Werner’s founder gets big FTC penalty for not disclosing stock purchases

“Werner is aware of the FTC settlement; it’s a personal matter for CL (with no liability being imposed on Werner) and Werner assisted CL and his advisers with making the required filings,” a Werner spokeswoman told FreightWaves.

CL Werner stepped down as chairman and director earlier this year. He is currently Chairman Emeritus.

One notable aspect of the charges: CL Werner self-reported his violations to the FTC in early 2020, with multiple acquisitions having taken place going back to 2007 that violated federal rules.

Specifically, CL Werner was charged with violating a section of the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976. That law sets reporting requirements on several magnitudes of acquisition of a company’s stock, including transactions valued at more than $94 million in 2020 dollars, though the limit was set at $50 million at the time HSR was passed and is adjusted for inflation.

There also are reporting requirements for transactions in which the acquiring party — in this case, CL Werner — will hold securities in the company in excess of certain benchmark numbers, adjusted for inflation. They were originally set at $100 million in 1976, adjusted to $188 million in 2020, and in excess of $500 million in 1994 dollars, adjusted to $940.1 million for 2020. The “competitive impact statement” filed with the courts say CL Werner would be in excess of the adjusted $100 million threshold. 

There are exemptions to the reporting requirements under certain conditions. There also are required waiting periods. The disclosures are required to be filed with the FTC and the Department of Justice.

“The crux of [CL] Werner’s violation is that he failed to submit HSR Act notifications even though his acquisitions of Werner voting securities satisfied the HSR Act filing requirements,” the competitive impact statement said. 

That document spells out acquisitions of Werner stock by CL Werner in 2007, 2009, 2012 and 2019. 

In early 2020, according to the document, Werner’s counsel contacted a division of the SEC to let the agency know that the attorney “anticipated … multiple post-consummation filings.” “As of that date, Werner, through his counsel, was aware that he had violated the HSR Act,” the court document said. 

But in February, roughly a month later, CL Werner saw some restricted stock awards vest. And although his attorney had already notified the SEC of possible earlier violations of filing rules, the acquisition of the additional shares through vesting was not reported to the SEC either.

In March 2020, about two months after his counsel informed the SEC of the failure to file, CL Werner made filings regarding the 2007, 2012 and 2019 acquisitions. Due to the complexity of the filing requirements, had CL Werner filed those disclosures at that time, some acquisitions during the period between May 2007 and April 2020 — like the 2009 acquisition — would have fallen under an exemption in the reporting rule.

The size of the penalty against CL Werner was driven in part because it “reflects that [Werner] was serving in a director capacity throughout the period he was in violation of the HSR,” the FTC said in its statement announcing the agreement. “Additionally, they were open market acquisitions, and the court filing notes that such a purchase “require[s] an acquirer to affirmatively and actively decide to acquire voting securities. It is not excusable negligence to be unaware of HSR Act legal requirements.”

In Werner’s proxy statement for 2020, CL Werner’s compensation was listed in total at $1.471 million, including stock awards of $1.125 million.

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