Guttenberg, Defendant In “Most Significant Insider Trading Case” Sentenced
One of the key participants in what many billed as the most significant insider trading case since the late 1980’s was sentenced on Monday. Mitchel Guttenberg, a former executive director in the equity research department of UBS Securities LLC was sentenced to 78 months imprisonment. In addition, he was ordered to forfeit $15.81 million in illegal trading profits. Mr. Guttenberg previously pled guilty to two counts of conspiracy to commit securities fraud and four counts of securities fraud in connection with an insider trading scheme.
The criminal charges against Mr. Guttenberg stem from his participation on the Investment Review Committee at UBS. Mr. Guttenberg became a member of that committee in 2001. The committee reviewed UBS analysts’ recommendations for upgrades and downgrades before they are released to the public. From the time he joined the committee through August 2006, Mr. Guttenberg repeatedly sold material non-public information regarding the recommendations to David Tavdy who has also pled guilty. Mr. Tavdy and others used the information to either purchase shares in the companies involved or sell short, depending on the recommendation, and then liquidate the holdings after the public announcement. This trading netted over $15 million in illegal trading profits.
Mr. Tavdy previously pled guilty to one count of conspiracy to commit securities fraud and two counts of securities fraud in connection with the insider trading scheme. Mr. Tavdy has not been sentenced.
In connection with this matter, criminal charges were brought against 13 defendants. There were nine related cases. See, e.g., U.S. v. Jurman, Case No. 1:07-cr-00 140 (S.D.N.Y. Filed Feb. 26, 2007). These cases have been resolved.
The SEC filed a case based in part on the same conduct, naming fourteen defendants. SEC v Guttenberg, Case No. 1:07-cv-01774 (S.D.N.Y. Filed March 1, 2007). The defendants were primarily securities professionals. The SEC’s complaint alleged two overlapping schemes. One was the UBS scheme involving Mr. Guttenberg. A second was the Morgan Stanley scheme. That part of the case alleged that a Morgan Stanley attorney misappropriated M&A information and, along with her husband lawyer, tipped a Florida broker who traded and split the profits with the couple. With the sentencing of Mr. Guttenberg, the “most significant insider trading case” since the late 1980s is drawing to a close.