NEW YORK - 9/6/2015 - United States Attorney for the Southern District of New York Preet Bharara recently announced that Robert Stewart, the father of former investment bank managing director Sean Stewart, pled guilty to participating in a conspiracy to trade on inside information about several mergers and acquisitions announced between 2011 and 2014.
Robert Stewart was arrested on May 14, 2015, and Sean Stewart surrendered to federal authorities that same day
Charges against Sean Stewart remain pending before U.S. District Judge Laura Taylor Swain. A third member of the charged conspiracy, cooperating witness Richard Cunniffe, pled guilty before Judge Swain on May 12, 2015, and awaits sentencing. Steward is scheduled to be sentenced by Judge Swain on November 12.
“Instead of teaching his son lessons of right and wrong, Robert Stewart worked with him to break the law by trading on nonpublic information and sharing in the benefits with him. Robert Stewart’s criminal actions – to which he has pled guilty today – perpetuate the unfortunate perception that the markets are rigged in favor of those with connections,” Bharara said.
According to the agreement pursuant to which Robert Stewart entered his plea of guilty today, the underlying criminal complaint filed May 13, 2015, the Superseding Indictment filed July 15, 2015, and statements made during court proceedings:
In early 2011, Sean Stewart, who at the time held the position of Vice President in the Healthcare Investment Banking Group of a global bank headquartered in Manhattan (“Investment Bank A”), began tipping his father with nonpublic information about upcoming mergers and acquisitions.
The first of these deals involved the acquisition of Kendle International Inc. (“Kendle”) by INC Research, LLC, which was announced publicly on May 4, 2011
Sean Stewart worked on the deal, representing Kendle. Robert Steward made about $7,900 in profits on purchases of Kendle stock executed in February and March of 2011 When questioned by the Securities and Exchange Commission about his Kendle trades in May 2013, Robert Stewart reported that he used the proceeds of those trades to pay expenses related to Sean Stewart’s June 2011 wedding.
The second deal about which Sean Stewart tipped Robert Steward was the acquisition of Kinetic Concepts Inc. (“KCI”) by Apax Partners, announced on July 13, 2011. Although Robert Steward purchased some stock in KCI based on Sean Stewart’s tip, he sold that stock before the acquisition was announced, around the same time that Sean Stewart learned the Financial Industry Regulatory Authority was conducting an inquiry into Robert Steward’s Kendle trading.
Also around this time, in the spring of 2011, Robert Steward expressed a concern to co-conspirator and cooperating witness Richard Cunniffe that Robert Steward was “too close to the source” to be trading in KCI stock in his own account, and asked Cunniffe to make purchases of KCI call options for Robert Steward in Cunniffe’s brokerage account. Cunniffe agreed to do so, and also mirrored for his own benefit the KCI trades that Robert Steward was directing.
When the KCI/Apax Partners deal was announced, Robert Steward and Cunniffe reaped profits totaling approximately $107,790. At around this time, Robert Steward told Cunniffe that the source of the KCI tip and the earlier Kendle tip had been Robert’s son Later, around the spring of 2012, Robert Steward clarified for Cunniffe that the son in question was Sean Stewart, who worked on the “sell side” on Wall Street.
In October 2011, Sean Stewart left Investment Bank A. A few months later, he joined an investment banking advisory firm headquartered in Manhattan (“Investment Bank B”) as a managing director.
During Sean Stewart’s tenure with Investment Bank B, based on tips concerning nonpublic acquisition-related information supplied by Sean Stewart, Robert Steward had Cunniffe conduct options trading in advance of the public announcements of three more deals: (1) the acquisition of Gen-Probe Inc. by Hologic Inc., announced on April 30, 2012; (2) the acquisition, by tender offer, of Lincare Holdings Inc. (“Lincare”) by Linde AG, announced on July 1, 2012; and (3) the acquisition of CareFusion Corp. (“CareFusion”) by Becton, Dickinson & Co. (“Becton”), announced on October 5, 2014. Investment Bank B represented Hologic Inc. in connection with its acquisition of Gen-Probe Inc.; Linde AG in connection with its acquisition of Lincare; and CareFusion in connection with its acquisition by Becton. The profits that Robert Steward and Cunniffe reaped from illegal insider trading in advance of the announcements of these three deals totaled approximately $1.1 million. In the midst of the scheme, in December 2012, Robert Steward transferred at least $15,000 to Sean Stewart.
To try to avoid detection for their crimes, Robert Steward and Cunniffe refrained from speaking explicitly about their trading over the phone or e-mail, sometimes using “golf”-related code For example, shortly after the announcement of Lincare’s proposed acquisition by Linde AG, a German company, Robert Steward wrote to Cunniffe that he had seen a news story about the “high cost of golf reservations since a foreign company purchased all-even more expensive than imagined.” Other steps Robert Steward and Cunniffe took to avoid detection included trying to discuss their trading at face-to-face meetings and adopting a profit-splitting mechanism that had Cunniffe paying Robert Steward his portion of the illegal proceeds in small increments, over time, typically in cash.
In March and April of 2015, Cunniffe recorded meetings he had with Robert Steward During one such meeting, Robert Steward accepted a payment of $2,500 cash from Cunniffe, which was the balance of the proceeds owed to Robert Steward for profitable trading executed in Cunniffe’s account in advance of the CareFusion acquisition announcement. Also during this meeting, Robert Stewart admitted that Sean Stewart once chastised him for failing to make use of a tip, saying, “I can’t believe I handed you this on a silver platter and you didn’t invest in it.”
Source: Financial Fraud Enforcement Task Force
Showing posts with label Insider trading. Show all posts
Showing posts with label Insider trading. Show all posts
Executive Sentenced For Insider Trading Scheme
(RPC) - 5/12/2015 - Former chief information officer of Foundry Networks, Inc. David Riley was sentenced on April 27 to 78 months in prison for his participation in an insider trading scheme that yielded approximately $39 million in ill-gotten gains. Foundary Networks is a California-based technology company that was acquired by Brocade Communications, Inc., in 2008. The sentence was imposed by U.S. District Judge Valerie E. Caproni.
Riley was convicted following a 13-day trial in September 2014 in which the jury unanimously concluded that Riley passed inside information about Foundry’s acquisition by Brocade and about Foundry’s earnings for the first quarter of 2008 to Matthew Teeple, a former analyst for San Francisco-based hedge fund Artis Capital Management, L.P. Teeple pled guilty to related charges in May 2014 and was sentenced principally to 60 months in prison by U.S. District Judge Robert P. Patterson on October 16, 2014.
“David Riley took advantage of his insider position at Foundry Networks to funnel sensitive nonpublic financial information to Matthew Teeple. This inside information enabled Teeple’s firm to reap nearly $40 million in illegal profits. This conduct has now earned Riley more than six years in federal prison," Manhattan U.S. Attorney Preet Bharara said
According to the Superseding Indictment filed February 20, 2014, other court documents, and the evidence presented at trial: As CIO and a Vice President at Foundry, Riley had access to monthly and quarterly financial reporting, along with other sensitive, nonpublic information relating to Foundry, well before such information became public. RILEY provided this Inside Information to Teeple – sometimes by telephone and sometimes during meetings the two arranged in the San Jose, California, area. On several occasions, RILEY spoke with Teeple while logged into the database that Foundry used to maintain sensitive financial information. The Inside Information that Riley passed to Teeple included quarterly financial performance numbers during the first quarter of 2008 and information regarding Brocade’s intended acquisition of Foundry in July 2008.
