I. Joseph Massoud, 44 and founder of Westport-based private equity firm Compass Group Management, agreed to pay $1.4 million to settle SEC allegations he profited off of insider information while trading in Patriot Capital stock in 2009.
He is also barred from working in the securities industry or serving as an officer or director of a public company. A judge has to approve the settlement. Massoud neither admitted nor denied the allegations.
A Compass Group spokesman said the firm has not issued a statement on the matter.
Massoud, a Westport resident who is known for supporting charity in the region, founded Compass Group in 1998. The firm manages the day-to-day operations of Compass Diversified Holdings, a publicly traded company with seven subsidiaries, including the iconic CamelBak drinking system favored by hikers.
In February of 2011, Massoud abruptly stepped down as chief executive of Compass Diversified to focus his attention on a then undisclosed “informal regulatory matter.”
On Friday, the U.S. Securities and Exchange Commission revealed the allegations of insider trading, claiming Massoud learned that his bid to acquire Patriot Capital in a nonpublic bidding process in 2009 was much lower than other bids at the time. To get the bid information, Compass Group had to agree to a confidentiality agreement that prohibited the company from buying Patriot Capital stock.
The SEC, which cited internal Compass Group emails, said Massoud bought 322,216 shares in Patriot Cap after learning about other bids and when the sale was announced, Massoud sold the shares for a $676,000 profit.
Massoud had actually founded Patriot Capital in Westport in 2002 as a private company providing financing to small and medium sized business. He took the company public in 2005 and Patriot Cap had its own management until a sale in 2009.
“Massoud must pay back double what he made in the scheme and he can never work in the securities industry again,” said John T. Dugan, associate director of the SEC’s Boston Regional Office.