UPDATE 3-Connecticut ex-CEO faces insider trading charge

* Ex-Home Diagnostics CEO, friend charged with conspiracy

* Prosecutors say tips about possible merger were leaked

* The two defendants in criminal case plead not guilty
(Adds details on bail, paragraph 8)

By Jonathan Stempel

NEW YORK, Jan 13 (BestGrowthStock) – Federal prosecutors charged a
Connecticut man over his alleged participation in an insider
trading scheme tied to the takeover of his company, a maker of
diabetes testing products, by Japan’s Nipro Corp (8086.T: ).

George Holley, founder and former chief executive of Home
Diagnostics Inc, and Phairot Iamnaita, a Thailand resident and
business partner of Holley’s, were each charged with one count
of conspiracy to commit insider trading.

If convicted, each defendant could face up to five years in
prison plus a fine, according to U.S. Attorney Paul Fishman in
New Jersey, who announced the charges on Thursday.

Nipro agreed on Feb. 3, 2010 to buy Home Diagnostics for
$215 million, or $11.50 per share, at a big premium to the
latter’s closing price the previous day. The news sent Home
Diagnostics shares up 89 percent.

Prosecutors said Holley, 70, tipped Iamnaita, 28, and at
least three others prior to the announcement that a sale of
Fort Lauderdale, Florida-based Home Diagnostics was possible.

They said Iamnaita and others then bought more than 58,000
shares, resulting in more than $290,000 of illegal profits.

The U.S. Securities and Exchange Commission filed a related
civil case against Holley, Iamnaita and Steven Dudas, who the
regulator said is Holley’s accountant.

Holley and Iamnaita pleaded not guilty at a hearing in
Newark, New Jersey federal court. Bail was set at $1 million
for Holley and $500,000 for Iamnaita. Prosecutors had sought
bail of $10 million for Holley, with electronic monitoring.

“Mr. Holley looks forward to proceeding to trial, and
expects to be exonerated,” his lawyer Kevin Marino said.

Michael Critchley, a lawyer for Iamnaita, said: “My client
is innocent. The charges are an overreach.”

William Deni, a lawyer for Dudas, declined to comment, his
office said.

Holley lives in Norwalk, Connecticut, and Iamnaita in
Hangdong, Chiang Mai, prosecutors said.

Dudas lives in Pittstown, New Jersey, the SEC said.

The criminal case is U.S. v. Holley et al, U.S. District
Court, District of New Jersey, No. 11-04013. The SEC case is
SEC v. Holley et al in the same court.
(Reporting by Jonathan Stempel in New York; Editing by Richard
Chang, Bernard Orr)