On May 21, Mr. James D. Dondero, a Texas hedge fund manager, entered a settlement with the DOJ where he agreed to pay $250,000 for alleged charges of violating premerger reporting requirements.
According to the complaint, Mr. Dondero acquired stock of Motient Corp. (“Motient”), based in Reston, Virgina, where he served on the board of directors in February 2005, before complying with the antitrust premerger notification and waiting period requirements of the HSR Act. As a result of exercising the options, Dondero and the investment fund that he controlled, Highland Capital Management L.P. (“Highland”), held voting securities of Motient valued in excess of the $50 million HSR reporting threshold.
Less than a year before the violation alleged in the complaint, Dondero made a corrective HSR filing relating to a failure to file regarding Highland’s acquisitions of stock in another company. As part of that filing, Highland outlined steps that would be taken to avoid future violations.
The Hart-Scott-Rodino Act of 1976 imposes notification and waiting period requirements on individuals and companies over a certain size before they can consummate acquisitions of stock or assets above a certain value, which was $50 million at the time of the violations alleged and is now adjusted annually to reflect changes in gross national product. A party is subject to a maximum civil penalty of $11,000 for each day it is in violation of the HSR Act.
This penalty serves as a reminder that all individuals and businesses must seek the advice of experienced antitrust counsel when contemplating a transaction that may be reportable under the HSR Act.