Ex-CEO of Sunnyvale company sentenced for insider trading

SAN JOSE » The former head of a Sunnyvale fiber optics equipment maker was sentenced on June 13 to two years in prison for insider trading and tender offer fraud, according to the U.S. Department of Justice.

Peter C. Chang, 60, of Los Altos, founded Alliance Fiber Optic Products Inc. (AFOP) in 1995 and served as chairman of the board of directors, chief executive officer and president until it was sold in 2016.

According to his guilty plea, Chang used two brokerage accounts — held in the names of his wife, Mary, and brother Daniel, who lives in Taiwan — to purchase and sell his company’s stock.

Peter Chang admitted that he sold the company’s stock in the days before negative earnings reports in 2015 and 2016.

He also admitted that he bought stock ahead of the company’s earnings and sale last year to manufacturing giant Corning Inc. That’s called “tender offer fraud” — deception during a so-called “tender offer” to purchase some or all of shareholders’ shares in a corporation.

Chang’s insider trading scheme was brazen, according to the Securities and Exchange Commission. For instance, he made several of his illicit trades while he was at work, from AFOP’s headquarters.

He engaged in the scheme despite already standing to gain more than $30 million through the acquisition of his stock and options in the company.

Using non-public information to gain an edge in stock investments — selling before bad news becomes public or buying before good news is released — is illegal, because it hurts people who are buying or selling the stock without this information.

AFOP designed and manufactured high-performance optical components that are used by cloud data-center operators and leading datacom and telecom manufacturers. Founded in 1995, it did manufacturing and product development in the U.S., Taiwan and China.

In addition to the prison term, Koh ordered Chang to serve three years of supervised release. Chang is currently free on bond and must begin serving his sentence on or before Sept. 12.