Teeple passed the Inside Information he obtained from Riley on to others, including others at Artis. From the Inside Information Teeple provided about Foundry, Artis ultimately reaped gains of approximately $39 million.
In addition to the prison sentence he received, Riley, 48, of San Jose, California, was ordered to pay a fine of $50,000.
Bharara praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.
Source: Financial Fraud Enforcement Task Force
Riley was convicted following a 13-day trial in September 2014 in which the jury unanimously concluded that Riley passed inside information about Foundry’s acquisition by Brocade and about Foundry’s earnings for the first quarter of 2008 to Matthew Teeple, a former analyst for San Francisco-based hedge fund Artis Capital Management, L.P. Teeple pled guilty to related charges in May 2014 and was sentenced principally to 60 months in prison by U.S. District Judge Robert P. Patterson on October 16, 2014.
“David Riley took advantage of his insider position at Foundry Networks to funnel sensitive nonpublic financial information to Matthew Teeple. This inside information enabled Teeple’s firm to reap nearly $40 million in illegal profits. This conduct has now earned Riley more than six years in federal prison," Manhattan U.S. Attorney Preet Bharara said
According to the Superseding Indictment filed February 20, 2014, other court documents, and the evidence presented at trial: As CIO and a Vice President at Foundry, Riley had access to monthly and quarterly financial reporting, along with other sensitive, nonpublic information relating to Foundry, well before such information became public. RILEY provided this Inside Information to Teeple – sometimes by telephone and sometimes during meetings the two arranged in the San Jose, California, area. On several occasions, RILEY spoke with Teeple while logged into the database that Foundry used to maintain sensitive financial information. The Inside Information that Riley passed to Teeple included quarterly financial performance numbers during the first quarter of 2008 and information regarding Brocade’s intended acquisition of Foundry in July 2008.
Teeple passed the Inside Information he obtained from Riley on to others, including others at Artis. From the Inside Information Teeple provided about Foundry, Artis ultimately reaped gains of approximately $39 million.
In addition to the prison sentence he received, Riley, 48, of San Jose, California, was ordered to pay a fine of $50,000.
Bharara praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.
Source: Financial Fraud Enforcement Task Force
Former co-founder of hedge fund sentenced
NEW YORK - 2/14/2013 - Steven Fortuna, who co-founded the hedge fund S2 Capital LLC (S2), was sentenced today to two years of probation for his participation in an insider trading scheme in which he obtained and traded on material, nonpublic information about various publicly-traded companies from employees at other hedge funds, announced U.S. Attorney for the Southern District of New York Preet Bharara. Fortuna pleaded guilty in October 2009 to three counts of conspiracy to commit securities fraud and one count of securities fraud under a cooperation agreement with the government. He was sentenced on February 13 in federal court by U.S. District Judge Sidney H. Stein.
According to court documents, statements made during Fortuna’s guilty plea proceeding and the government’s sentencing submission in his case suggest that from July 2008 through March 2009, while working as a portfolio manager at a hedge fund he co-founded, Fortuna obtained inside information concerning various technology companies from employees at other hedge funds for the purpose of trading on that information. The inside information was disclosed by company insiders in breach of their duties to their respective employers.
For example, in July and August 2008, Fortuna obtained inside information concerning Akamai Inc. from Danielle Chiesi, a portfolio manager at New Castle Partners, a hedge fund. Chiesi told Fortuna that Akamai planned to report that its revenue guidance for the following quarter would miss expectations and that, internally, the company believed that its stock price would fall following the quarterly earnings announcement. Fortuna executed trades based on that Inside Information, and earned approximately $2.4 million in profits for S2.
As part of the conditions of his probation, Fortuna, 50, of Westwood, Mass., was ordered to serve six months on home confinement with electronic monitoring, and 120 hours of community service during each of the years of his probation. He was also ordered to pay forfeiture in the amount of $200,000, and a $400 special assessment fee.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Antonia M. Apps is in charge of the prosecution.
According to court documents, statements made during Fortuna’s guilty plea proceeding and the government’s sentencing submission in his case suggest that from July 2008 through March 2009, while working as a portfolio manager at a hedge fund he co-founded, Fortuna obtained inside information concerning various technology companies from employees at other hedge funds for the purpose of trading on that information. The inside information was disclosed by company insiders in breach of their duties to their respective employers.
For example, in July and August 2008, Fortuna obtained inside information concerning Akamai Inc. from Danielle Chiesi, a portfolio manager at New Castle Partners, a hedge fund. Chiesi told Fortuna that Akamai planned to report that its revenue guidance for the following quarter would miss expectations and that, internally, the company believed that its stock price would fall following the quarterly earnings announcement. Fortuna executed trades based on that Inside Information, and earned approximately $2.4 million in profits for S2.
As part of the conditions of his probation, Fortuna, 50, of Westwood, Mass., was ordered to serve six months on home confinement with electronic monitoring, and 120 hours of community service during each of the years of his probation. He was also ordered to pay forfeiture in the amount of $200,000, and a $400 special assessment fee.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Antonia M. Apps is in charge of the prosecution.
Insurance Executive Indicted for Insider Trading
DENVER – 11/2/2012 - Insurance executive Michael Van Gilder, age 45, of Denver, was indicted by a federal grand jury in Denver on five counts of insider trading, U.S. Attorney for the District of Colorado John Walsh and FBI Denver Special Agent in Charge James Yacone announced.
The case is being prosecuted in conjunction with the U.S. Attorney’s Office for the Southern District of New York. The U.S. Securities and Exchange Commission (SEC), which has filed a complaint charging Van Gilder with civil insider trading violations, conducted a parallel civil investigation and substantially contributed to the criminal investigation of the case as well. The defendant allegedly traded based on inside information regarding a Denver oil and natural gas company called Delta Petroleum Corp. Van Gilder surrendered to the FBI this morning at the U.S. Marshals’ Office, and will appear in U.S. District Court in Denver this afternoon for an initial appearance.
According to the indictment, Van Gilder was the CEO and a member of the board of directors of Van Gilder Insurance Company, an insurance business owned by the defendant’s family. Van Gilder was a close personal friend of an executive at Delta Petroleum. Delta Petroleum was a Denver-based oil and gas exploration and development company whose core area of operations was in the Gulf Coast and Rocky Mountain regions. The company’s stock was traded on NASDAQ under the ticker symbol “DPTR.” Van Gilder at times arranged for and provided insurance policies covering certain of Delta’s business operations.
From Nov. 5, 2007, and continuing until at least Jan. 9, 2008, Van Gilder allegedly committed securities fraud by trading in securities based on material, non-public information.
Specifically, on Nov. 8, 2007, Delta publicly announced and filed with the SEC a quarterly report disclosing its operational performance, revenues, earnings and other financial performance for its quarterly period which ended Sept. 30, 2007. Three days prior to the disclosure, the financial publication Barron’s disseminated an article entitled “Day of Reckoning” focusing on Delta, expressing pessimism about the company and its stock. Following the publication of the article, the price of Delta’s common stock dropped $1.49 per share. Van Gilder was, at the time, a shareholder of Delta and held shares of its common stock and long-term call options to purchase Delta common stock in a brokerage account with Merrill Lynch and Company.
The Barron’s article was brought to Van Gilder’s attention. Based on the article, Van Gilder called his stockbroker and asked whether he should sell his shares of Delta. Later that day, Van Gilder spoke with a Delta executive. According to the indictment’s allegations, the executive conveyed to Van Gilder that Delta planned on announcing figures in its third quarter financial report that would not miss its third quarter forecasts and projections for its financial and operational performance, a first in a number of quarters that Delta would meet its projected numbers. At the time Van Gilder received this information, the financial and operational performance had not yet been publicly released and was not generally known to the investing public.
