Former SeaWorld CEO made 'suspicious' stock sales, lawsuit claims

Investors accuse SeaWorld of misleading them about 'Blackfish' impact

ORLANDO, Fla. - A group of SeaWorld shareholders have accused the company's former CEO of making millions of dollars on "suspicious" insider sales of SeaWorld stock at the same time a documentary critical of killer whale captivity was airing on TV, according to newly filed court documents.

The investors, which include several government pension funds, sued SeaWorld Entertainment Inc. and some of its executives in September. They accused the company of misleading shareholders about the impact the film "Blackfish" was having on theme park attendance. The plaintiffs are requesting class-action status on their lawsuit, which seeks unspecified damages.

[READ: Lawsuit filed by SeaWorld investors]

According to a newly-filed, 127-page amended complaint, the investors claim they've obtained evidence, including statements from several "confidential witnesses", suggesting former CEO Jim Atchison likely knew the documentary was hurting the company months before publicly acknowledging the damage to shareholders.

The investors claim SeaWorld executives artificially inflated the company's stock price "in order to benefit their own personal financial situation with the proceeds from insider stock sales," according to the lawsuit.

Atchison stepped down as SeaWorld's President and CEO in January, following months of declining attendance and profits. Atchison, who led the company since 2009, is now vice-chairman of SeaWorld's board of directors and oversees its non-profit conservation fund.

"Blackfish" premiered at the Sundance Film Festival in January 2013, followed by a limited release run in theaters over the summer.

In November 2013, after "Blackfish" had been broadcast several times on CNN, Atchison publicly denied the film was to blame for a recent 3.6 percent drop in park attendance, according to the lawsuit.

"I scratch my head if there's any notable impact from this film at all," Atchison told the Wall Street Journal that month.

Instead, the CEO blamed SeaWorld's attendance decline on bad weather and a ticket price increase.

Between Dec. 2, 2013 and March 6, 2014, Atchison sold 154,000 shares of his personal holdings in SeaWorld stock with proceeds of $4,662,235, according to the lawsuit.

On Aug. 13, 2014, while reporting poor quarterly earnings, SeaWorld officials announced a 4.3 percent decline in attendance, which they partially blamed on school calendars and new attractions at competing theme parks like Walt Disney World and Universal.

However, for the first time, the company also acknowledged the attendance drop "was impacted by demand pressures related to recent media attention surrounding proposed legislation in the state of California," according to a filing with the U.S. Securities and Exchange Commission.

The proposed California law would ban the display of captive killer whales for entertainment purposes. The bill's sponsor, California Assemblyman Richard Bloom, said the proposed law was partially inspired by "Blackfish."

"The company had finally admitted that 'Blackfish' was hurting attendance at SeaWorld parks," states the lawsuit.

Almost immediately after SeaWorld announced those poor quarterly results in August 2014, the company's stock price plummeted nearly 33 percent. As a result, two of the investors suing SeaWorld, the Arkansas Public Employees Retirement System and a teacher's pension fund based in Denmark, said they suffered more than $4 million in losses.

Although the lawsuit claims Atchison possessed inside information concerning the impact "Blackfish" was having on attendance, the plaintiffs do not directly accuse the former CEO of illegal insider trading. However, the plaintiffs suggest Atchison's financial transactions indicate a possible motive for misleading investors.

"(The) sales were suspiciously timed in that they were Atchison's only sales" between SeaWorld's Initial Public Offering in April 2013 and the stock price plunging in August 2014, according to the lawsuit. The plaintiffs also claim "these sales were suspicious" because Atchison disposed of 20 percent of his total holdings of SeaWorld common stock during that period.

Atchison's trades were made pursuant to a "Rule 10b5-1" trading plan, according to the lawsuit. The rule, established by the SEC, helps company executives avoid accusations of illegal insider trading by allowing them to schedule pre-determined stock transactions prior to gaining insider information.

"The company has not disclosed any facts about Atchison's Rule 10b5-1 trading plan," according to the lawsuit. "Thus pertinent facts, such as when Atchison entered into the plan...are not available because they have not been publicly disclosed."

A spokeswoman for the U.S. Securities and Exchange Commission would not comment on whether the agency has received any complaints about Atchison.  The plaintiffs' attorneys did not respond to an email from Local 6 asking if they had filed a complaint with the SEC, which investigates allegations of securities law violations.

SeaWorld spokesman Fred Jacobs said neither Atchison nor the company can comment on the pending litigation.

Since filing the lawsuit, the plaintiffs claim they have interviewed several former SeaWorld employees who suggest the company had early concerns about the potential impact of "Blackfish" on attendance.

One of the confidential witnesses is a former social media manager for SeaWorld. The ex-employee reportedly told the plaintiffs that she was responsible for monitoring "Blackfish" commentary from a so-called "war room" in the company's Orlando headquarters. Around the time of SeaWorld's IPO in April 2013, "there were at least a couple hundred anti-SeaWorld posts a day on Twitter," according to the lawsuit, many of which "hijacked SeaWorld's hashtags" to reach existing fans of the marine parks.

Another unnamed witness, a former SeaWorld marketing director, claimed to have received weekly attendance figures while working at the company's park in San Antonio. The former employee told plaintiffs "Blackfish" was discussed at several monthly meetings in 2013, including one in which the San Antonio park's general manager reportedly tried to "boost morale" by expressing "this too shall pass." The former worker interpreted the comment as an indication that "Blackfish" was plaguing the company, according to the lawsuit.

"(The) defendants knew or recklessly disregarded that 'Blackfish' was, in fact, causing a decline in SeaWorld's attendance and negatively harming its reputation," concludes the shareholder lawsuit. 

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