- The Washington Times - Tuesday, March 4, 2003

Capital One Financial Corp. said yesterday that one of its top executive resigned amid accusations of illegal insider trading.
The McLean-based financial services company, the fifth-largest issuer of MasterCard and Visa credit cards, said Chief Financial Officer David Willey quit after learning that the Securities and Exchange Commission will investigate his actions within the company and may file civil charges against him. If authorized, the civil action would claim Mr. Willey traded Capital One stock based on knowledge not available to the general public.
The potential civil action centers around the sale of stock last May, two months before the company's shares plummeted when regulators ordered the company to increase reserves for loan losses.
Mr. Willey sold 52,075 shares of Capital One between May 9 and May 13, and his wife sold 26,291 shares, according to the SEC.
After the company announced July 17 it would increase reserves, the company's stock fell 40 percent that day. He made about $1.5 million more by selling his shares in May instead of July.
The SEC has no plans to seek action against other executives of Capital One, and the company said it would re-certify financial statements from 2002 and reaffirm earnings guidance for this year. Capital One said David Lawson, the president and chief executive officer of Capital One Auto Finance, will be the interim chief financial officer until a permanent replacement is found. The company had been looking for someone to replace the 41-year-old Mr. Willey for about a year because he had indicated a desire to retire, analysts said.
Mr. Willey will have an opportunity to present information to the SEC so that the commission can determine if an action is warranted. Richard Morvillo, Mr. Willey's attorney, said his client denies any wrongdoing, and that they are discussing the matter with the SEC. Mr. Morvillo said Mr. Willey resigned in order to fully dedicate his time to defending his actions.
Capital One shares fell $2.72 to close at $28.25 on the New York Stock Exchange yesterday, the lowest closing price since November.
Merrill Lynch lowered its estimate for the company's year-end closing price from $54 to $45.50.
Other analysts defended Mr. Willey and said his departure would not affect the company's performance.
"While today's announcement is likely to raise questions surrounding the credibility of Capital One's management team, we continue to believe the company's senior executives have always acted with honesty and integrity," Friedman, Billings and Ramsey analyst Todd Pitsinger said in a report yesterday. "Mr. Willey was always a systematic seller of stock. Had Mr. Willey known about impending regulatory action, we do not believe he would have sold shares."
Mr. Willey and other executives are currently named in a class-action lawsuit filed by Capital One shareholders. National law firm Milberg, Weiss, Bershad, Hynes and Lerach claim that executives knew that regulators might order the company to increase reserves as early as 2001, and that they sold more than $250 million in company shares based on that knowledge.
Executives at Capital One are compensated largely from stock options rather than salary. Company Chairman Richard Fairchild exercised $142 million in options over the course of 2001, and did not collect a salary or bonus. President Nigel Morris sold $89 million in options. Mr. Willey earned $1.3 million in salary and bonuses, while selling $6.8 million in options.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide