SEC enforcement actions are civil matters, meaning no matter how badly a defendant may lose the case he or she isn't going to prison. However, there is a one easy way to parlay this situation into jail time, and that is by perjuring yourself in sworn testimony or, similarly, by obstructing justice by making false statements to the SEC during its investigation.

I came across the most recent example of this in yesterday's Litigation Release from the SEC stating that a Grand Jury has now issued indictments for conspiracy, securities fraud, and obstruction of justice against Peter E. Talbot and Carl E. Binette. Talbot and Binette are alleged to have made false statements to the SEC in the course of its insider trading investigation. In 2009, the SEC sued the two men for their role in an insider trading scheme.

The two sides of the story are as follows:

SEC: According to the SEC, Talbot learned nonpublic information about an acquisition of Safeco

because he was snooping in a co-worker's folder on the shared computer network which contained Safeco's Form 10-K and detailed analyses and evaluations of Safeco's assets. When Talbot subsequently noticed that key employees were working long hours and in unusual pairings, Talbot told Binette to buy Safeco call options because Safeco was an acquisition target. Using Binette's brokerage account, Talbot and Binette bought Safeco call options from April 17, 2008 to April 22, 2008 and sold them on April 23, 2008, for a realized profit of $615,833.

Binette: Binette, on the other hand, repeatedly denied to SEC investigators that he spoke to anyone before trading in Safeco. So what, then, prompted Binette's trading in Safeco? According to the SEC, "Binette also claimed that his trades were based on a dream he had in which a deceased relative told him that she was 'safe.'"

Get it? "Safeco?" ... "Safe?" Apparently the Grand Jury didn't buy that explanation.