
The following is not meant to be legal advice.
In May 2007, the Federal Trade Commission obtained a $250,000 civil penalty against James Dondero. Dondero is the operator of the Highland Capital hedge fund and a director of Motient Corporation. Dondero made a late Hart-Scott-Rodino Act (HSR) filing. An option exercise will not be deemed an acquisition if the officer sells all the shares acquired through the option exercise or sells other shares in an amount not less than the number of shares acquired through the option exercise, and the sale is the same day as the exercise. A filing must be made and the waiting period observed before any new stock can be acquired. The Dondero filing was in connection with Dondero’s 2005 exercise of options to acquire 10,000 Motient shares. The shares had a value at the time of around $300,000.
Dondero failed to make timely HSR filings in connection with
Between 2002 and 2004, Highland Capital acquired a total of 3.5 million shares of Motient. At the time of acquisition, the share had a total value of below the then-applicable $50 million HSR threshold. Thus, no HSR filing was necessary. The value of those shares subsequently appreciated. At the time of Dondero's option exercise, Dondero’s cumulative direct and indirect holdings, which is the measure for HSR, exceeded $50 million. Given the appreciation, any acquisition by Dondero triggered the need to file.





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