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Entries in Insider Trading (14)

Saturday
Mar162013

SAC Capital Agrees to Settle Insider Trading Cases for $614 Million

Andrew Harrer/Bloomberg via Getty Images(NEW YORK) -- The Securities and Exchange Commission (SEC) has settled insider trading charges against two affiliates of the giant hedge fund SAC Capital for $614 million.

According to the New York Times, the SEC said this was the biggest ever settlement for such cases.

One affiliate, CR Intrinsic, agreed to pay over $600 million over charges of one of their employees trading confidential information about the drug makers Elan and Wyeth. The other affiliate, Sigma Cipital Management, agreed to pay $14 million to settle charges of insider trading in stocks of Dell and Nvidia.

SAC’s management company will pay the settlements, which means the investors of the hedge fund will not be held accountable, the paper reports.

“The historic monetary sanctions against CR Intrinsic and its affiliates are sharp warning that the SEC will hold hedge fund advisory firms and their funds accountable when employees break the law to benefit the firm,” George S. Canellos, the acting director of the SEC’s enforcement division, said in a statement.

Copyright 2013 ABC News Radio

Thursday
Aug022012

Bristol-Myers Squibb Exec. Busted on Insider Trading

Photodisc/Digital Vision/Thinkstock(NEWARK, N.J.) -- An executive at the pharmaceuticals giant Bristol-Myers Squibb Co. was arrested Thursday for insider trading.

It was part of Robert Ramnarine's job to evaluate potential acquisitions for Bristol Myers Squibb so prosecutors say he had access to inside information.  They also say he traded on it and generated hundreds of thousands of dollars in illicit profits.

And apparently Ramnarine, 45, of East Brunswick, N.J., considered whether what he was doing was illegal.  Court records say he searched on Yahoo terms like "insider trading options trace" and he looked up articles about insider trading violations.

If he's found guilty Ramnarine faces 20 years in prison and a $5 million fine.

Copyright 2012 ABC News Radio

Wednesday
May232012

Facebook Sued, Subpoenaed About IPO

Zef Nikolla/Facebook(WASHINGTON) -- Facebook and its IPO underwriters are being sued and face pointed questions from lawmakers about whether they misled some investors before the largest initial public offering by a tech company in U.S. history.

Facebook investors have filed a class action lawsuit against the company and its underwriters, saying the registration statement and prospectus filed with the Securities and Exchange Commission ahead of the IPO were "false and misleading."

The class action lawsuit was filed on Wednesday in a New York District Court on behalf of Facebook stock purchasers against Facebook's board, including CEO Mark Zuckerberg and CFO David Ebersman, Morgan Stanley and the other underwriters.

The suit alleges that Facebook failed to disclose that the company told the lead underwriters to reduce their 2012 performance estimates because more users are using its mobile apps, which don't generate advertising revenue.

Facebook stock moved higher on Wednesday after two days of declines. Shares of the tech company are up about 2.5 percent to $31.76 in mid-day trading.

But while the company's stock sees a slight jump, regulators have directed pointed questions at the tech company after its muted IPO on Friday.

On Tuesday, there was a report that Morgan Stanley and Goldman Sachs -- investment bank underwriters supporting the IPO -- told clients earlier this month that they were reducing their earnings forecasts for Facebook.

The Senate Banking Committee is conducting staff briefings with Facebook, regulators and other stakeholders to learn more about issues raised in the news regarding Facebook's IPO, a committee aide told ABC News on Wednesday.

Facebook did not immediately respond to a request for comment.

Meanwhile, Massachusetts Secretary of State William Galvin has subpoenaed the tech company, investigating whether Morgan Stanley, the main IPO underwriter, told preferred investors that an analyst cut his revenue estimate based on the company's S-1 filing before the IPO.

"If it turns out you have a pattern of conduct where preferred investors are getting special treatment that's devastating to rebuilding confidence in the market," Galvin told ABC News.

His office issued a subpoena to Morgan Stanley that seeks information about discussions the bank had with certain clients about Facebook's IPO.

"It is so important that we not allow this situation to go uninvestigated," Galvin said. "Given the breadth and size of the issue and the losses that are out there it's important that we move rapidly."

Facebook stock lost nearly 20 percent of its value in its first three days of trading on the NASDAQ.

