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FBI Report: Insider Trading on the Rise
February 28, 2012
[ by Melanie Gretchen ]
The FBI is investigating some 120 individuals on and off Wall Street in an expanding criminal insider trading investigation, following a series of successful prosecutions of insider trading. Since late 2009, 66 individuals at hedge funds and other companies with insider trading and won 57 convictions or guilty pleas - among them Raj Rajaratnam, whose 11-year sentence broke recent records.
Michael Douglas PSA. During a presentation to reporters at FBI headquarters in Manhattan, the FBI presented a one-minute public service announcement against insider trading featuring Michael Douglas, whose fictional character Gordon Gekko in the 1987 movie "Wall Street" made famous, "Greed, for lack of a better word, is good."
In the spot, for which Mr. Douglas wasn't paid, the actor addresses the camera in front of a black background, stern-faced, and wearing a black blazer and white collared shirts, urging people with information on securities fraud to contact the FBI. "I play Gordon Gekko, a greedy coroporate executive. The movie was fiction, but the problem is real."
The PSA follows a string of public appearances in the past 2 years by Manhattan U.S. Attorney Preet Bharara, who has likened insider trading to a "criminal club" benefiting the elite few, and underscores the government's focus on what it sees as rampant behavior.
FBI Investigation. The government is currently investigation whether some 240 individuals, including hedge fund traders and company insiders, improperly shared insider information, said senior FBI agent David Chaves, after the presentation. Roughly half of those, are "targets," meaning the government believes they have violated insider-trading laws and is actively building cases against them, Agent Chaves said. He manages 1 of 2 white-collar crime squads handling the New York-based insider trading investigations.
The rest of the 240 are "subjects," meaning investigators believe they could have committed crimes and have approached them or could do so to build cases.
Growing Trend. Called "Perfect Hedge" by FBI agents, the investigation's large number of "targets" reflect the evolution of insider trading - namely that it is broader and deeper than previously believed and potentially the most expansive of its kind in modern history.
In the major 1980s insider trading cases, "generally the number of people in a particular ring, you could count on both hands," Barry Goldsmith, a lawyer who back then was a chief litigation counsel in the SEC's enforcement division. By contrast, current rings involve bankers, analysts, corporate insiders, consultants, and traders. "What we've seen already in terms of cases have involved people from more walks of life."
Going forward, arrests could move into new firms on Wall Street and U.S. corporations, to continue for several more years.
For further details, go to [WSJ, 2/28/12].
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