, she made out a check to Charles Schwab for $28,794.00. Timothy Salzer, one of Hughes's and Stacy's brokers, also testified for the Government. Based on the couple's recent purchase of 6,000  plus shares of WF, Salzer requested new financial information on them because he did not believe it was a suitable investment for them due to their limited liquidity. The liquid net worth stated by Hughes and Stacy in 1998 was between $50,000 and $100,000. In September 1999, that number changed to between $100,000 and $500,000. When Salzer learned of the Kellogg buyout, he was surprised because of the size of the couple's recent purchases of WF stock and the proximity to the buyout. Because the couple virtually doubled their money in eight days, Salzer concluded that they either had great luck or had inside information.