WREX.com – Rockford’s News LeaderSEC Accuses Rockford Attorney, Doctor of Insider Trading

SEC Accuses Rockford Attorney, Doctor of Insider Trading

By Bob Schaper

The U.S. Securities and Exchange Commission sues the owner of a Rockford local weight loss clinic and a Rockford attorney who died last month over claims of insider trading.

The lawsuit, filed Tuesday in U.S. District Court in Chicago, accuses them of making thousands of dollars after hearing confidential information about a business deal.

It took investigators nearly three years to unravel this case, a crime that allegedly happened in November 2005. That's when a Wichita company agreed to buy Georgia-Pacific, a large paper manufacturer based in Atlanta. But even before the ink was dry, the SEC says, news of the deal leaked. SEC Regional Director Katherine Addle man says, "This was referred to us through two different sources, the New York Stock Exchange as well as the options trading authorities AMEX and the Chicago Board Options Exchange. All of the exchanges have in place various watch programs where they note unusual trading patterns and try to investigate those."

The lawsuit claims James D. Zeglis heard about the merger through his brother, a member of Georgia-Pacific's board of directors. Zeglis, in turn, tipped off his friend, Dr. Gautam Gupta. Gupta owns five weight loss clinics in Northern Illinois, including one in Rockford and one in South Beloit. This is video of an interview we did with him in 2004. Gupta allegedly used the information to make almost $700,000. "We believe that the facts are supportive of a case that James Zeglis took advantage of his relationships with his brother, took that information for his own purposes and passed it on to others."

The SEC also investigated two other Rockford men. James Dixon and Lance McKee settled out of court.

The SEC now has to figure out how to proceed with James Zeglis' case. He died last month. "What the commission has to do is determine whether it's appropriate to proceed against the estate," Addleman says.

The U.S. Attorney has not brought any criminal charges against any of the defendants.  Zeglis' attorney tells us that the government's case is seriously flawed, which is why Zeglis refused to settle the matter before he died.

None of other men involved in the case or their attorneys returned our calls today.