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Insider Trading: Power Broker's Son Going to Prison
January 12, 2012
[ by Melanie Gretchen ]
Former hedge fund manager and son of a prominent Democratic power broker, Drew 'Bo' Brownstein was sentenced to a year and a day in prison on Wednesday after he had pleaded guilty to insider trading charges. Brownstein, 35, who had lived a charmed life prior to his arrest, bought stock in Mariner Energy using insider information. He earned $2.4 million in illicit profits.
Sentencing Considerations. While the one year sentence was below federal guidelines, which calls for a prison term of 37 to 46 months, the judge's sentence exceeded the probation officer’s presentence recommendation of 6 months, who had cited Mr. Brownstein’s "genuine remorse." Brownstein's lawyer, Gary Naftalis, had requested that his client be spared a prison sentence, saying, "What he did will haunt him for the rest of his life.”
The tipper in this case ... was Drew Peterson, who provided his friend with the inside information in April 2010. Peterson's father, H. Clayton Peterson, at the time was on the board of Mariner. Peterson later called Brownstein to confirm that Apache, another energy company, had agreed to buy Mariner. Brownstein then proceeded to buy Mariner stock and options stock and options for both his hedge fund and for his personal investment accounts. He also bought stock for his family, including his father, without their knowledge.
H. Clayton Peterson, the former Mariner director, pleaded guilty and was sentenced to 2 years probation. Son Drew awaits sentencing.
With Brownstein's conviction, U.S. Attorney Preet Bharara has now secured more than 50 insider trading convictions over the last 2 years.
Brownstein's Charmed Life. Bo Brownstein was a star offensive lineman in high school before briefly playing football at Northwestern. He transferred over to UCLA, where he earned his undergraduate degree. After college, he went to work for Donaldson, Lufkin & Jenrette before earning a graduate degree in business from Columbia Business School.
Brownstein returned to Denver, where father Norman Brownstein is a power broker and a major donor to the Democratic Party. It was in Denver that Drew Brownstein started his investment firm, Big 5 Asset Management.
[Dealbook, 1/12/12]

