S.E.C. Accuses Dead Man of Insider Trading

The Securities and Exchange Commission has filed an insider trading complaint against four men it said profited from insider trading in Georgia-Pacific Corp.'s 2005 sale to Koch Industries Inc.

That's not unusual, except for this: One of the men died last month, his lawyer says.

The deceased defendant is James D. Zeglis, who according to the S.E.C. tipped others after he learned from his brother, John D. Zeglis, a G-P director, that the pulp, paper and packaging giant was going to be sold.

John Zeglis is the retired chief executive and chairman of AT&T Wireless Services, as well as a director for Helmerich & Payne, a contract oil and gas well driller; AMX Corp., a technology company; State Farm Mutual Automobile Insurance Co.; and Telstra Corp., the Australian telecommunications company.

But James Zeglis died three weeks ago; his lawyer, Kevin M. Flynn, said that if the S.E.C. had called him, "I would have told them that Mr. Zeglis passed away."

He said his client had denied wrongdoing, and questioned whether the federal government could pursue a suit against his deceased client.

Katherine Addleman, regional director of the S.E.C.'s Atlanta office, blamed Flynn for not notifying them of his client's death. She said government lawyers would now decide whether to go forward with their claim against his estate.

James Zeglis, who was a lawyer in solo practice, was accused in the complaint of passing along information he learned from his brother about the impending Georgia-Pacific sale.

He was accused of tipping off Gautum Gupta, a physician who operates weight loss clinics, and Jim W. Dixon, a real estate developer and agent. Both bought Georgia-Pacific shares. The complaint said Gupta then told Lance D. McKee, a self-employed investor, who also bought shares.

The day after Koch announced that a subsidiary would make a cash tender for Georgia-Pacific's shares, the stock soared 36 percent.

Dixon paid Zeglis a kickback, mostly in cash, of about $25,000 from his $116,000 gain, the S.E.C. said. Gupta made a $689,401 profit, and McKee made $7,157, the commission asserted.

McKee and Dixon have agreed to settlements with the commission to give up their gains plus penalties, the agency said.

by Elizabeth Olson