Based on this confidential material, Van Gilder decided not to sell his Delta investment but instead instructed his stockbroker to buy more Delta common stock on his behalf. As a result, the stockbroker purchased an additional 1,250 shares of Delta common stock at $15.55 per share. Several hours after he purchased the additional stock, Van Gilder emailed two friends and told them that the Barron’s article was “bogus” and that they should buy Delta stock because Delta “will hit their numbers.” In the Nov. 8, 2007, third quarter results Delta disclosed earnings and other financial figures that were in line with or exceeding previous forecasts and predictions of its performance for the quarter.
In late November 2007, discussions also began for Delta to get a large cash infusion from a privately held investment company called Tracinda, owned by California resident Kirk Kerkorian, through a large equity investment by Tracinda in the oil and gas company. The indictment alleges that the Delta executive shared confidential information about the possible investment with Van Gilder, and that, on Nov. 26, 2007, following a series of calls and other communications, Van Gilder contacted his stockbroker and purchased an additional 1,750 shares of Delta common stock at $13.87 and $13.88 per share.
As the indictment further relates, the Delta executive continued to share information about the confidential discussions about the contemplated Tracinda equity investment in Delta with defendant Van Gilder, as the confidential discussions progressed over the course of early December 2007. As result, according to the indictment, on Dec. 8, 2007, Van Gilder, in turn, emailed his stockbroker to advise him that he “wanted to purchase as much Delta stock as possible” and two days later arranged through the stockbroker to purchase an additional 4,000 shares of Delta common stock at $17.64 per share. Within minutes of execution of these purchases, Van Gilder spoke by phone with a family member, who, several minutes later, instructed his own stockbroker to purchase Delta common stock.
On Dec. 17, 2007, the Delta executive advised its board of directors of his discussions with Tracinda. The board authorized the executive to proceed with negotiations with Tracinda. That evening, the executive exchanged a series of text messages with the defendant regarding the board’s decision. Several hours later, Van Gilder directed that $40,000 be wire transferred from a bank account to his Merrill Lynch brokerage account.
On Dec. 19, 2007, a representative of Tracinda contacted the Delta executive and made an offer for Tracinda to purchase a one-third interest in Delta through a purchase of Delta’s common stock at $17 per share. At the time, Delta’s stock was trading at approximately $14.65 per share. Tracinda’s overture remained confidential. Van Gilder, knowing about the overture, purchased 200 call options, entitling him to purchase up to 20,000 shares of Delta common stock at $20 per share. Delta continued negotiations with Tracinda, and on Dec. 22, 2007, Tracinda agreed to increase its stock purchase to $19 per share. The indictment alleges that in a series of calls Van Gilder was informed of the progress of the confidential negotiations. Immediately following one of these conversations between Van Gilder and the Delta executive, Van Gilder sent an email to two of his family members, with the subject line entitled “Xmas present.” In the email, he advised the family members to purchase Delta stock because “something significant will happen in the next 2-4 weeks.”
On Dec. 24, 2007, Van Gilder, through his stockbroker, purchased 3,000 more shares of Delta common stock at prices ranging between $15.63 and $15.65 per share, and 90 more call options to purchase up to 9,000 additional shares at $20 per share. On Dec. 28, 2007, during the course of working to finalize the Tracinda stock purchase, the Delta executive exchanged a series of cell phone text messages with Van Gilder. As a result, Van Gilder caused $272,212 from a bank account to be wire transferred into his Merrill Lynch brokerage account. The following day Van Gilder emailed his stockbroker, requesting the broker to “get it on Delta asap.”
On Dec. 29, 2007, Delta’s board of directors approved a finalized stock purchase agreement for Tracinda to purchase approximately 35 percent of Delta’s common stock for $19 per share. On Monday, Dec. 31, 2007, before the commencement of NASDAQ’s regular trading hours, Delta and Tracinda issued a press release announcing the stock purchase agreement. Within an hour of the commencement of regular trading hours that day, Van Gilder’s stockbroker purchased an additional 4,000 shares of Delta common stock at prices ranging from $19.28 to $19.33 per share, and 114 additional call options. By the close of regular hours trading that day, Delta’s common stock price had risen $3.34 from its previous close of $15.51. Over the course of the next three trading days, Delta’s stock price continued to rise, closing at $22.82 per share by Jan. 4, 2008. On Jan. 9, 2008, Van Gilder sold the 290 call options that he had purchased between Dec. 19 and Dec. 24, 2007, realizing a profit of approximately $86,100 on the transaction.
The indictment charges Van Gilder with five counts of securities fraud, reflecting five transactions between Nov. 6, 2007 and Dec. 24, 2007 where Van Gilder purchased Delta common stock based on confidential insider information. If convicted on all counts, the defendant faces up to 100 years in federal prison, and up to $25 million in fines.
“Trading on inside information undercuts the fairness and transparency of our financial markets,” said U.S. Attorney Walsh. “This case demonstrates that in the highly networked world we now live in, insider trading knows no geographic boundaries. This office, and U.S. Attorney’s Offices around the country, will continue to target insider trading wherever it may occur. Thanks to the hard work of this office, the U.S. Attorney’s Office in the Southern District of New York, the SEC and the FBI, a Denver insurance executive has been charged for profiting using confidential information.”
Thr case was investigated by the FBI, New York and Denver Divisions, with the assistance of and working with the SEC.
Van Gilder is being prosecuted by Assistant U.S. Attorney Ken Harmon and Special Assistant U.S. Attorney Michael Levy from the Southern District of New York.
The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.
According to the indictment, Van Gilder was the CEO and a member of the board of directors of Van Gilder Insurance Company, an insurance business owned by the defendant’s family. Van Gilder was a close personal friend of an executive at Delta Petroleum. Delta Petroleum was a Denver-based oil and gas exploration and development company whose core area of operations was in the Gulf Coast and Rocky Mountain regions. The company’s stock was traded on NASDAQ under the ticker symbol “DPTR.” Van Gilder at times arranged for and provided insurance policies covering certain of Delta’s business operations.
From Nov. 5, 2007, and continuing until at least Jan. 9, 2008, Van Gilder allegedly committed securities fraud by trading in securities based on material, non-public information.
Specifically, on Nov. 8, 2007, Delta publicly announced and filed with the SEC a quarterly report disclosing its operational performance, revenues, earnings and other financial performance for its quarterly period which ended Sept. 30, 2007. Three days prior to the disclosure, the financial publication Barron’s disseminated an article entitled “Day of Reckoning” focusing on Delta, expressing pessimism about the company and its stock. Following the publication of the article, the price of Delta’s common stock dropped $1.49 per share. Van Gilder was, at the time, a shareholder of Delta and held shares of its common stock and long-term call options to purchase Delta common stock in a brokerage account with Merrill Lynch and Company.
The Barron’s article was brought to Van Gilder’s attention. Based on the article, Van Gilder called his stockbroker and asked whether he should sell his shares of Delta. Later that day, Van Gilder spoke with a Delta executive. According to the indictment’s allegations, the executive conveyed to Van Gilder that Delta planned on announcing figures in its third quarter financial report that would not miss its third quarter forecasts and projections for its financial and operational performance, a first in a number of quarters that Delta would meet its projected numbers. At the time Van Gilder received this information, the financial and operational performance had not yet been publicly released and was not generally known to the investing public.
