A Long Island lawyer with a history of suing corporate figures under a federal law barring “short-swing profits” has brought a complaint against William Ackman for allegedly violating the regulation during his proxy fight with Target Corp.
The Securities and Exchange Commission rule bars company insiders from profiting from the purchase and sale of stock within a six-month window. Officers, directors and investors with stakes larger than 10 percent qualify as company insiders under the law, which is meant to prevent short-term gains by those privy to company information.
Ackman’s Pershing Square Capital Management said it would not comment on the litigation. The fund first invested in Target in 2007 and hasn’t been on record as having a stake greater than the 7.8 percent holding in the retailer reported to the SEC on May 27. Its attempt to change the composition of Target’s board and seat a slate of directors was unsuccessful.
In a lawsuit filed June 1 in U.S. District Court in Manhattan, attorney David Lopez, on behalf of Target shareholder Deborah Donoghue, accused Ackman and Pershing Square of breaking the short-swing rule by making trades while owning a larger than 10 percent stake, and seeks to recover profits.
Lopez said his calculations included “common stock underlying over-the-counter American-style call options and cash-settled equity swaps.”
According to published reports, the Southampton, N.Y., native has hit executives from companies such as Parlux Fragrances and Casual Male Retail with similar suits since as early as 1990. A national search of court records showed 137 securities suits have been filed on behalf of Deborah Donoghue in federal courts since 2001.