"So many investors have lost so rapidly so much," said Galvin. "We intend to move quickly. We need to get answers for average American investors."

A spokesman for Morgan Stanley provided a statement regarding some of the allegations put forward against the investment bank, saying it "followed the same procedures for the Facebook offering that it follows for all IPOs."

"After Facebook released a revised S-1 filing on May 9th providing additional guidance with respect to business trends, a copy of the amendment was forwarded to all of MS's institutional and retail investors and the amendment was widely publicized in the press at the time."

In response to the information about business trends, a significant number of research analysts in the syndicate who were participating in investor education reduced their earnings views to reflect their estimate of the impact of the new information. These revised views were taken into account in the pricing of the IPO. "

A spokeswoman for JP Morgan Chase declined to comment about the lawsuits.

Copyright 2012 ABC News Radio

Wednesday
Apr042012

Obama Signs STOCK Act To Ban Insider Trading By Congress

iStockphoto/Thinsktock(WASHINGTON) -- Surrounded by a group of bipartisan lawmakers, President Obama on Wednesday signed the Stop Trading on Congressional Knowledge Act, banning insider trading on Capitol Hill.

“The idea that everybody plays by the same rules is one of our most cherished American values,” the president said at the White House signing ceremony. “It’s the notion that the powerful shouldn’t get to create one set of rules for themselves and another set of rules for everybody else… If we expect that to apply to our biggest corporations and to our most successful citizens, it certainly should apply to our elected officials.”

Any lawmaker who attempts to gain an unfair advantage in the market through the use of nonpublic information will now be breaking the law as a result of the STOCK Act.

While the president lauded the legislation, he made clear “our work isn’t done.”

“There’s obviously more that we can do to close the deficit of trust and limit the corrosive influence of money in politics.  We should limit any elected official from owning stocks in industries that they have the power to impact.  We should make sure people who bundle campaign contributions for Congress can’t lobby Congress, and vice versa,” he said.

Obama thanked the members of Congress who worked together to make the law a reality, saying “it shows that when an idea is right that we can still accomplish something on behalf of the American people and to make our government and our country stronger.”  

Copyright 2012 ABC News Radio

Thursday
Mar222012

Senate Passes Congress Insider Trading Ban

Architect of the Capitol(WASHINGTON) -- The STOCK Act, a House-passed legislation to ban members of Congress from benefiting from insider stock trading, was approved by the Senate Thursday 96-3 and will go to President Obama for his signature.

The bill reaffirms that members of Congress, congressional staff, and executive and judicial branch officials are not exempt from the insider trading prohibitions arising under securities and commodities laws.

Members of Congress have consistently cited this legislation as one that could help restore some of the public’s confidence and trust.

“I believe by the overwhelming vote today that we have sent a message to the American people that we recognize that elected office is a place not for personal gain but for public service,” Sen. Susan Collins, R-Maine, said following the vote.

The bill requires members and senior congressional staff to report the purchase or sale of securities exceeding $1,000 no later than 30 days after the transaction. It also requires senior executive branch officials to disclose their home mortgages.

“I believe those who make the laws should live under the same laws as everyone else,” Sen. Scott Borwn, R-Mass., said. “Insider trading is wrong, whether it happens on Wall Street or on Capitol Hill. The passage of this legislation is an important step toward restoring trust in our government.”

The bill bans this group from participating in initial public offerings in any manner other than what is available to the members of the public. It strengthens laws relating to denial of congressional pensions to members who commit public corrupt crimes while serving in Congress and will deny pensions to former members who commit those crimes while serving in public offices.

The legislation also prohibits executives at Fannie Mae and Freddie Mac from receiving bonuses while the firms remain in federal conservatorship.

This bill is now headed towards the president’s desk for final signature.

Copyright 2012 ABC News Radio

Thursday
Mar152012

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

Monday
Feb272012

FBI and Michael Douglas Turn Up the Heat on Insider Trading

Alberto E. Rodriguez/Getty Images(WASHINGTON) -- The FBI has enlisted Michael Douglas, best known for his role as the ruthless Wall Street executive Gordon Gekko in the film Wall Street, in the bureau’s efforts to crack down on the rising number of insider trading cases. While Gekko lived by the mantra that “greed, for lack of a better word, is good,” Douglas is now asking corporate employees and financial traders to report insider trading and securities fraud to the FBI.

