The mayor of Beaufort has agreed to pay almost $44,000 to settle a case of insider stock trading, the Securities and Exchange Commission said Wednesday.
The regulatory agency alleged William J. "Bill" Rauch bought shares of Alameda, Calif.-based Advanced Cell Technology Inc. immediately after one of its executives informed him about a breakthrough in embryonic stem cell research before the company publicly disclosed it.
Rauch was working as a consultant to the biotechnology company at the time.
In a lawsuit filed in federal court in San Francisco, the SEC said Rauch was told on Aug. 3, 2006, by the unidentified executive that a science journal would be publishing an article on the breakthrough. Rauch then called a securities broker and opened accounts in his name and his children's names on the same day.
Within two weeks, after further discussions with the executive, Rauch bought more than $11,000 of Advanced Cell stock in his children's accounts, the SEC said.
After the article was published Aug. 23, 2006, the company's stock jumped, initially rising to $1.83 a share from 40 cents before settling back to about 96 cents a few days later.
"Even with the price decline, Rauch's potential profit on his stock purchases two weeks earlier, had he sold, was more than $20,000," the SEC said.
Bob Leach, SEC branch chief in the enforcement division of the San Francisco office, said Rauch sold some of the shares "but as of June 2008 he continued to hold a majority of the stock."
Leach said insider trading occurs when either a purchase or a sale of publicly traded securities is based on information not disclosed to all investors. He declined to comment on the specifics of the investigation.
In an e-mail message Wednesday, Rauch referred questions to his lawyer but issued a brief statement about Advanced Cell and the SEC probe: "It's a good company doing good work. Settling was simply a matter of practicality."
Rauch settled the case without admitting or denying the allegations. He also agreed to disgorge $20,708 and pay $23,284 in fines and interest.
In a written statement, Rauch lawyer Ralph E. Tupper said his client never profited from the investment and that the stock "is worth considerably less today than it was when it was purchased in August of 2006."
Shares of Advanced Cell were trading at about 3 cents apiece Wednesday.
"In this settlement ... Mr. Rauch neither admits or denies any wrongdoing, and his decision to settle was largely a matter of practicality: to settle cost Mr. Rauch approximately $44,000, but to litigate against the SEC would have cost Mr. Rauch much more," Tupper wrote.
The statement did not address whether the case will affect Rauch's political future.
Rauch has served as Beaufort's mayor since 1999, according to the city's Web site. Before moving to Beaufort in 1988 to start a publishing company, he served under then-New York City Mayor Ed Koch in a number of key staff positions, including press secretary.
Rauch is married to Gov. Mark Sanford's sister. Sanford declined to a comment Wednesday because family is involved, according to Joel Sawyer, his press secretary. As governor, Sanford has no authority to intervene in Rauch's role as Beaufort's mayor because the SEC case is not a criminal matter, Sawyer said.
Yvonne Wenger of The Post and Courier contributed to this report.