Insider Trading Bust: SEC May Have Pulse
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| Tue, 10-20-2009 - 9:28am |
Insider Trading Bust Shows SEC May Have a Pulse
Complete article at link.....
http://www.bloomberg.com/apps/news?pid=20601039&sid=aqAAZ8PB9Hto
The Securities and Exchange Commission’s Big Bust on Friday is an example of everything that’s right, and everything wrong, with the agency that’s been bungling its job of keeping the financial markets safe.
Working with federal prosecutors in New York, the SEC charged hedge fund operator Raj Rajaratnam, whose net worth of $1.5 billion placed him at No. 236 on Forbes magazine’s 400 Richest Americans list, with insider trading. Rajaratnam’s lawyer, James Walden, says his client is innocent and that “we intend to vigorously defend him in court.â€
With its simultaneous charges against a network of other alleged cheaters on Wall Street and in the C-suite, the SEC’s case was enough to bring tears to the eyes of Wall Street nostalgia buffs.
The agency sent Wall Street into a collective cold sweat in the 1980s, when the Nov. 14, 1986, news that Ivan Boesky had agreed to pay $100 million for insider trading sent a signal that the jig was up for lawbreakers who swapped illegal inside-information.
The agency was a regulatory mensch back then, working with prosecutors to do the spadework that helped send Boesky, Kidder, Peabody & Co.’s Martin Siegel, and Drexel Burnham Lambert’s Dennis Levine and Michael Milken to the slammer. If you can imagine it, Wall Street was actually afraid of the SEC after the Boesky bust.
Image Building
Today, the only people getting captured are SEC lawyers who are hot for big paychecks at the brokerage firms they’re supposed to be regulating.
After getting skewered in the September report “Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme†by SEC Inspector General David Kotz, the agency has been trying to polish its image. It’s no surprise that the agency’s big splash with Rajaratnam and friends came in an area where it tends to excel.
Vision Loss
Today, the SEC is a reactive institution, going after “the flavor of the month†as determined by cases initiated by U.S. attorneys or investigative reports in prominent business publications, Gorman says. In the 1980s, though, “they had a vision†of what was important to pursue, and, particularly with insider trading, pushed to make their legal cases stick.
Indeed, only 4 percent of new cases initiated at the agency involved insider trading in 1984, but then-chairman John Shad made it his pet project, warning lawbreakers that he would come down on them “with hobnail boots†should they violate insider- trading laws. Try to find fighting words like that from any recent SEC leaders.
Chasing Big Shots
It’s worth mentioning that the same SEC that today chases scandals it reads about in the papers once had the courage to pursue big shot financiers who were venerated by slobbering financial journalists. BusinessWeek magazine once compared Michael Milken to J.P. Morgan Sr. Institutional Investor magazine called him “Milken the Magnificent.â€
In those days, top guys complained that they were picked on because they were powerful. These days, the power of someone like Bernie Madoff helps him escape scrutiny. Imagine if Boesky or Milken had been asked to sit on an SEC advisory committee like Bernie was.
Given the agency’s expertise in insider trading, Rajaratnam and his band of alleged illegal traders are no doubt wishing they’d been dabbling in one of the multitudinous areas where the SEC is wanting. I mean hey, where are the longstanding experts on dark pools? Or credit default swaps? Or any of those products and practices that less than 1 percent of the population really understands? Or even Ponzi schemes, which we all understand, but we don’t seem to be able to stop.
Good for the SEC that it’s drawing on its experience in insider trader to bring new cases. But there are a lot of new games in town, too. I’m waiting for the hobnail boots to come crashing down on a dark pool and a credit default swapper or two.
Insider fallout continues as IBM puts exec on leave
Complete article at link.......
http://www.marketwatch.com/story/insider-fallout-continues-ibm-puts-exec-on-leave-2009-10-19
International Business Machines Corp. placed one of its executives on leave following allegations of his involvement in an insider-trading scandal, as details of the operation continue to emerge.
The Wall Street Journal reported Monday on its Web site that IBM put Robert Moffat Jr., a senior vice president, on leave following his arrest Friday.
The Journal describes Moffat as "a senior vice president and a close confidant of IBM /quotes/comstock/13*!ibm/quotes/nls/ibm (IBM 122.73, -0.33, -0.27%) Chief Executive Samuel Palmisano." See full story at WSJ.com.
Officials arrested Moffat and five others Friday, including Galleon Group founder Raj Rajaratnam, in an alleged insider-trading scheme that federal prosecutors claim netted millions in illegal profits. Read more.
In another development Monday, the Wall Street Journal reported that some former hedge-fund clients and contacts of Galleon's are bolstering prosecutors' information.
The paper said California hedge-fund managers Ali Far and Choo Beng Lee are cooperating witnesses in the case, citing people familiar with the criminal investigation. See full story at WSJ.com
Details of the case say that there allegedly were several different periods of trading, dating at least as far back a 2006.
Stocks involved in the deals, according to authorities, included Advanced Micro Devices Inc., Akamai Technologies Inc., Clearwire Corp., Google Inc., Hilton Hotels, Intel, PeopleSupport Inc., Polycom Inc. and Sun Microsystems Inc.