Appearing in a public service announcement that begins with a scene from Wall Street, Douglas says, “In the movie Wall Street I play Gordon Gekko, a greedy corporate executive who cheated to profit while innocent investors lost their savings. The movie was fiction, but the problem is real.

“Our economy is increasingly dependent on the success and the integrity of the financial markets,” Douglas says in the video produced by the FBI.  “If a deal looks too good to be true, it probably is. For more information on how you can identify securities fraud, or to report insider training, contact your local FBI office. Or submit a tip online at tips.fbi.gov.”

A report released by the FBI on Monday on financial crimes noted that there has been an increase in the number of insider trading cases.

“While the number of cases involving the falsification of financial information remains relatively stable, the FBI has observed an increase in the number of insider trading cases. Insider trading has been a continuous threat to the fair and orderly operation of the U.S. financial markets and has robbed the investing public of some degree of trust that markets operate fairly,” the report noted, which looked at financial crimes from Oct. 1, 2009 to Sept. 30, 2011.

“We couldn’t be more excited about Mr. Douglas.  The antagonist role that he played as Gordon Gekko suggested to us there would be no better voice to put this message out insider trading and securities fraud,” said FBI Special Agent David Chaves from the FBI’s New York field office, where he is the supervisor of the corporate and securities fraud unit.

“Greed is a factor that we always have to consider.  Our hope is that we continue to be proactive and aggressive in this area,” Chaves said.

Insider trading has been prosecuted by the U.S. Attorney’s Office for the Southern District of New York in a number of high-profile cases with 66 individuals being charged since August 2009. The district successfully prosecuted hedge fund manager Raj Rajaratnam, who operated an elaborate insider trading operation. Rajaratnam and others indicted in the case netted over $60 million in profits.

The case was also unique because the FBI and prosecutors used court-authorized wiretaps to build the case, something that the FBI and Justice Department have been doing more frequently in other corporate fraud cases.

In January the Securities and Exchange Commission and the Justice Department charged seven individuals from hedge funds Diamondback Capital Management LLC and Level Global Investors LP for illegally trading on inside information about Dell and Nvidia and allegedly netting $78 million in profits.

The FBI on Monday also released video from an insider trading case involving Walt Disney, the parent company of ABC, where Bonnie Hoxie, a former assistant to a top executive at Disney, passed information to her boyfriend Yonni Sebbag, a.k.a "Jonathan Cyrus." Sebbag sent multiple inquires to hedge funds and tried to peddle the inside information he was getting from Hoxie. The FBI intervened and posed as a hedge fund interested in buying the inside information.

On the FBI video Sebbag bragged that he had top information, telling an FBI undercover agent, “Any information that comes through my executives, like CEO, any information.”

“What motivates me is money.” Sebbag said on the FBI video.

Sebbag asked the undercover agent “You’re not FBI or SEC, right?... we’re OK, right?”

[VIEW THE TRANSCRIPT HERE]

“Well, I’m the CIA,” the undercover agent responded -- the men sharing a laugh as they proceeded with the deal.

Both Bonnie Hoxie and Yonni Sebbag pleaded guilty to wire fraud and conspiracy to commit securities and wire fraud. Hoxie only received a sentence of four months home confinement after a judge agreed she was manipulated by Sebbag, who was sentenced to 27 months in federal prison.

The FBI report released Monday noted that in 2011 the FBI had 726 pending corporate fraud cases and noted that the Bureau secured $2.4 billion in restitution and over $16 million in fines from corporate criminal defendants.

Copyright 2012 ABC News Radio

Thursday
Feb022012

Senate Passes Ban on Insider Trading

Architect of the Capitol(WASHINGTON) -- The ban on insider trading in Congress is moving along legislatively.

The Stop Trading on Congressional Knowledge (STOCK) Act passed in the Senate Thursday evening by a vote of 96-3.

Sens. Jeff Bingaman, D-N.M., Richard Burr, R-N.C., and Tom Coburn, R-Okla., voted against the bill. Sen. Mark Kirk, R-Ill., is still recovering from his stroke, so he did not vote.

