CANTON, N.C. (From news reports) -- A highly-scrutinized and much-criticized stock sale by four Pactiv Evergreen corporate officials mere days before the announcement of the Canton mill closure was not a case of insider trading -- nor even a voluntary stock sale that the corporate officers profited from, according to further investigation of Securities and Exchange filings.
While the transactions were listed as stock sales in SEC reports, they weren't sales in the true sense of the word. Rather, the company reclaimed a portion of the stock shares previously awarded to the corporate officers -- who annually receive stock shares as part of their compensation package. The company withheld shares to cover tax obligations before releasing the rest of the vested shares to executives.
"The sales were automatically scheduled in advance by the company to cover legally required tax withholding and were not discretionary sales made by the executives," said Beth Kelly, communications director for Pactiv Evergreen. "The timing of these sales was based on the stock vesting date, which was established a year ago."
A review of additional SEC filings show that is indeed the case. Pactiv Evergreen dished out a boat load of stock to corporate execs on March 3, 2022 -- more than half a million shares worth. A portion of the shares were "restricted" until the vesting date of March 2, 2023.
"When employees' stock awards vest, the employees receive their shares, and the company must pay taxes on their behalf. To cover these taxes, the company usually withholds and cancels a portion of the shares owed to the employees for an amount equal to the taxes owed," Kelly said.
The vesting date triggers this transaction, which ends up being reported by the SEC as a sale, even through the shares are merely being reclaimed by the company to cover the execs' tax liability.
When that date rolled around one year later, however, it happened to come right before the closing of the mill was announced. That, in conjunction with the company's year-end financial report, prompted Pactiv Evergreen's stock to fall.
The optics were unfortunate: it appeared that top execs had sold off stock before the share prices fell based on insider knowledge.
The initial story on the stock sales noted that the transactions had been coded in SEC filings as "payment of tax liability by delivering or withholding securities."
However, allegations of insider trading allegations were already swirling in the community by then and Congressman Chuck Edwards had already called for an investigation.