by T. GormanPosted on Posted in SECActions

Market professionals continue to be targets in insider trading cases. Earlier this week, the UK’s FSA and the Serious Fraud’s Office conducted a huge raid in which six individuals, including City professionals, were arrested for insider trading. Not to be outdone, yesterday the U.S. Attorney’s Office in Manhattan, along with the SEC and the Financial Fraud Enforcement Task Force, brought insider trading charges centered on an insider trading ring involving Wall Street professionals. The USAO filed a criminal information naming as defendants Igor Poteroba and Alexei Koval. U.S. v. Poteroba (S.D.N.Y. Filed Mar. 24, 2010). At the same time, the SEC filed insider trading complaint against Messrs. Poteroba and Koval as well as Alexander Vorobiev. SEC v. Poteroba (S.D.N.Y. Filed Mar. 24, 2010).

Mr. Poteroba was a managing director at UBS Securities in their Healthcare Group. Mr. Koval previously was employed at Citigroup Asset Management. Both men are Russian nationals, as is Alexander Vorobiev, the third defendant in the SEC complaint who currently resides in that country.

The criminal information contains one count of conspiracy and three counts of securities fraud. It centers on illegal tips Mr. Potoroba is alleged to have provided to Defendant Koval. From 2005 through February 2009, Mr. Poteroba provided Mr. Koval with inside information on six publicly traded healthcare companies involved in pending mergers, according to the court papers. That information was then typically passed on by Mr. Koval to a person identified as “another co-conspirator (CC-1).” Frequently, the tips were passed on in coded e-mails.

The six companies included Guilford Pharmaceuticals, Inc., Molecular Devices Corporation, PharmaNet Pharmaceuticals, Inc. and Indevus Pharmaceuticals, Inc. Overall, the trading is alleged to have resulted in about $870,000 in trading profits. Mr. Poteroba is alleged to have received at least $28,000 from Mr. Koval. The two defendants were arrested yesterday.

The SEC complaint is based on a larger version of the same scheme. It adds tips on five additional deals involving: ID Biomedical Corporation, ViaCell, Inc., Radiation Therapy Services, Inc., Datascope Corp. and Sciele Pharma, Inc. According to the Commission’s complaint, the scheme yielded in excess of one million dollars in illegal trading profits. The complaint alleges violations of Exchange Act Sections 10(b) and 14(e). The case is in litigation.

by T. GormanPosted on Posted in SECActions

Blue collar tactics in white collar cases has become the topic of discussion in the wake of the Galleon insider trading cases, discussed here. Informants, wire taps and wires were used in the Galleon investigation, yielding some of the most significant insider trading cases in years. While this was not the first time that tactics more typically seen in organized crime cases have been used in white collar prosecutions, it is one of the most high profile.

Now, however, these tactics seem to have crossed the pond. The UK’s FSA is adopting these tactics in a get tough campaign on insider trading. Shaking off critics who claimed the regulator is not aggressive, this week the FSA teamed up for the first time with London’s Serious Frauds Office in what is being called its biggest enforcement effort. The FSA and FSO dispatched 143 agents on a raid of 16 London and South England homes and business locations as part of an insider dealing investigation which has been underway for the two years. The agents seized documents and computers which supposedly are part of a large, long running insider dealing ring.

Six individuals were arrested during the raid, including an executive from Deutsche Bank, a senior employee of BNP Paribas, and a trader at New York City-based hedge fund Moore Capital, who supposedly was using his personal rather that firm accounts. The FSA apparently believes that London city professionals are passing inside information to traders either directly or through middlemen. Prior to this week, there have been five arrests in connection with this investigation.

In the last two years, the FSA has obtained convictions in six insider dealing cases. The agency currently is prosecuting three other criminal insider trading cases. As part of its campaign against insider dealing, the FSA is reportedly adopting the techniques of its U.S. counterparts, including the use of co-operating witnesses and telephone taping. Last week, the regulator proposed requiring London firms to record and retain conversations on mobile phones provided to employees to help track market abuse.