Former Toys R Us Executive Accused of Insider Trading

WASHINGTON —  A former Toys R Us Inc. purchasing executive was accused of using insider information about the company’s Christmas season sales to make a $40,000 profit in stock options, the Securities and Exchange Commission said Tuesday.

The SEC filed a lawsuit against James Markham, formerly a director of industrial purchasing for Toys R Us, claiming that he bought the options, which are rights to buy shares in the future, when he learned that sales in the key months of November and December, 1986, were exceptionally strong.

In a civil complaint filed in U.S. District Court for the District of New Jersey, the SEC said Markham bought Toys R Us options in November and December, 1986.

Markham’s actions were “in willful or reckless disregard of both his duty not to trade while in possession of such material non-public information, and of a (Toys R Us) policy prohibiting trading while having access to material non-public information,” the SEC alleged.

The SEC said that when Toys R Us publicly announced that its sales in the two-month period were up 26.8% over the previous year, exceeding expectations, Markham sold the options in January, 1987, for a profit of about $39,287.

Markham resigned from the company after Toys R Us management learned of the charges, court papers said.

The suit seeks an order prohibiting Markham from further insider trading violations, repayment of the profit in alleged illegal profits and an “appropriate,” unspecified fine under the Insider Trading Sanctions Act. Fines under the act can be as much as three times the illegal profits made.

The SEC said Markham’s trading in Toys R Us options was the subject of an investigation by the Chicago Board of Options Exchange, where the options are traded. Toys R Us shares trade on the New York Stock Exchange.