Based on this confidential material, Van Gilder decided not to sell his Delta investment but instead instructed his stockbroker to buy more Delta common stock on his behalf. As a result, the stockbroker purchased an additional 1,250 shares of Delta common stock at $15.55 per share. Several hours after he purchased the additional stock, Van Gilder emailed two friends and told them that the Barron’s article was “bogus” and that they should buy Delta stock because Delta “will hit their numbers.” In the Nov. 8, 2007, third quarter results Delta disclosed earnings and other financial figures that were in line with or exceeding previous forecasts and predictions of its performance for the quarter.
In late November 2007, discussions also began for Delta to get a large cash infusion from a privately held investment company called Tracinda, owned by California resident Kirk Kerkorian, through a large equity investment by Tracinda in the oil and gas company. The indictment alleges that the Delta executive shared confidential information about the possible investment with Van Gilder, and that, on Nov. 26, 2007, following a series of calls and other communications, Van Gilder contacted his stockbroker and purchased an additional 1,750 shares of Delta common stock at $13.87 and $13.88 per share.
As the indictment further relates, the Delta executive continued to share information about the confidential discussions about the contemplated Tracinda equity investment in Delta with defendant Van Gilder, as the confidential discussions progressed over the course of early December 2007. As result, according to the indictment, on Dec. 8, 2007, Van Gilder, in turn, emailed his stockbroker to advise him that he “wanted to purchase as much Delta stock as possible” and two days later arranged through the stockbroker to purchase an additional 4,000 shares of Delta common stock at $17.64 per share. Within minutes of execution of these purchases, Van Gilder spoke by phone with a family member, who, several minutes later, instructed his own stockbroker to purchase Delta common stock.
On Dec. 17, 2007, the Delta executive advised its board of directors of his discussions with Tracinda. The board authorized the executive to proceed with negotiations with Tracinda. That evening, the executive exchanged a series of text messages with the defendant regarding the board’s decision. Several hours later, Van Gilder directed that $40,000 be wire transferred from a bank account to his Merrill Lynch brokerage account.
On Dec. 19, 2007, a representative of Tracinda contacted the Delta executive and made an offer for Tracinda to purchase a one-third interest in Delta through a purchase of Delta’s common stock at $17 per share. At the time, Delta’s stock was trading at approximately $14.65 per share. Tracinda’s overture remained confidential. Van Gilder, knowing about the overture, purchased 200 call options, entitling him to purchase up to 20,000 shares of Delta common stock at $20 per share. Delta continued negotiations with Tracinda, and on Dec. 22, 2007, Tracinda agreed to increase its stock purchase to $19 per share. The indictment alleges that in a series of calls Van Gilder was informed of the progress of the confidential negotiations. Immediately following one of these conversations between Van Gilder and the Delta executive, Van Gilder sent an email to two of his family members, with the subject line entitled “Xmas present.” In the email, he advised the family members to purchase Delta stock because “something significant will happen in the next 2-4 weeks.”
On Dec. 24, 2007, Van Gilder, through his stockbroker, purchased 3,000 more shares of Delta common stock at prices ranging between $15.63 and $15.65 per share, and 90 more call options to purchase up to 9,000 additional shares at $20 per share. On Dec. 28, 2007, during the course of working to finalize the Tracinda stock purchase, the Delta executive exchanged a series of cell phone text messages with Van Gilder. As a result, Van Gilder caused $272,212 from a bank account to be wire transferred into his Merrill Lynch brokerage account. The following day Van Gilder emailed his stockbroker, requesting the broker to “get it on Delta asap.”
On Dec. 29, 2007, Delta’s board of directors approved a finalized stock purchase agreement for Tracinda to purchase approximately 35 percent of Delta’s common stock for $19 per share. On Monday, Dec. 31, 2007, before the commencement of NASDAQ’s regular trading hours, Delta and Tracinda issued a press release announcing the stock purchase agreement. Within an hour of the commencement of regular trading hours that day, Van Gilder’s stockbroker purchased an additional 4,000 shares of Delta common stock at prices ranging from $19.28 to $19.33 per share, and 114 additional call options. By the close of regular hours trading that day, Delta’s common stock price had risen $3.34 from its previous close of $15.51. Over the course of the next three trading days, Delta’s stock price continued to rise, closing at $22.82 per share by Jan. 4, 2008. On Jan. 9, 2008, Van Gilder sold the 290 call options that he had purchased between Dec. 19 and Dec. 24, 2007, realizing a profit of approximately $86,100 on the transaction.
The indictment charges Van Gilder with five counts of securities fraud, reflecting five transactions between Nov. 6, 2007 and Dec. 24, 2007 where Van Gilder purchased Delta common stock based on confidential insider information. If convicted on all counts, the defendant faces up to 100 years in federal prison, and up to $25 million in fines.
“Trading on inside information undercuts the fairness and transparency of our financial markets,” said U.S. Attorney Walsh. “This case demonstrates that in the highly networked world we now live in, insider trading knows no geographic boundaries. This office, and U.S. Attorney’s Offices around the country, will continue to target insider trading wherever it may occur. Thanks to the hard work of this office, the U.S. Attorney’s Office in the Southern District of New York, the SEC and the FBI, a Denver insurance executive has been charged for profiting using confidential information.”
Thr case was investigated by the FBI, New York and Denver Divisions, with the assistance of and working with the SEC.
Van Gilder is being prosecuted by Assistant U.S. Attorney Ken Harmon and Special Assistant U.S. Attorney Michael Levy from the Southern District of New York.
The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.
Executives, Borrowers Indicted in Massive Fraud
Bank Collapse Called Largest in Virginia Since 2008NORFOLK, Va. – 7/14/2012 - Top executives and favored borrowers have been indicted by a federal grand jury in Norfolk, Va., accused of masking non-performing assets at the Bank of the Commonwealth for their own personal benefit and to the detriment of the bank. This long-running scheme allegedly contributed to the failure of the bank in 2011, which the Federal Deposit Insurance Corporation (FDIC) estimates will cost the FDIC deposit-insurance fund $268 million.
Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia; John Boles, Special Agent in Charge (SAC) of the FBI’s Norfolk Field Office; Rick A. Raven, Special Agent in Charge (SAC) of the Internal Revenue Service Criminal Investigation (IRS-CI)’s Washington, D.C., Field Office; Christy L. Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP); and Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG), made the announcement.
“The Bank of the Commonwealth’s high risk lending practices resulted in soaring losses after the 2008 financial crisis. Led by former CEO and Board Chairman Edward Woodard, these bank insiders and their favored borrowers allegedly conspired to hide the rapidly deteriorating financial condition of the bank through fraud,” MacBride said. “For more than 30 years, this community put their trust – and their money – in the Bank of the Commonwealth. These charges portray a bank leadership that betrayed that trust for their own profit at the detriment to their own bank, its shareholders and the community it served.”
The 25-count indictment was returned on July 11 and made public July 12 after the following individuals from Norfolk were taken into custody:
- Edward J. Woodard , 69, who served as the bank’s chief executive officer and chairman of the board for more than three decades until he was forced to step down as chairman in April 2010 and forced to retire from the bank in December 2010. Woodard is charged with conspiracy to commit bank fraud, bank fraud, false entry in a bank record, multiple counts of unlawful participation in a loan, multiple counts of false statement to a financial institution and multiple counts of misapplication of bank funds.
- Simon Hounslow , 47, who served as an executive vice president and chief lending officer until the bank closed in September 2011. Hounslow is charged with conspiracy to commit bank fraud, misapplication of bank funds, false statement to a financial institution and multiple counts of false entry in a bank record.
