Wednesday, May 26, 2010

Abbott and Mrs. Costello as Insider Traders

WSJ has the details:

Insider-trading cases have a tendency for the cloak and dagger: code words, secret meetings and wire transfers. Few come with a cover letter and a shopping list out of “Sex and the City.”

As described by the SEC complaint today, the insider-trading case devised by a Walt Disney administrative assistant and her boyfriend wasn’t the slickest of schemes. The SEC alleges that Bonnie Jean Hoxie and her paramour attempted to sell Disney’s second-quarter earnings ahead of their official release. The method: the two sent as many as 20 hedge funds a letter offering to provide the earnings release for a fee. The text of the letter, contained in the SEC complaint, begins:

“Hi, I have access to Disney (DIS) quarterly earnings report before its release on 5/03/10. I am willing to share this information for a fee that we can determine later….My email is XXX I count on your discretion as you can count on mine.”

One of the hedge funds notified authorities about the letter and a pair of FBI agents got in contact with Hoxie’s boyfriend, Yonni Sebbag.

At one point, Sebbag asked for a $20,000 fee. The FBI agents, who were posing as traders, bid him down.

“$15K sounds great. $30K even better as I hope you will make a killing form Q2 earnings,’’ Sebbag allegedly wrote in an email to the agents, according to the SEC complaint. They settled on $15,000.

Then, when it came time to send the earning results 2-3 hours before the official release as promised, Sebbag couldn’t deliver, according to the complaint.

Sebbag pressed Hoxie to send him the information quickly. To which his girlfriend replied, according to an email cited in the SEC complaint:

“What would you suggest I do. If I could wave my magic wand and give you what you want – I would. However, since that is not going to happen I suggest you call on you inner Buddhist – and CHILL the f—- out.”

In the end, he never got the release, but he was allegedly able provide some key details such as when the earnings per shares, which was higher than what the market expected.

With their mission seemingly complete, Hoxie allegedly sent Sebbag an email saying: “Here is the bag that you are going to get for me” and a photo attached of a $700 McCartney handbag. She also said she wanted Stella McCartney shoes, “also sold at Neiman Marcus,’’ the complaint states.

1 comment:

  1. Interesting to see one HF snitched these guys to the FBI to prevent other HF from profiting from this info while the first HF tried to be virtuous.

    Sounds like using the power of the State to muscle competitors into line...