« US Seeks to Recoup Billions in Unemployment Benefits Paid Out in Error | Main | Bizarre Tax Claims: Man Claims Politician as a Deduction »

Insider Trading Case Involves Secrets Shared Among AA Members

Andrew Harrer/Bloomberg via Getty Images(PHILADELPHIA) -- In what a government attorney calls the first case of its kind, the Philadelphia office of the Securities and Exchange Commission (SEC) has charged five people with making more than $1.8 million illegally through insider trading of stocks.

The SEC is claiming that the violation of trust and confidentiality required to prove insider trading occurred between members of Alcoholics Anonymous (A.A.).

The SEC says Timothy McGee and Michael Zirinsky, both registered representatives of Ameriprise Financial Services, bought and sold stock in Philadelphia Consolidated Holding Corp. (PHLY), based on non-public information about an impending merger between PHLY and Tokio Marine Holdings.

McGee, the SEC claims, got that insider information from a PHLY executive who confided in him, based on the fact they both were members of A.A.

"What we're saying, here, is that the two shared a relationship of confidence and trust, beginning at the time they both started to attend A.A. in 2009," says Elaine Greenberg, associate director of the SEC's Philadelphia Regional office.

The two men's relationship extended beyond A.A.  For example, they occasionally trained together for triathlons, according to the SEC, and routinely shared confidences about their personal and professional lives.  But, says Greenberg, their relationship of trust was heightened by A.A.

That contention matters, because the government, to establish insider trading, must show that a relationship of trust and confidentiality existed above and beyond that of ordinary friendship.  The government has to prove, says Greenberg, that the person communicating the information and the one receiving it "have a history of sharing confidences, such that the recipient knows the giver expects him to maintain confidentiality."

Never before has the SEC tried to use as proof a shared membership in A.A.

Copyright 2012 ABC News Radio

ABC News Radio