Sunday, May 17, 2009

More Details Emerge on Possible Insider Trading by SEC Enforcement Agents

The report issued by the Inspector General of the SEC is now available online.

Note the names of the SEC enforcement attorneys involved in the case have not been publicly revealed, they are identified by number. The report states that potential insider trading occurred in a "large financial services company" and also in a "global oil company".

The report reached the following conclusions:

Our investigation revealed suspicious activity, appearances of improprieties, and evidence of possible trading on nonpublic information, and/or potential insider trading, on the part of SEC Enforcement attorneys #l and #2 Because of the seriousness of the information that the OIG investigation uncovered; we have referred the matter to the United States Attorney's Office of the District of Columbia's Fraud and Public Corruption Section, which is conducting an investigation of possible criminal and civil violations together with the Federal Bureau of Investigation.

The OIG investigation disclosed that approximately two months before an investigation of a large health care company was opened in her Assistant group, #2 sold all of her shares of stock in the company. We also found that #2 purchased additional shares of a global oil company's stock both a few days and a couple of weeks after a formal investigation was opened by her friend who occupies the office next to her. [#2] also sold shares of that company's stock two days before an inquiry was opened in that matter.

We also found that both [# 1] and[# 2} traded in the stock of a large financial
services company, even though their fellow Enforcement attorney: [#3 ]became aware of three separate enforcement investigations of that company.[*3 ]credibly testified that she told [ #1 ]and [#2 ]during their regular weekly lunches that she could not purchase additional stock in this company because she had become aware of the investigations. Yet #1 and #2 did trade in this particular company, although incredibly, they both deny remembering #3 telling them about any of these investigations.

We also found that #2, #1 and #3 committed violations of different aspects of the SEC's securities reporting requirements of Rule 5.
The report also states that sworn testimony was taken from 13 SEC enforcement employees, including #1, #2 and #3, which suggests that #1 and #2 likely lied in sworn testimony a la Martha Stewart, in the midst of an insider trading investigation.

No comments:

Post a Comment