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NEW YORK - Husband and wife lawyers and 11 top Wall Street workers were charged Thursday with making more than $15 million in illegal trading profit through an alleged federal securities fraud scheme, authorities said.
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Linda Chatman Thomsen, director of the Division of Enforcement for the Securities and Exchange Commission, said in a statement that the case was "one of the most pervasive Wall Street insider trading rings since the days of Ivan Boesky and Dennis Levine" in the mid-1980s.
"What is so alarming about the conduct alleged in the SEC's case isn't just the scope of the scheme ... but, sadly, who is at the center of it," she said.
Besides the lawyers, defendants including registered representatives, compliance personnel and hedge fund portfolio managers, improperly relied on hundreds of tips during five years of illegal trading, she said.
"And this conduct didn't occur in obscure boiler rooms — but rather at what are commonly considered `top tier' Wall Street firms," Thomsen said.
U.S. Attorney Michael Garcia said Wall Street professionals repeatedly traded on secrets revealed to them by insiders at UBS Securities LLC and Morgan Stanley and Co.
Among financial professionals charged criminally in U.S. District Court in Manhattan was Mitchel Guttenberg, an executive director and institutional client manager at UBS.
Garcia said Guttenberg, who worked in UBS's equity research department, accepted hundreds of thousands of dollars as he sold nonpublic information to two men regarding upcoming upgrades and downgrades in UBS analysts' securities recommendations.
The men, David Tavdy and Erik Franklin, used the UBS inside information to each earn more than $4 million by executing profitable trades in various brokerage accounts they controlled, Garcia said.
The attorneys, Randi Collotta, 30, who worked for Morgan Stanley & Co. Inc. in Manhattan, and her husband, Christopher Collotta, 34, who worked in private practice, were also among those criminally charged. Civil charges against 11 individuals and three entities were brought in a complaint filed by the SEC.
In an indictment, prosecutors said Randi Collotta was an associate in Morgan Stanley's global compliance division when she passed inside stock tips to her husband, who gave it to others, resulting in illegal profits of hundreds of thousands of dollars between September 2004 and August 2005.
After others made money from the tips, they paid Christopher Collotta cash that represented a portion of their profits, the indictment said.
Guttenberg, Tavdy, Franklin and the Collottas all were charged with conspiracy to commit securities fraud and securities fraud, which carry potential penalties of up to 25 years in prison. It was not immediately clear who would represent them at an initial court appearance along with five others arrested Thursday.
The four other criminal defendants have pleaded guilty to conspiracy, securities fraud and commercial bribery charges, prosecutors said.
Mary Claire Delaney, a Morgan Stanley spokeswoman, said, "We have cooperated and are continuing to cooperate fully with authorities regarding a former employee who allegedly stole information from Morgan Stanley."
Prosecutors said two insider trading schemes and two separate bribery schemes were part of the case.
The SEC said the scheme involved unlawful trading ahead of upgrades and downgrades by UBS research analysts and corporate acquisition announcements involving Morgan Stanley's investment banking clients.
It said the ringleaders of the UBS part of the scheme went to great lengths to hide their illegal conduct with tactics including a clandestine meeting at Manhattan's famed Oyster Bar and eventually the use of disposable cell phones, secret codes and cash kickbacks before the scheme unraveled.
-------------------- If ignorance is bliss, why aren't more people happy? Posts: 2647 | From: MN | Registered: Feb 2006
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i can't count how many times i have seen news and "been on it", literally within seconds, only to find the volume was already up and the PPS was either rising TOO quickly, or already up as well, only to fall again MUCH too quickly...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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-------------------- "Gentleman, you have come sixty days too late. The depression is over." Herbert Hoover 1930 Posts: 678 | From: currently in hiding due to investigation | Registered: Oct 2004
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March 1, 2007 Lawyer Charged in $10 Million Securities Fraud By REUTERS Federal prosecutors charged an ex-partner of the law firm McGuireWoods with fraud yesterday, claiming that he illegally obtained and sold shares of various companies for a profit of millions of dollars.
Louis W. Zehil, 41, was arrested, and a federal magistrate later set bail at $250,000.
Separately, the Securities and Exchange Commission filed a civil complaint against Mr. Zehil in Federal District Court in Manhattan.
Mr. Zehil, who worked at McGuireWoods’s offices in Jacksonville, Fla., and New York, resigned from the firm in January. His lawyer declined to comment.
Mr. Zehil represented seven companies between January 2006 and February 2007 in issuing their stock in private investments in public equity, or PIPE, transactions, according to the SEC.
In these PIPE transactions, investors buy restricted shares at a discount and can sell them in public markets after the shares have been registered with the S.E.C., according to the complaint.
Mr. Zehil invested in the seven companies through two entities he controlled, according to the complaint filed by the United States attorney’s office in Manhattan.
But Mr. Zehil told the stock transfer agent that the two companies he controlled were eligible to get shares without a restrictive legend and he sold those shares in the public market for a profit of about $10 million, according to the complaint. The matter was reported to the S.E.C. by McGuireWoods, the government said, adding that the law firm was cooperating with its investigation.
Copyright 2007 The New York Times Company
-------------------- ......in Psychiatry circles it's known as a "warning sign" Posts: 1736 | From: Saint Louis | Registered: Jul 2005
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March 1, 2007 Lawyer Charged in $10 Million Securities Fraud By REUTERS Federal prosecutors charged an ex-partner of the law firm McGuireWoods with fraud yesterday, claiming that he illegally obtained and sold shares of various companies for a profit of millions of dollars.
another one down, millions to go
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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