- Stephen G. Fields , 48, who served as an executive vice president and commercial loan officer until he was terminated in December 2010. Fields is charged with conspiracy to commit bank fraud, multiple counts of false entry in a bank record, multiple counts of false statement to a financial institution and multiple counts of misapplication of bank funds.
- Troy Brandon Woodard , 35, the son of Edward Woodard, and who was employed by a wholly-owned subsidiary of the bank as a vice president and mortgage loan specialist until he was terminated in January 2011. Brandon Woodard is charged with conspiracy to commit bank fraud, bank fraud and multiple counts of unlawful participation in a loan.
- Thomas E. Arney , 56, who leased office space on the third floor of the bank’s headquarters and owned and operated a residential development company, several restaurants, rental properties and a car restoration business. Arney is charged with conspiracy to commit bank fraud, bank fraud, unlawful participation in a loan, misapplication of bank funds and multiple counts of false statement to a financial institution.
- Dwight A. Etheridge , 47, who owned and operated a residential and commercial development company, as well as an employment staffing company. Etheridge is charged with conspiracy to commit bank fraud, misapplication of bank funds and multiple counts of false statement to a financial institution.
The indictment alleges that many of the bank’s loans were funded and administered without regard to industry standards or the bank’s own internal controls, and by 2008 the volume of the bank’s troubled loans and foreclosed real estate soared. From 2008 through 2011, bank insiders – Edward Woodard, Hounslow and Fields – allegedly masked the bank’s true financial condition out of fear that the bank’s declining health would negatively impact investor and customer confidence and affect the bank’s ability to accept and renew brokered deposits.
To fraudulently hide the bank’s troubled assets, bank insiders allegedly overdrew demand deposit accounts to make loan payments, used funds from related entities – at times without authorization from the borrower – to make loan payments, used change-in-terms agreements to make loans appear current, and extended new loans or additional principal on existing loans to cover payment shortfalls.
In addition, the indictment alleges that bank insiders also provided preferential financing to troubled borrowers – including Arney, Etheridge and others – to purchase bank-owned properties. These troubled borrowers were already having difficulty making payments on their existing loans; however, the financing allowed the bank to convert a non-earning asset into an earning asset, and the troubled borrowers obtained cash at closing to make payments on their other loans at the bank or for their own personal purposes.
The indictment also alleges that troubled borrowers purchased or attempted to purchase property owned by bank insiders and Brandon Woodard. These real estate loans were fraudulently funded by the bank.
According to the indictment, in November 2008, the Bank of the Commonwealth sent to the Federal Reserve an application requesting approximately $28 million from the Troubled Asset Relief Program (TARP). Based on its regulator's concerns about the health of the bank, the Federal Reserve later requested that the bank withdraw its TARP application, which the bank did.
From 2008 up to its closing in 2011, the bank lost nearly $115 million. The indictment alleges that the bank’s failure will cost the federal government through the deposit insurance fund in excess of $260 million. The forfeiture notice in the indictment attributes at least $71 million as illegal proceeds of the fraud.
Others charged as part of this ongoing investigation include the following:
- Business partners Eric H. Menden, 53, of Chesapeake, Va., and George P. Hranowskyj, 47, of Chesapeake, pleaded guilty to engaging in a $41 million bank fraud scheme that contributed to the failure of the Bank of the Commonwealth. They also pleaded guilty to a separate fraud involving a six-year historic tax credit scheme that cost state and federal governments over $12 million and investors more than $8 million.
- Menden faces a maximum penalty of five years in prison for each count of conspiracy to commit wire fraud, making false statements and conspiracy to commit bank fraud when he is sentenced on Sept. 26, 2012. Hranowskyj faces a maximum of 20 years in prison for conspiracy to commit wire fraud and a maximum of five years in prison for conspiracy to commit bank fraud when he is sentenced on Oct. 15, 2012.
- Natallia Green , 29, of Norfolk, and formerly employed by Menden and Hranowskyj, pleaded guilty to making a false statement on a loan application to the Bank of the Commonwealth. In January 2012, Green was sentenced to five years probation.
- Maria Pukhova , 30, of Virginia Beach, and formerly employed by Menden and Hranowskyj, has been charged with making a false statement on a loan application to the Bank of the Commonwealth.
- Jeremy C. Churchill , 35, of Norfolk, and a former vice president and commercial loan officer at the bank, pleaded guilty to conspiring with others to cause the bank to suffer millions of dollars in losses from loans meant to conceal financial problems at the bank and with one of its customers. Convicted of conspiracy to commit bank fraud, he faces a maximum penalty of five years in prison when he is sentenced on Aug. 24, 2012.
- Recardo S. Lewis , 61, of Norfolk, and a former employee with by Tivest Development & Construction LLC, pleaded guilty to conspiring with others to defraud the Bank of the Commonwealth by submitting fraudulent draws on a multi-million construction project in Virginia Beach. Convicted of conspiracy to commit bank fraud, Lewis faces a maximum penalty of five years in prison when he is sentenced on Sept. 19, 2012.
Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at www.vaed.uscourts.gov or on https://pcl.uscourts.gov.
Source: Financial Fraud Enforcement Task Force
Executive Pleads Guilty to Insider Trading
NEW YORK – 6/27/2017 - Tai Nguyen, 49, pleaded guilty on June 26 in Manhattan federal court to one count of conspiracy to commit securities fraud and wire fraud in connection with an insider trading scheme in which Nguyen, the president of Insight Research LLC, an investment research firm, and a paid consultant of an expert networking firm, provided material, nonpublic information to members of the investment community, announced U.S. Attorney for the Southern District of New York Preet Bharara and Assistant Director-in-Charge of the New York Field Office of the FBI Janice K. Fedarcyk. The information concerned quarterly financial results for Abaxis Inc., a California biotechnology company. Nguyen secured the information from a family member employed in Abaxis’s Finance Department (the “Abaxis Insider”).
U.S. Attorney Bharara said, “Tai Nguyen was a consultant who, for a handsome fee, provided his clients with confidential and proprietary inside information in violation of the law. He also illegally traded on that information himself, earning a quick and easy profit, and exploiting the information for all it was worth. Today’s plea adds another to our nationwide roll call of those who choose to corrupt our markets. We will continue to go after individuals who flout the securities laws and see to it that they are prosecuted and punished.”
FBI Assistant Director-in-Charge Fedarcyk said, “Mr. Nguyen regularly provided material, non-public information to his clients before quarterly announcements in return for momentary financial gain. Providing and receiving inside tips not only damages the integrity and confidence of our markets, but violates the law. Securities fraud has been, and will continue to be, a major priority for this office until people throughout the hedge-fund industry and Wall Street understand that gaining an unfair advantage – like knowing the answers before the test – is cheating.”
According to the information and statements made during the guilty plea proceeding:
From 2006 through mid-2009, Nguyen obtained detailed information from the Abaxis Insider about the company’s anticipated revenues, earnings, gross margins and other financial results prior to the company’s quarterly announcement. After obtaining the Abaxis inside information, Nguyen provided it, on multiple occasions, to Noah Freeman, a research analyst at a hedge fund based in Boston and to Samir Barai, a portfolio manager at two separate hedge funds in New York, N.Y.
Freeman’s hedge fund earned more than $4.5 million between July 2006 and May 2009, while Barai’s hedge fund earned over $1.7 million between July 2008 and September 2009, as a result of Abaxis stock trading based on tips from Nguyen, including the Abaxis inside information. In exchange for the Abaxis inside information, Freeman’s and Barai’s hedge funds paid Insight Research and/or Nguyen consulting fees of several thousand dollars per month. At various times, Insight Research earned consulting fees of more than $15,000 a month from just one of these hedge fund clients.