The legislation turned into a much more expansive bill than when it was proposed, after a slew of amendments were debated all week and voted on Thursday.

Most significantly the bill, which bans members of Congress from benefiting from insider stock trading, now covers the executive branch as well, including the requirement that financial disclosure statements are now electronically filed to be available online and that the 30-day notice of stock or securities transactions also apply to a limited number of executive branch officials.

“If it affects us, it affects them, they have a tremendous amount of inside information and they should be held to the same standard that we are,” said Sen. Scott Brown, R-Mass.

But the expansion of the bill also had a few other inclusions, such as the requirement of disclosure of mortgages by members of Congress and limits to the bonuses of executives of Fannie Mae and Freddie Mac while they’re in a trusteeship.

At a time when public confidence in Congress is at an all-time low, senators hope this legislation will restore some much-needed confidence and trust from the American people.

“We sent a strong message by strengthening our laws that public office is not for private gain,” said Sen. Susan Collins, R-Maine. “The Senate came together in an overwhelming bipartisan fashion to correct the perception that insider trading is somehow going on in Washington, D.C. Whether or not members are engaging in insider trading, it is important that we respond to the perception that some members may be using their official position for private gain.”

The legislation will now be sent over to the House of Representatives. Senators hope President Obama can have a final bill ready for his signature by the end of the month.

Copyright 2012 ABC News Radio

Monday
Jan302012

Congressional Insider Trading Bill Moves Forward in the Senate

iStockphoto/Thinkstock(WASHINGTON) -- The Stop Trading on Congressional Knowledge Act, the STOCK Act, a legislation to ban members of Congress from benefiting from insider stock trading, on Monday moved one step closer to passage in the Senate.

By a bipartisan vote of 93-2, the Senate invoked cloture on the act, meaning the bill procedurally moved forward and will now move towards final passage after debate and amendments. Voting against the bill were Sen. Richard Burr, R-N.C., and Sen. Tom Coburn, R-Okla. Not voting were Sen. Johnny Isakson, R-Ga.; Mark Kirk, R-Ill.; Mary Landrieu, D-La.; Robert Menendez, D-N.J.; and Roger Wicker, R-Miss.

The bill requires that members of Congress and staff disclose any stock transactions within 30 days. It also prohibits members of Congress from trading based on information that is not available to the public and puts into language and law that if their actions violate the public trust they will be punished.

Senators hope that this explicit law will clear up “confusion” that they say has been rampant and led to reports of members of Congress benefiting from insider trading.

“Members of Congress are not above the law,” Senate Majority Leader Harry Reid, D-Nev., said Monday. “We must play by the same rules every other American plays by. The STOCK Act will clear up any perception that it’s acceptable for members of Congress to profit from insider trading.”

The final passage of this law will be symbolic. On Monday many senators noted that with such low approval ratings, Congress doesn’t need one more reason for the public to be against them.  They hope that a law like this on the books would at least in part help to clean up their tattered image.

“It is a violation of trust that our constituents place in us, a violation of the democratic process, a violation of the securities laws, and a violation of congressional ethics rules if members of Congress or their employees engage in insider trading, the use of information not available to the public, to make investment decisions,” Sen. Carl Levin, D-Mich., said on the Senate floor Monday. “It’s important to remove that doubt because any appearance of a breach in trust between Congress and our constituents is so corrosive to honest, open and effective government.”

Sen. Scott Brown, R-Mass., the sponsor of the bill, who appealed directly to President Obama to help get this legislation through the Senate quickly, said Monday passage of the bill will send an important message to the American people.

“It’s about cleaning up Washington,” Brown said. “With the bill before us today, we can take a small step to reestablishing the trust between the American people and Congress. If we pass the STOCK Act this week, it will send a very strong and unified message to the American people that Congress does not -- does not -- consider itself above the law.”

In his State of the Union address last Tuesday, Obama pushed for passage of a bill to ban insider trading by members of Congress, saying he’ll “sign it tomorrow” once Congress sends him a bill passed by both houses.

The Senate could approve final passage of the bill possibly as early as this week. If passed, which is likely given the bipartisan vote tally Monday, the bill will be sent over to the House of Representatives.

