The US Securities & Exchange Commission has named the key individual in the Mid Ocean Ltd. insider trading scam which took place in Tennessee last year: he is Jay T. Deragon, described by the SEC as "an Exel consultant who owns an insurance consulting business in Hendersonville, Tennessee''.

As reported in The Royal Gazette yesterday, on November 16, the Commission filed a civil complaint in the United States District Court for the Middle District of Tennessee against six Nashville-area residents alleging insider trading in the securities of Mid Ocean Ltd. (Mid Ocean) prior to the March 16, 1998 announcement that Mid Ocean would merge with Exel Ltd. (now XL Capital), another Bermuda-based reinsurance company.

The complaint alleges that Deragon, in violation of his fiduciary or similar duty of trust and confidence to Exel, tipped Robert G. Poole of Hendersonville, Tennessee, about the proposed acquisition of Mid Ocean.

According to the complaint, shortly after Deragon's illegal tip, Poole told Mark C. Chesnut of Goodlettsville, Tennessee, the information about Mid Ocean.

On or before March 13, 1998, Poole provided Chesnut with $20,000 to invest in Mid Ocean call options that would appreciate in value when the proposed acquisition of Mid Ocean was announced to the public.

Using Poole's $20,000, Chesnut purchased "out-of-the-money'' Mid Ocean call options on March 13, 1998, valued at $65 per share. Those options would have expired worthless in just six days if Mid Ocean's stock price (which was $62 per share at the time of Chesnut's purchase) did not rise above $65.

Immediately after the March 16, 1998 announcement, the SEC alleges, Mid Ocean's stock price rose as high as $74 per share, and Chesnut sold the options and divided the profit with Poole.

The complaint also alleges that prior to the March 16, 1998 announcement, Poole tipped his father-in-law, Giles R. Krebs of Hendersonville, Tennessee, about the proposed merger. According to the SEC's complaint, on March 13, 1998, Krebs purchased Mid Ocean stock which he sold for a profit immediately after the March 16, 1998 announcement.

The SEC also alleges that, prior to the March 16, 1998 announcement, Poole provided the inside information about the Mid Ocean merger to Cristan K.

Blackman of Hendersonville, Tennessee. According to the SEC's complaint, Blackman, who is a stockbroker in the Nashville office of Morgan Keegan & Co.

(Morgan Keegan), tipped Charles R. Roberts of Hendersonville, Tennessee, another Morgan Keegan stockbroker, about the Mid Ocean merger.

The SEC's complaint alleges that on March 13, 1998, in order to profit from the material non-public information which they had received, Blackman purchased Mid Ocean call options and 3,000 shares of Mid Ocean common stock, and Roberts purchased 1,000 shares of Mid Ocean common stock.