In addition to passing the Abaxis inside information, on numerous occasions between 2006 and 2009, Nguyen used the information to trade Abaxis stock in his personal brokerage account. As a result of his own trading activity, Nguyen earned over $147,000 during that time period.
Nguyen, of Oregon City, Ore., pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud. This charge carries a maximum sentence of five years in prison and a maximum fine of the greatest of $250,000, twice the gross pecuniary gain derived from the offense, or twice the gross pecuniary loss to persons other than the defendant resulting from the offense. As part of his plea agreement, Nguyen agreed to forfeit the proceeds of the offense.
U.S. Attorney Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group.
This case is being handled by the U.S. Attorney’s Office for the Southern District of New York’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney David I. Miller is in charge of the prosecution.
Source: Financial Fraud Enforcement Task Force
U.S. Attorney Bharara said, “Tai Nguyen was a consultant who, for a handsome fee, provided his clients with confidential and proprietary inside information in violation of the law. He also illegally traded on that information himself, earning a quick and easy profit, and exploiting the information for all it was worth. Today’s plea adds another to our nationwide roll call of those who choose to corrupt our markets. We will continue to go after individuals who flout the securities laws and see to it that they are prosecuted and punished.”
FBI Assistant Director-in-Charge Fedarcyk said, “Mr. Nguyen regularly provided material, non-public information to his clients before quarterly announcements in return for momentary financial gain. Providing and receiving inside tips not only damages the integrity and confidence of our markets, but violates the law. Securities fraud has been, and will continue to be, a major priority for this office until people throughout the hedge-fund industry and Wall Street understand that gaining an unfair advantage – like knowing the answers before the test – is cheating.”
According to the information and statements made during the guilty plea proceeding:
From 2006 through mid-2009, Nguyen obtained detailed information from the Abaxis Insider about the company’s anticipated revenues, earnings, gross margins and other financial results prior to the company’s quarterly announcement. After obtaining the Abaxis inside information, Nguyen provided it, on multiple occasions, to Noah Freeman, a research analyst at a hedge fund based in Boston and to Samir Barai, a portfolio manager at two separate hedge funds in New York, N.Y.
Freeman’s hedge fund earned more than $4.5 million between July 2006 and May 2009, while Barai’s hedge fund earned over $1.7 million between July 2008 and September 2009, as a result of Abaxis stock trading based on tips from Nguyen, including the Abaxis inside information. In exchange for the Abaxis inside information, Freeman’s and Barai’s hedge funds paid Insight Research and/or Nguyen consulting fees of several thousand dollars per month. At various times, Insight Research earned consulting fees of more than $15,000 a month from just one of these hedge fund clients.
In addition to passing the Abaxis inside information, on numerous occasions between 2006 and 2009, Nguyen used the information to trade Abaxis stock in his personal brokerage account. As a result of his own trading activity, Nguyen earned over $147,000 during that time period.
Nguyen, of Oregon City, Ore., pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud. This charge carries a maximum sentence of five years in prison and a maximum fine of the greatest of $250,000, twice the gross pecuniary gain derived from the offense, or twice the gross pecuniary loss to persons other than the defendant resulting from the offense. As part of his plea agreement, Nguyen agreed to forfeit the proceeds of the offense.
U.S. Attorney Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group.
This case is being handled by the U.S. Attorney’s Office for the Southern District of New York’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney David I. Miller is in charge of the prosecution.
Source: Financial Fraud Enforcement Task Force
Insider Trading Sentence is Longest in History
NEW YORK – 11/14/2011 - Raj Rajaratnam was sentenced Oct. 13 in Manhattan federal court to 11 years in prison stemming from his involvement in the largest hedge fund insider trading scheme in history, announced U.S. Attorney for the Southern District of New York Preet Bharara.
Rajaratnam was the managing member of Galleon Management LLC, the general partner of Galleon Management L.P. and a portfolio manager for Galleon Technology Offshore Ltd. and certain accounts of Galleon Diversified Fund Ltd. He was convicted on May 11 of all 14 counts of conspiracy and securities fraud with which he was charged, following an eight-week jury trial. Rajaratnam was sentenced today by U.S. District Judge Richard J. Holwell.
It is the longest sentence imposed for insider trading in history.
“Two years ago, Raj Rajaratnam stood at the summit of Wall Street, commanding his own financial empire. Then he was arrested, tried and convicted by a jury. Mr. Rajaratnam stood convicted 14 times over of felonies, his empire exposed as a web of fraud and corruption that entangled many,” U.S. Attorney Bharara said. “Today, Mr. Rajaratnam stood once more and faced justice which was meted out to him. It is a sad conclusion to what once seemed to be a glittering story. We can only hope that this case will be the wake-up call we said it should be when Mr. Rajaratnam was arrested. Privileged professionals do not get a free pass to pursue profit through corrupt means. The message is the same for everyone no matter who you are or how much money you have – obey the law or face the fate of those who don’t.”
According to the superseding indictment filed in Manhattan federal court, other court documents and statements made during related court proceedings:
From 2003 to March 2009, Rajaratnam repeatedly traded on material, nonpublic information pertaining to upcoming earnings forecasts, mergers, acquisitions and other business combinations. As the evidence at trial showed, the inside information was given as tips by insiders and others at hedge funds, public companies and investor relations firms – including Goldman Sachs, Intel, International Business Machines (IBM) Corporation, McKinsey & Company, Moody’s Investor Services Inc., Market Street Partners, Akamai Technologies Inc. and Polycom Inc. Based on the inside information, Rajaratnam executed trades in the stock of public companies, including Goldman Sachs, Clearwire, Akamai, AMD, Intel, Polycom and PeopleSupport. The court found Rajaratnam earned “well over $50 million” from his illegal trading.
The evidence at trial included, among other things, recordings of wiretapped phone calls between Rajaratnam and his various co-conspirators, including: Anil Kumar, a former senior partner and director at McKinsey; Rajiv Goel, a former employee of Intel; Adam Smith, a former portfolio manager and analyst at Galleon; and Danielle Chiesi, a former employee of the hedge fund New Castle Partners. Rajaratnam engaged in overlapping conspiracies to commit securities fraud with these individuals, as well as with Mark Kurland, a co-founder at New Castle Partners, Robert Moffat, a former senior vice president at IBM, and Roomy Khan, who traded securities on her own behalf.
In addition to his prison term, Rajaratnam, 54, of New York was sentenced to two years of supervised release and ordered to pay forfeiture in the amount of $53,816,434 and a $10 million fine. Rajaratnam will surrender to authorities on Nov. 28, 2011.
During the sentencing proceeding, Judge Holwell said that insider trading “is an assault on our free markets,” and added that “the crimes and scope of the crimes (committed by Rajaratnam) reflect a virus in our business culture that needs to be eradicated.”
Chiesi, Kurland, Moffat, Kumar, Goel, Smith and Khan have all pleaded guilty to their involvement in the insider trading schemes. Chiesi was sentenced to 30 months in prison, Kurland to 27 months in prison and Moffat to six months in prison. Kumar, Goel, Smith and Khan are awaiting sentencing.
Bharara praised the investigative work of the FBI and thanked the U.S. Securities and Exchange Commission for its extraordinary assistance.
