The U.S. Securities and Exchange Commission (SEC) has accused an ex-vice president at Life Time Fitness Inc., Chanhassen, Minnesota, along with seven alleged conspirators, of using insider-trading tactics to make a profit of nearly $1 million, according to a Sept. 29 media release issued by the commission.
Shane Fleming, 54, was Life Time's vice president of corporate sales when, in February 2015, he allegedly learned that the fitness company had been purchased and would be taken private. According to the SEC, Fleming devised a plan with friend Bret Beshey, in which Beshey would use Fleming's tip to make a profit the men would split. Beshey then directly or indirectly involved six others, all of whom agreed to share trading profits.
Between Feb. 25, 2015 and March 3, 2015, the defendants allegedly purchased and sold approximately 2,000 "highly speculative" call options for Life Time shares, amounting to $866,209. Life Time ceased trading on the New York Stock Exchange on June 10, 2015.
“Beshey allegedly tried to mask his role in this scheme by recruiting others to trade on inside information rather than trading himself,” Joseph G. Sansone, chief of the SEC Enforcement Division’s Market Abuse Unit, said in the release. “Through our ever-evolving investigative tools, we were able to thwart Beshey’s efforts at concealment by uncovering trading by his immediate and downstream tippees and tracing those trades back to him.”
In an Oct. 2 statement to Club Industry, a Life Time spokeswoman emphasized the company has always had clear and prohibitive insider trading policies in place. For allegedly violating these policies, Fleming was fired in 2016.
"As alleged in the SEC’s complaint, Mr. Fleming understood and agreed to abide by these policies with respect to this transaction," Public Relations Manager Amy Williams told Club Industry. "Mr. Fleming’s employment was terminated as a result and he has not been employed by Life Time for nearly a year. Additionally, the other individuals mentioned were not current or former employees of Life Time. Finally, Life Time cooperated fully with government law enforcers in this matter.
In addition to the SEC's complaint filed in U.S. District Court in the Northern District of Illinois, the U.S. Attorney’s Office for the Northern District of Illinois also announced criminal charges against all eight defendants on Sept. 29.
All have been charged with conspiracy and at least one count of securities fraud, according to a report by the Star Tribune. A single fraud conviction can result in a maximum 20-year prison term.
Life Time Fitness ranked No. 2 on Club Industry’s Top 100 Health Clubs if 2017 with estimated 2016 revenue of $1.475 billion.