But, as ABC News’ John Parkinson reports, the House is expected to consider its own version of the STOCK Act by the end of February. A GOP leadership aide says while the Senate bill is a good-faith effort, is not a perfect bill and the House will introduce its own version with tweaks to improve it.

Then the House would likely send its bill back to the Democrat-controlled Senate for final passage before sending the bill to Obama for his signature.

Copyright 2012 ABC News Radio

Wednesday
Oct262011

Inside the Rajat Gupta Insider Trading Charges

Spencer Platt/Getty Images(NEW YORK) -- Wall Street power player Rajat Gupta arrived at the White House State Dinner in 2009 at the pinnacle of American business: on the board of directors at Goldman Sachs and Proctor & Gamble, and widely respected in the financial community.

But Wednesday, federal investigators accused Gupta of being a symbol of Wall Street greed -- an inside trader.

Authorities say he used his sensitive positions to provide billionaire hedge fund manager Raj Rajaratnam with tips that allowed him to pocket $23 million playing the stock market.

While small investors saw their portfolios crater in 2008-2009, Rajaratnam, the founder of Galleon Management, profited no matter what happened on Wall Street.

The government released wiretaps of telephone conversations between the two men to show how they operated. This conversation took place in July 2008, just after Gupta attended a Goldman Sachs board meeting. The Galleon fund manager quizzed him about what acquisitions Goldman Sachs might be interested in.

RAJARATNAM: There’s a rumor that Goldman might look to buy a commercial bank....Have you heard anything along that line?

GUPTA: Yeah. This was a big discussion at the board meeting...on whether we...

RAJARATNAM: Buy a commercial bank?

GUPTA: Buy a commercial bank.

No stock transactions came from that particular call, but many other calls between the two did result in insider trading, according the indictment. In fact, that wiretapped conversation was part of the evidence last spring when Rajaratnam was convicted in the biggest insider trading case ever brought by the U.S. government.

This discussion was also entered into evidence to establish Rajaratnam was pumping Gupta for critical investment information.

RAJARATNAM: All right, anything else? Anything interesting?...Keep your eyes and ears open if you hear anything.

The government claims something “interesting” did come up as 2008′s financial meltdown became evident. At a 3:15 p.m. board meeting on Sept. 22, 2008, Gupta learned that Warren Buffet and Berkshire-Hathaway were going to invest $5 billion dollars in Goldman Sachs.

Gupta allegedly called Rajaratnam at 3:53 p.m. and tipped him off. The hedge fund manager then bought more than 217,000 shares of Goldman minutes before the market closed at 4 p.m. The next day, Goldman stock soared on the news of the Berkshire-Hathaway investment. Rajaratnam then sold the Goldman stock just before the market closed, turning a $800,000 profit in just 24 hours, thanks to the tip from Gupta.

In another example cited in the indictment, Gupta was on the phone with Rajaratnam a mere 23 seconds after a Goldman Sachs board meeting. This time, Gupta allegedly told Rajaratnam that Goldman was about to announce big losses. The stock price would surely take a beating when the news surfaced publicly. Rajaratnam quickly dumped his Goldman stock and avoided losses of more than $3.6 million.

The government also charges that Gupta abused his position at Proctor & Gamble by tipping Rajaratnam off to P&G’s financial results for the quarter ending December 2008.

Gupta called Rajaratnam to tell him that P&G would soon release information that its sales would not meet expectations. Galleon funds then sold short approximately 180,000 P&G shares, making, according to the indictment, “an illicit profit of more than $570,000.”

U.S. Attorney Preet Bharara said, “Rajat Gupta was entrusted by some of the premier institutions of American business to sit in their boardrooms…so that he could give advice and counsel for the benefit of their shareholders. As alleged, he broke that trust and instead became the illegal eyes and ears in the boardroom for his friend and business associate, Raj Rajaratnam, who reaped enormous profits from Mr. Gupta’s breach of duty.”

Gupta’s attorney responded, “The government’s allegations are totally baseless. The facts in this case demonstrate that Mr. Gupta is innocent of any of these charges and that he has always acted with honesty and integrity. He did not trade in any securities, did not tip Mr. Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo.”

In fact, his attorney said, Gupta lost his entire investment in the Galleon Fund at the time of the events in question, removing any motive he may have had for helping Rajaratnam.

Copyright 2011 ABC News Radio







ABC News Radio