“Two years ago, Raj Rajaratnam stood at the summit of Wall Street, commanding his own financial empire. Then he was arrested, tried and convicted by a jury. Mr. Rajaratnam stood convicted 14 times over of felonies, his empire exposed as a web of fraud and corruption that entangled many,” U.S. Attorney Bharara said. “Today, Mr. Rajaratnam stood once more and faced justice which was meted out to him. It is a sad conclusion to what once seemed to be a glittering story. We can only hope that this case will be the wake-up call we said it should be when Mr. Rajaratnam was arrested. Privileged professionals do not get a free pass to pursue profit through corrupt means. The message is the same for everyone no matter who you are or how much money you have – obey the law or face the fate of those who don’t.”
According to the superseding indictment filed in Manhattan federal court, other court documents and statements made during related court proceedings:
From 2003 to March 2009, Rajaratnam repeatedly traded on material, nonpublic information pertaining to upcoming earnings forecasts, mergers, acquisitions and other business combinations. As the evidence at trial showed, the inside information was given as tips by insiders and others at hedge funds, public companies and investor relations firms – including Goldman Sachs, Intel, International Business Machines (IBM) Corporation, McKinsey & Company, Moody’s Investor Services Inc., Market Street Partners, Akamai Technologies Inc. and Polycom Inc. Based on the inside information, Rajaratnam executed trades in the stock of public companies, including Goldman Sachs, Clearwire, Akamai, AMD, Intel, Polycom and PeopleSupport. The court found Rajaratnam earned “well over $50 million” from his illegal trading.
The evidence at trial included, among other things, recordings of wiretapped phone calls between Rajaratnam and his various co-conspirators, including: Anil Kumar, a former senior partner and director at McKinsey; Rajiv Goel, a former employee of Intel; Adam Smith, a former portfolio manager and analyst at Galleon; and Danielle Chiesi, a former employee of the hedge fund New Castle Partners. Rajaratnam engaged in overlapping conspiracies to commit securities fraud with these individuals, as well as with Mark Kurland, a co-founder at New Castle Partners, Robert Moffat, a former senior vice president at IBM, and Roomy Khan, who traded securities on her own behalf.
In addition to his prison term, Rajaratnam, 54, of New York was sentenced to two years of supervised release and ordered to pay forfeiture in the amount of $53,816,434 and a $10 million fine. Rajaratnam will surrender to authorities on Nov. 28, 2011.
During the sentencing proceeding, Judge Holwell said that insider trading “is an assault on our free markets,” and added that “the crimes and scope of the crimes (committed by Rajaratnam) reflect a virus in our business culture that needs to be eradicated.”
Chiesi, Kurland, Moffat, Kumar, Goel, Smith and Khan have all pleaded guilty to their involvement in the insider trading schemes. Chiesi was sentenced to 30 months in prison, Kurland to 27 months in prison and Moffat to six months in prison. Kumar, Goel, Smith and Khan are awaiting sentencing.
Bharara praised the investigative work of the FBI and thanked the U.S. Securities and Exchange Commission for its extraordinary assistance.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jonathan Streeter and Reed Brodsky, and Special Assistant U.S. Attorney Andrew Michaelson are in charge of the prosecution.
Man Sentenced to 66 Months for Insider Trading
NEW YORK – 9/5/2011 - Craig Drimal was sentenced on August 31 in Manhattan federal court to 66 months in prison for his participation in an insider trading scheme in which he obtained and traded on material, nonpublic information, including information misappropriated from the law firm of Ropes & Gray, announced Preet Bharara, U.S. attorney for the Southern District of New York.
Drimal pleaded guilty to five counts of securities fraud and one count of conspiracy on April 26, 2011. U.S. District Judge Richard J. Sullivan imposed the sentence.
According to the indictment, a complaint previously filed in this case and statements made during the guilty plea proceeding:
In 2007 and 2008, Drimal obtained inside information from Zvi Goffer and others about several mergers and acquisitions of public companies, and traded based on that information. The inside information included information provided by two Ropes & Gray attorneys, Arthur Cutillo and Brien Santarlas, regarding the potential acquisition of 3Com Corporation and the potential acquisition of Axcan Pharma Inc. Cutillo and Santarlas delivered the inside information to Jason Goldfarb, another attorney, who provided the inside information to Goffer. Goffer then delivered it to Drimal, who executed trades based on the inside information.
Drimal also traded in the stock of Hilton Hotels Corporation based on inside information. He made combined profits exceeding $10 million based on these trades. Following the public announcement of the acquisition of Axcan, Drimal delivered a cash payment to Goffer for the tip.
In addition to the prison term, Sullivan sentenced Drimal, 55, of Weston, Conn., to 66 months in prison and three years of supervised release, and ordered him to pay forfeiture in the amount of $11 million and a $600 special assessment fee.
Cutillo, Goldfarb and Santarlas previously pleaded guilty to conspiracy and securities fraud charges in connection with this scheme. Goffer was convicted after a one month jury trial of conspiracy and securities fraud charges for his role in the scheme. Cutillo was sentenced to 30 months in prison and Goldfarb was sentenced to 36 months in prison. Santarlas’s sentencing is scheduled for Oct. 28, 2011, at 2:30 p.m. and Goffer’s sentencing is scheduled for Sept. 21, 2011, at 2 p.m.
U.S. Attorney Bharara praised the investigative work of the FBI and thanked the Securities and Exchange Commission for its assistance with the investigation.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group.
Assistant U.S. Attorneys Andrew Fish, Reed Brodsky and Richard Tarlowe are in charge of the prosecution.
Source: Financial Fraud Enforcement Task Force
Drimal pleaded guilty to five counts of securities fraud and one count of conspiracy on April 26, 2011. U.S. District Judge Richard J. Sullivan imposed the sentence.
According to the indictment, a complaint previously filed in this case and statements made during the guilty plea proceeding:
In 2007 and 2008, Drimal obtained inside information from Zvi Goffer and others about several mergers and acquisitions of public companies, and traded based on that information. The inside information included information provided by two Ropes & Gray attorneys, Arthur Cutillo and Brien Santarlas, regarding the potential acquisition of 3Com Corporation and the potential acquisition of Axcan Pharma Inc. Cutillo and Santarlas delivered the inside information to Jason Goldfarb, another attorney, who provided the inside information to Goffer. Goffer then delivered it to Drimal, who executed trades based on the inside information.
Drimal also traded in the stock of Hilton Hotels Corporation based on inside information. He made combined profits exceeding $10 million based on these trades. Following the public announcement of the acquisition of Axcan, Drimal delivered a cash payment to Goffer for the tip.
In addition to the prison term, Sullivan sentenced Drimal, 55, of Weston, Conn., to 66 months in prison and three years of supervised release, and ordered him to pay forfeiture in the amount of $11 million and a $600 special assessment fee.
Cutillo, Goldfarb and Santarlas previously pleaded guilty to conspiracy and securities fraud charges in connection with this scheme. Goffer was convicted after a one month jury trial of conspiracy and securities fraud charges for his role in the scheme. Cutillo was sentenced to 30 months in prison and Goldfarb was sentenced to 36 months in prison. Santarlas’s sentencing is scheduled for Oct. 28, 2011, at 2:30 p.m. and Goffer’s sentencing is scheduled for Sept. 21, 2011, at 2 p.m.
U.S. Attorney Bharara praised the investigative work of the FBI and thanked the Securities and Exchange Commission for its assistance with the investigation.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group.
Assistant U.S. Attorneys Andrew Fish, Reed Brodsky and Richard Tarlowe are in charge of the prosecution.
Source: Financial Fraud Enforcement Task Force
Investment Advisor Pleads Guilty in Scheme
NEW YORK – 1/10/2011 - A registered investment advisor pleaded guilty on Jan. 7 to conspiracy and securities fraud charges in connection with his participation in an insider trading scheme, announced U.S. Attorney for the Southern District of New York Preet Bharara.
