Blue I thought this thread was dead...glad you guys are back....here is an interesting article.....and check out the name of that investment firm at the end....any relationship to how you picked your name?
19 Charged With Insider Trading Using
the Internet and a Clerk
By CHRISTOPHER DREW
n the first criminal case involving the swapping of inside stock
information over the Internet, the federal authorities accused 19
people yesterday of making $8.4 million on illegal tips from a
part-time graphics clerk on Wall Street who passed some of the
information through private chat rooms and America Online's instant
messaging system.
The clerk, John J. Freeman, who had temporary jobs at Goldman,
Sachs & Company and Credit Suisse First Boston, pleaded guilty
yesterday in federal court in New York to sharing confidential
information on corporate mergers in exchange for $70,000 to $110,000
in kickbacks from the trading profits.
Mr. Freeman devised the plan in 1997 with two disgruntled investors
who frequented an Internet chat room involving stocks, and the
authorities say it expanded over nearly three years to include illegal
trading in four states by stockbrokers, insurance sales representatives,
restaurant waiters, a dentist and a schoolteacher.
Mary Jo White, the United States attorney for the Southern District of
New York, said the case was a good example of "insider trading,
millennium-style." She said it showed how the nature of insider trading
had changed as the public's captivation with the stock markets, and the
explosion of financial information on the Internet, had led to a culture in
which more people are searching desperately for the latest edge or hot
tip.
In contrast to the era of insider-trading involving top securities executives
that was popularized in the 1987 movie "Wall Street," Ms. White said,
"This is a case of Wall Street meeting Main Street and coming back again
-- over the Internet."
Federal officials said the charges represented the largest criminal
insider-trading case ever in terms of the number of people who made
illegal trades and the number of business deals for which inside
information was stolen.
They said Mr. Freeman rummaged through garbage pails and other
workers' desks at Goldman, Sachs and Credit Suisse First Boston, a unit
of the Credit Suisse Group, to gather sensitive information about 23
mergers, acquisitions and buyouts, and then often did his own research to
decipher coded references meant to shield the identities of the companies
from workers at the investment houses.
In prepared statements, both firms said they were cooperating fully with
the authorities investigating the matter. Goldman's statement said that "the
firm will do everything in its power to ensure that anyone
misappropriating confidential or proprietary information will be caught
and prosecuted."
Mr. Freeman and the 18 other defendants also face civil securities fraud
charges filed yesterday by the Securities and Exchange Commission,
which has stepped up enforcement of various types of questionable stock
activities on the Internet. It recently brought a civil case accusing Yun
Soo Oh Park, a stock picker known as Tokyo Joe, of improperly
promoting stocks on the Internet to increase his own trading profits, and
earlier this month, Douglas Colt, a former Georgetown University law
student, settled similar charges involving a Web site that he had set up to
pass on hot tips about penny stocks.
But in some ways, Mr. Freeman's case is more reminiscent of the frenetic
kind of insider-trading activity that took place around the I.B.M.
acquisition of the Lotus Development Corporation in 1995.
In that case, the S.E.C. filed civil charges against 25 people after they
reaped more than $1.3 million in illegal profits based on confidential
information that came from Lorraine K. Cassano, a former secretary at
an I.B.M. office in Somers, N.Y.
The S.E.C. said Mrs. Cassano told her husband, who then told two
friends who agreed to buy stock for him.
Those two friends told others and soon the information had spread
through a wide network of family members, friends and stockbrokers,
the S.E.C. said. Many of them were first-time or infrequent buyers of
stocks.
The Cassanos and at least two other defendants settled the S.E.C.
charges against them.
According to the federal charges filed yesterday, Mr. Freeman, 34, first
offered to supply inside information to James Cooper, a Kentucky
insurance agent, and Benton Erskine, the owner of a computer supply
store in West Virginia.
The three men had been commiserating in an Internet chat room over a
stock in which they had all lost money when Mr. Freeman suggested that
he could give them an inside edge on Wall Street deals, through Internet
messages, if they agreed to kick back 10 percent of the profits.
Over time, the documents said, Mr. Freeman began handing out the tips
even more indiscriminately. He gave them to neighbors in Brooklyn;
co-workers at his full-time job at the Philip Morris Companies; and
employees and customers at Les Halles restaurant in New York, where
he had another part-time job as a waiter.
He often referred to the deals by code -- the largest ones were called
monsters -- and he took his kickbacks in cash, sometimes slipped inside
unsigned birthday cards. In one case, the documents said, he was paid
with cases of wine.
Mr. Cooper, who also pleaded guilty yesterday, and Mr. Erskine also
passed Mr. Freeman's tips on to chains of relatives and friends, including
stockbrokers in Tennessee and Kentucky who were charged with trading
on the information for themselves and their clients.
Two businessmen even called their trading account Blue Horseshoe
Investments, a name used as a code for insider trading by Gordon
Gekko, the swashbuckling character who articulated the Wall Street
movie's famed ethos that greed is good.
Federal officials said they got onto the case through normal
exchange-surveillance activities, and they arrested Mr. Freeman in
January. They said Mr. Freeman and Mr. Cooper had both cooperated
with the investigation. Nearly all of the other defendants were taken into
custody yesterday and were being arraigned. |