Alexei P. Koval, aka “Aleksey Koval,” admitted that he obtained inside information from his co-conspirator, Igor Poteroba, a former investment banker in the Healthcare Group of UBS Securities LLC, and then traded on that information.
The information related to six mergers and acquisitions that certain UBS clients were contemplating. Koval pleaded guilty in Manhattan federal court before U.S. District Judge Paul A. Crotty.
“Alexei Koval flagrantly violated the securities laws to make a quick profit, and now he will pay for his crimes,” Bharara said. “Insider trading undermines faith in the market and cheats honest investors. It will not be tolerated. Together with our law enforcement partners, we will continue to prosecute and punish those who use their access to inside information to break the law.”
According to documents previously filed in Manhattan federal court, from May 2006 through at least 2009 Koval was a registered investment adviser. During approximately the same time period, Poteroba served as an executive director at UBS. In that capacity, Poteroba obtained material, non-public information regarding certain mergers and acquisitions involving the following six publicly traded healthcare companies: Guilford Pharmaceuticals Inc., Molecular Devices Corporations, PharmaNet Development Group Inc., Via Cell Inc., Millennium Pharmaceuticals Inc. and Indevus Pharmaceuticals Inc.
In violation of his duties of trust and confidence, Poteroba then disclosed the UBS inside information to Koval, who in turn disclosed the UBS inside information to another co-conspirator (CC-1).
As part of the scheme, Koval typically received tips from Poteroba by telephone in advance of a public announcement about certain mergers and acquisitions. Shortly after receiving a tip from Poteroba, Koval and CC-1 purchased securities in one of the healthcare companies on the basis of the UBS inside information.
Following the public announcement of the acquisition, Koval and CC-1 quickly sold the securities they had purchased. Koval and CC-1 executed dozens of securities transactions based on UBS inside information provided by Poteroba. Koval then paid a portion of the profits to Poteroba.
Koval pleaded guilty to three counts of securities fraud and one count of conspiracy to commit securities fraud. The securities fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5 million.
The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. Koval agreed as part of his plea agreement to forfeit at least $1,414,290, representing the amount of proceeds obtained as a result of the securities fraud offenses.
Koval, 36, of Chicago, and Pasadena, Calif., will surrender to federal authorities on Jan. 14, 2011, and is scheduled to be sentenced by Judge Crotty on April 12, 2011, at 2:30 p.m.
Poteroba, 37, of Darien, Conn., pleaded guilty to similar charges before Judge Crotty on Dec. 21, 2010. He is scheduled to be sentenced on March 16, 2011.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. The case is being handled by the U.S. Attorney Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Marissa Molé is in charge of the prosecution.
Note: Original release date was Jan. 7, 2011. Source: Financial Fraud Enforcement Task Force
Alexei P. Koval, aka “Aleksey Koval,” admitted that he obtained inside information from his co-conspirator, Igor Poteroba, a former investment banker in the Healthcare Group of UBS Securities LLC, and then traded on that information.
The information related to six mergers and acquisitions that certain UBS clients were contemplating. Koval pleaded guilty in Manhattan federal court before U.S. District Judge Paul A. Crotty.
“Alexei Koval flagrantly violated the securities laws to make a quick profit, and now he will pay for his crimes,” Bharara said. “Insider trading undermines faith in the market and cheats honest investors. It will not be tolerated. Together with our law enforcement partners, we will continue to prosecute and punish those who use their access to inside information to break the law.”
According to documents previously filed in Manhattan federal court, from May 2006 through at least 2009 Koval was a registered investment adviser. During approximately the same time period, Poteroba served as an executive director at UBS. In that capacity, Poteroba obtained material, non-public information regarding certain mergers and acquisitions involving the following six publicly traded healthcare companies: Guilford Pharmaceuticals Inc., Molecular Devices Corporations, PharmaNet Development Group Inc., Via Cell Inc., Millennium Pharmaceuticals Inc. and Indevus Pharmaceuticals Inc.
In violation of his duties of trust and confidence, Poteroba then disclosed the UBS inside information to Koval, who in turn disclosed the UBS inside information to another co-conspirator (CC-1).
As part of the scheme, Koval typically received tips from Poteroba by telephone in advance of a public announcement about certain mergers and acquisitions. Shortly after receiving a tip from Poteroba, Koval and CC-1 purchased securities in one of the healthcare companies on the basis of the UBS inside information.
Following the public announcement of the acquisition, Koval and CC-1 quickly sold the securities they had purchased. Koval and CC-1 executed dozens of securities transactions based on UBS inside information provided by Poteroba. Koval then paid a portion of the profits to Poteroba.
Koval pleaded guilty to three counts of securities fraud and one count of conspiracy to commit securities fraud. The securities fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5 million.
The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. Koval agreed as part of his plea agreement to forfeit at least $1,414,290, representing the amount of proceeds obtained as a result of the securities fraud offenses.
Koval, 36, of Chicago, and Pasadena, Calif., will surrender to federal authorities on Jan. 14, 2011, and is scheduled to be sentenced by Judge Crotty on April 12, 2011, at 2:30 p.m.
Poteroba, 37, of Darien, Conn., pleaded guilty to similar charges before Judge Crotty on Dec. 21, 2010. He is scheduled to be sentenced on March 16, 2011.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. The case is being handled by the U.S. Attorney Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Marissa Molé is in charge of the prosecution.
Note: Original release date was Jan. 7, 2011. Source: Financial Fraud Enforcement Task Force
Hariri Sentenced in Historic Hedge Fund Case
Former Executive Gets 18 Months, Fine for Role in Trading Scam
NEW YORK – 11/9/10 - Ali Hariri, a former executive at Atheros Communications Inc., was sentenced on Nov. 8 in Manhattan federal court to 18 months in prison for his participation in the largest hedge fund insider trading case in history, U.S. Attorney for the Southern District of New York Preet Bharara announced this week. U.S. District Judge Richard J. Holwell, who imposed the sentence, also imposed a two year term of supervised release and a $50,000 fine.
According to documents previously filed in Manhattan federal court and statements made during Hariri’s guilty plea proceeding, from 2008 to March 2009, Hariri, a vice president at Atheros, engaged in an insider trading scheme in which he obtained material, nonpublic information relating to Atheros.
Hariri provided this inside information to Ali Far, a hedge fund manager, for the purpose of executing profitable securities transactions Hariri knew that the information he provided to Far was material and non-public, and he disclosed it in breach of fiduciary and other duties of trust and confidence that he owed to Atheros. In exchange for inside information regarding Atheros, Far provided Hariri with tips to buy and sell the stocks of other technology companies.
“Ali Hariri’s sentencing provides another reminder of how pervasive insider trading has become and the lengths to which corrupt insiders will go to misuse confidential information for their own personal gain,” Bharara said. “It should also remind those who might contemplate similar crimes that we will ultimately find you, prosecute you and convict you. This office is committed to stopping insider trading in its tracks to protect the integrity of our markets.”
On March 3, 2010, Hariri, 39, of San Francisco, pleaded guilty to conspiring to commit insider trading crimes Hariri also pleaded guilty to substantive securities fraud. Far has also separately pled guilty to conspiring to commit insider trading crimes and to substantive securities fraud. He is awaiting sentencing.
Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission. Bharara said the investigation is continuing.
The case is being handled by the office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jonathan Streeter and Reed Brodsky and Special Assistant U.S. Attorney Andrew Michaelson are in charge of the prosecution.
Source: Financial Fraud Enforcement Task Force .
